1983 (7) TMI 123 - AT - Income Tax

Summary

Issues:
1. Charging of interest under section 139(8) of the Income Tax Act for late filing of returns by registered firms resulting in refund of advance tax paid.

Analysis:
The appeals before the Appellate Tribunal ITAT MADRAS-B involved two registered firms, with the issue of interest under section 139(8) of the Income Tax Act for late filing of returns resulting in a refund of advance tax paid. The Income Tax Officer (ITO) had initially paid interest under section 214 of the Act to the assessees due to the refund of advance tax. However, the ITO later charged interest under section 139(8) for the delayed filing of returns by the assessees. The assessees contended that once a refund situation arises, it is not appropriate to charge interest under section 139(8) as it is meant to deter assessees from withholding payments to the government. The Tribunal rejected the assessees' argument, stating that the charging of interest under section 139(8) is permissible if the statutory requirements are met, regardless of the motive behind the delay in filing the returns.

The assessees further argued that in cases where a registered firm receives a refund, interest under section 139(8) cannot be calculated as there is no tax payable by the firm. They relied on a Madras High Court decision in CIT vs. Fomra Bros. However, the Tribunal disagreed with this argument, citing a different Madras High Court decision in CIT vs. Kandaswamy Weaving Factory & Co. and Explanation No. 2 to section 139(8), which clarifies the computation of tax payable by registered firms for the purpose of interest calculation under the section. The Tribunal held that the assessees cannot escape the levy of interest under section 139(8) based on the provisions of the Explanation.

Additionally, the assessees referred to a passage discussing a decision by the Ahmedabad Bench of the Income Tax Tribunal regarding the charging of interest under section 139(8) when advance tax paid exceeds the tax determined on regular assessment. The Tribunal, however, found the Madras High Court decision more relevant for the present case and upheld the levy of interest under section 139(8). Consequently, the Tribunal dismissed both appeals, affirming the correctness of the interest charged by the ITO and finding no grounds for rectification.