1978 (2) TMI 108 - AT - Income Tax

Summary

Issues Involved:
1. Competence of appeal against non-granting of interest under Section 214.
2. Right of appeal under Section 246 of the Income Tax Act, 1961.
3. Interpretation of the term "tax" in relation to interest.
4. Legislative intent and statutory interpretation.
5. Jurisdiction of the larger bench to hear the appeal.

Detailed Analysis:

1. Competence of Appeal Against Non-Granting of Interest Under Section 214:
The primary issue was whether an appeal against the non-granting of interest under Section 214 is competent. The Revenue contended that the assessee's appeal before the AAC was incompetent because no appeal was provided for against non-granting of interest under Section 214 in Section 246 of the Income Tax Act, 1961. Additionally, it was argued that the assessee missed the opportunity to appeal since the cause of grievance arose on 18th March 1974, and no appeal was filed within 80 days.

2. Right of Appeal Under Section 246 of the Income Tax Act, 1961:
The Tribunal examined whether the right of appeal against non-granting of interest under Section 214 could be found in Section 246. It was noted that granting or non-granting of interest under Section 214 is not specifically mentioned as appealable in Section 246. The Tribunal emphasized that the right of appeal is a creature of statute, and unless the statute provides for an appeal, there would be no inherent right to appeal. The Tribunal interpreted the provisions of Section 246 liberally but found no ambiguity that would justify construing a right of appeal in favor of the assessee.

3. Interpretation of the Term "Tax" in Relation to Interest:
The Tribunal discussed whether the term "tax" includes interest. The Special Bench (SB) had previously held that interest payable to or receivable from the assessee alters the sum payable and forms part of the tax, making the appeal against levy or non-granting of interest maintainable. However, the Division Bench (DB) and several High Courts, including Gujarat, Gauhati, Allahabad, Andhra Pradesh, and Madras, held that the word "tax" did not include interest and that appeals against levy of interest were not maintainable. The Tribunal noted that the Bombay High Court had not directly dealt with the issue but had commented on the reasoning of the Gujarat High Court.

4. Legislative Intent and Statutory Interpretation:
The Tribunal considered the legislative intent and statutory interpretation, noting that the legislative intention should be found in the expression used in the section, and reference to subject clauses would be justified only in case of ambiguity. The Tribunal found no cogent reason to hold that the context in which "tax" is used in Section 246 should include interest. The Tribunal also noted that there was no inherent right of appeal against levy of interest under the old Act, and the question was whether the definition of "tax" in the IT Act, 1961, allowed for reading "interest" into "tax."

5. Jurisdiction of the Larger Bench to Hear the Appeal:
The Tribunal addressed the jurisdiction of the larger bench to hear the appeal, noting that the President of the Tribunal had constituted a larger bench under powers vested in him under Section 255(3) of the IT Act. The Tribunal found that the larger bench was appropriately constituted to hear and dispose of the appeal due to the complexity of the issue and differing High Court judgments.

Conclusion:
The Tribunal concluded that non-granting of interest under Section 214 is not appealable under Section 246. The Departmental appeal was allowed, and the Tribunal did not find it necessary to address other contentions raised by the Departmental Representative in detail due to the conclusion on the main issue.