1983 (9) TMI 45 - HC - Income Tax

Summary

Issues Involved:
1. Liability to pay interest on wealth-tax under the Voluntary Disclosure of Income and Wealth Act, 1976.
2. Applicability of the Finance (No. 2) Act, 1977, to the petitioner.
3. Interpretation of the press note issued by the Central Board of Direct Taxes on August 22, 1977.

Issue-wise Detailed Analysis:

1. Liability to Pay Interest on Wealth-Tax Under the Voluntary Disclosure of Income and Wealth Act, 1976:

The petitioner sought a writ of certiorari to quash the order demanding Rs. 9,000 as interest on the second installment of wealth-tax. The petitioner argued that Section 15 of the Act does not contemplate the payment of interest on wealth-tax and that Section 6 only provides for interest on income-tax. Therefore, the demand for interest on wealth-tax not paid before March 31, 1976, is not legally sustainable.

The court noted that the liability for payment of interest was introduced by sub-section (5A) of Section 15 through the Finance (No. 2) Act of 1977, with retrospective effect from April 1, 1976. This provision imposes an interest liability on persons who have not complied with Section 5(1) or 5(2) of the Act to get immunity. The court concluded that the petitioner had not paid the wealth-tax in accordance with Section 5(1) or 5(2), as he did not obtain the requisite permission from the Commissioner of Income-tax for installment payments. Therefore, the petitioner is liable to pay interest as per sub-section (5A) of Section 15 if he wants immunity.

2. Applicability of the Finance (No. 2) Act, 1977, to the Petitioner:

The petitioner contended that the Finance (No. 2) Act, 1977, does not apply to him as he complied with both Section 5(1) and Section 5(2) of the Act by paying the entire wealth-tax before March 31, 1977. The court, however, found that the petitioner did not pay the wealth-tax in accordance with Section 5(1) (payment before making the declaration) or Section 5(2) (payment in two installments with permission).

The court emphasized that the petitioner did not file an application seeking permission to pay in installments and did not show good and sufficient reasons for not paying the full amount of wealth-tax. Consequently, the payment was not in accordance with Section 5(2), and the petitioner is subject to the provisions of the Finance (No. 2) Act, 1977, including the payment of interest.

3. Interpretation of the Press Note Issued by the Central Board of Direct Taxes on August 22, 1977:

The petitioner argued that the press note indicated that individuals who paid the entire wealth-tax before March 31, 1977, are not liable to pay interest. The court, however, clarified that the press note cannot override the statutory provisions. The court reiterated that the petitioner did not comply with the procedural requirements of Section 5(2) and therefore, the interest liability under sub-section (5A) of Section 15 applies.

Conclusion:

The court held that the demand for payment of interest made on the petitioner is valid and in accordance with the provisions of the Central Act 8 of 1976 as amended by the Finance (No. 2) Act, 1977. The writ petition was dismissed, and the petitioner was advised to pay the interest to obtain immunity under the Act. There was no order as to costs.