1984 (5) TMI 30 - HC - Income Tax

Summary

Issues:
Challenge to the constitutionality of Expln. 2 to s. 139(8)(a) of the I.T. Act, 1961.

Analysis:
The petitioners in three original petitions sought a declaration that Expln. 2 to s. 139(8)(a) of the I.T. Act, which determines tax payable for delayed filing of returns for registered firms, is unconstitutional and violates art. 14 of the Constitution of India. The petitioners argued that the provision unfairly imposes interest as if they were unregistered firms, despite being registered. The Revenue contended that the provision is valid. The court noted that registered firms enjoy benefits like lower tax rates but must meet certain conditions. The legislature's imposition of interest based on unregistered firm tax rates for delayed filing was deemed reasonable and within its discretion. The court cited precedents allowing legislative discretion in tax matters, emphasizing the latitude granted to the legislature in taxation issues.

Validity of Section 271(2) of the I.T. Act:
Section 271(2) of the I.T. Act, which imposes penalties on registered firms akin to unregistered firms, was challenged for violating art. 14. The court referred to past decisions affirming the constitutionality of the provision. It was held that treating registered firms as separate entities for tax purposes, while imposing penalties as if unregistered, does not constitute discrimination under art. 14. The court cited the legislature's authority to provide tax benefits to registered firms while withholding the same for penalties.

Judicial Opinion on Expln. 2 to s. 139(8)(a):
There is a split in judicial opinion regarding the validity of Expln. 2 to s. 139(8)(a). Some High Courts found the provision discriminatory, while others upheld its constitutionality. The court referenced various judgments, including dissenting opinions, to support its conclusion. It highlighted the preponderance of judicial opinion favoring the constitutionality of the provision. Ultimately, the court held that Expln. 2 to s. 139(8)(a) is not ultra vires art. 14, discriminatory, or arbitrary as alleged by the petitioners, dismissing the original petitions with no costs awarded.