2008 (9) TMI 150 - SC - Income Tax

Levy of interest u/s 234A HC held that interest would be payable in a case, where tax has not been deposited prior to the due date of filing of the income-tax return. - High Court is justified in holding that that interest is not a penalty and that the interest is levied to compensate the revenue - Since the tax due had already been paid which was not less than the tax payable on the returned income which was accepted, the question of levy of interest does not arise this appeal is dismissed

Summary

Issues:
1. Appeal against the order of the High Court of Delhi in C.W.P.No.1745 of 1999 regarding interest charged under Section 234A of the Income-tax Act, 1961.
2. Challenge to the decision of the High Court in C.A.No.448 of 2003 based on the interpretation of Section 234A of the Act.
3. Dismissal of the appeal by the revenue in C.A.No.3125 of 2006 following the precedent set by the High Court in the case of Prannoy Roy v. CIT [2002] 254 ITR 755.

Issue 1:
In the first case, the appellants challenged the High Court's order regarding interest charged under Section 234A of the Income-tax Act, 1961. The respondent-assessees had earned substantial capital gains for the assessment year 1995-96, with a delay in filing the income tax return. Despite paying the taxes before the due date of filing, interest was charged under Section 234A. The assessees filed a revision petition under Section 264 of the Act, which was dismissed by the Administrative Commissioner. The High Court, in its impugned order, set aside the interest charged under Section 234A, stating that interest is not a penalty but a form of compensation to avoid revenue loss. The court held that interest would be payable only if the tax was not deposited before the due date of filing the return. The Supreme Court upheld the High Court's decision, emphasizing that since the tax due had been paid before the filing date, the levy of interest was unwarranted.

Issue 2:
In the second case, the High Court's decision in C.A.No.448 of 2003 was challenged by the revenue. The High Court had relied on the precedent set in the case of Prannoy Roy v. CIT [2002] 254 ITR 755 (Delhi) to dismiss the revenue's appeal. The Supreme Court, after hearing arguments from both sides, upheld the High Court's decision and interpretation of Section 234A of the Act. The Court found no merit in the revenue's appeal, as the issue had already been settled by the High Court's previous ruling.

Issue 3:
Regarding the appeal in C.A.No.3125 of 2006, the Supreme Court noted that the High Court's decision in the case of Prannoy Roy v. CIT [2002] 254 ITR 755 had been upheld while disposing of C.A.No.448 of 2003. As a result, the Court found no merit in the revenue's appeal and dismissed it accordingly. The decision was based on the precedent established by the High Court, and the Supreme Court concurred with the findings and judgment delivered in the previous case.