1984 (10) TMI 95 - AT - Income Tax

Advance Tax, Assessment Year, Interest Payable By Assessee, Previous Year, Regular Assessment

Summary

Issues Involved:

1. Levy of interest under Section 217 of the Income-tax Act, 1961.
2. Applicability of Section 209A in the context of a loss assessment.
3. Interpretation of 'total income' in Section 209(1)(a)(i).
4. Legislative intent behind provisions relating to advance tax.

Detailed Analysis:

1. Levy of Interest under Section 217 of the Income-tax Act, 1961:

The assessee, a private limited company, contested the levy of interest amounting to Rs. 85,110 under Section 217 of the Income-tax Act, 1961. The Income Tax Officer (ITO) had directed the charge of interest under Sections 139(8) and 217 as part of the assessment order dated 27-3-1982. The assessee objected, stating that no notice under Section 210 was issued, and thus, the provisions of Section 217 were not applicable. Despite raising this objection, the ITO did not respond, leading the assessee to appeal to the Commissioner (Appeals). The Commissioner restored the issue to the ITO for reconsideration, who subsequently upheld the interest charge under Section 217, citing amendments made by the Finance Act, 1978, which required every assessee to file a statement or estimate of advance tax without waiting for a notice under Section 210. The Commissioner (Appeals) ultimately rejected the assessee's objections, leading to further appeal.

2. Applicability of Section 209A in the Context of a Loss Assessment:

The Commissioner (Appeals) addressed the assessee's claim that no liability existed to file a statement or estimate under Section 209A due to a loss assessment in the latest previous year (1976-77). The Commissioner clarified that Sections 209 and 209A must be read harmoniously, indicating that the obligation to file a statement under Section 209A is based on the positive income last assessed, not merely the last assessed year. The Commissioner reasoned that the words 'income' and 'total income' in Sections 209 and 208 do not mean 'loss' and that advance tax obligations are tied to positive income assessments.

3. Interpretation of 'Total Income' in Section 209(1)(a)(i):

The Tribunal examined the meaning of 'total income' in Section 209(1)(a)(i), considering whether it includes loss assessments. The Tribunal referenced the definition of 'total income' in Section 2(45) and noted that while the term 'income' in certain contexts includes loss (e.g., Explanation 2 of Section 64), this broader interpretation does not necessarily apply universally. The Tribunal reviewed conflicting judicial interpretations, including the Gujarat High Court's view that 'income' does not include loss (Dayalbhai Madhavji Vadera v. CIT) and the Mysore High Court's broader interpretation (Dr. T.P. Kapadia v. CIT). The Tribunal favored the broader interpretation but acknowledged that the specific context of Section 209A might not support including loss within 'total income'.

4. Legislative Intent Behind Provisions Relating to Advance Tax:

The Tribunal considered the legislative intent behind advance tax provisions, emphasizing the importance of collecting tax as income is earned to protect revenue. The Tribunal acknowledged the argument that interpreting 'total income' to exclude loss aligns with the legislative intent to ensure advance tax payments. However, the Tribunal also noted that prior to the introduction of Section 209A, an old assessee had no liability to pay advance tax without receiving a notice under Section 210, even if the current year's income was substantial. The Tribunal concluded that the statutory language must clearly support any change in this position, and in cases of ambiguity, the interpretation beneficial to the taxpayer should prevail.

Conclusion:

The Tribunal found that both interpretations (excluding and including loss within 'total income') were reasonable. Given the ambiguity, the Tribunal preferred the interpretation beneficial to the taxpayer, concluding that there was no case for charging interest under Section 217. The appeal was allowed, and the interest was deleted.