1962 (8) TMI 66 - SC - Income Tax

Whether, on a true construction of sub-section (6), (8), and (9) of section 18A of the Indian Income-tax Act, the interest referred to in sub-section (8) is chargeable for failure on the part of an assessee to submit an estimate of his income and pay tax as required by the terms of sub-section (3) of that section? Held that - Appeal dismissed. Sub-section (9) of section 18A provides for payment of penalty in terms of section 28 upon submission of estimates under sub-section (2) and (3) known or reasonably believed to be untrue or upon failure without reasonable cause to comply with the provisions of sub-section (3). We are unable to see that this provision in any way affects the construction of sub-section (6) or (8) or assists in the solution of the difficulty which has arisen in this case. The penalty under sub-section (9) is in addition to the liability under sub-section (6) and (8) which is not penalty in the real sense, and is leviable for reasons different from those on which the levy of interest under sub-sections (6) and (8) is based. The result, therefore, is that these appeals are dismissed and the decision of the High Court answering the question framed is upheld.

Issues Involved:
1. Applicability of sub-section (8) of section 18A of the Indian Income Tax Act, 1922.
2. Calculation of interest under sub-section (6) of section 18A.
3. Interpretation of taxing statutes and machinery provisions.
4. Impact of sub-section (9) of section 18A on the interpretation of sub-sections (6) and (8).

Detailed Analysis:

1. Applicability of Sub-section (8) of Section 18A:
The primary issue in this case is whether the assessee could be charged with interest under sub-section (8) of section 18A of the Indian Income Tax Act, 1922. Sub-section (8) states that "interest calculated in the manner laid down in sub-section (6) shall be added to the tax as determined on the basis of the regular assessment." The assessee did not submit any estimate or pay any tax as required by sub-section (3). The High Court ruled against the assessee, and the Supreme Court upheld this decision, confirming that the assessee is liable for interest under sub-section (8).

2. Calculation of Interest Under Sub-section (6) of Section 18A:
Sub-section (6) specifies that interest is payable if the tax paid is less than eighty percent of the tax determined on regular assessment. The interest is calculated from January 1 of the financial year in which the tax was paid. The assessee argued that since no tax was paid, it was not possible to calculate interest as per sub-section (6). However, the Court interpreted that the interest should be calculated from "the 1st day of January in the financial year in which the tax ought to have been paid." This interpretation ensures that the provision is workable and aligns with the legislative intent.

3. Interpretation of Taxing Statutes and Machinery Provisions:
The Court distinguished between taxing provisions and machinery provisions within a taxing statute. The rule of strict construction applies to provisions creating a charge for tax but not to machinery provisions, which should be interpreted to make the statute workable. The Court cited several precedents, including Commissioner of Income-tax v. Mahaliram Ramjidas and India United Mills Ltd. v. Commissioner of Excess Profits Tax, to support this view. The Court emphasized that machinery provisions should be construed to effectuate the charge levied by the statute.

4. Impact of Sub-section (9) of Section 18A on the Interpretation of Sub-sections (6) and (8):
Sub-section (9) provides for penalties for submitting false estimates or failing to comply with sub-section (3). The Court clarified that this provision does not affect the interpretation of sub-sections (6) and (8). The penalties under sub-section (9) are additional to the interest liability under sub-sections (6) and (8). The interest under sub-sections (6) and (8) is not a penalty but a mechanism to ensure timely tax payments.

Conclusion:
The Supreme Court dismissed the appeals, upholding the High Court's decision. The Court concluded that the assessee is liable for interest under sub-section (8) of section 18A, calculated as if the tax should have been paid from January 1 of the financial year in which it was due. The interpretation ensures that the machinery provisions of the statute are workable and align with the legislative intent. The respondent was awarded the costs of the appeals.

← Previous Next →