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TMI Blog2001 (12) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... esting to delete interest charged under section 234A of the Act. The Commissioner in his order dated March 9, 1999, upheld the action of the Assessing Officer stating that deduction of tax paid on September 25, 1995, is not provided in section 234A of the Act, as it compensates for delay/default in filing of return of income and not the tax. Thus, against the said order of the Commissioner passed on March 9, 1999, the assessee filed a writ petition under article 226/227 of the Constitution of India (in short, "the Constitution"), before this court seeking for a writ of certiorari/mandamus in respect of the said order passed under section 264 of the Act upholding the levy of interest under section 234A of the Act. The heading of Chapter XVII-F is "Interest chargeable in certain cases". It comprises sections 234A, 234B and 234C. The said provisions were inserted by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989. Section 234A of the Act reads thus: "234A. Interest for defaults in furnishing return of income.-- (1) Where the return of income for any assessment year under sub-section (1) or sub-section (4) of section 139, or in response to a notice under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pletion of the reassessment or recomputation under section 147, on the amount by which the tax on the total income determined on the basis of such reassessment or recomputation exceeds the tax on the total income determined under sub-section (1) of section 143 or on the basis of the earlier assessment aforesaid. Explanation.--[Inserted by DTL (Amendment) Act, 1987, and omitted by DTL (Amendment) Act, 1989, with effect from April 1, 1989.] (4) Where as a result of an order under section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount of tax on which interest was payable under sub-section (1) or sub-section (3) of this section has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and-- (i) in a case where the interest is increased, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.2. With a view to simplify the aforesaid provisions and also to remove the discretion of the assessing authorities, which had led to litigation and consequent delay in realisation of dues, the Amending Act, 1987, has substituted the above provisions by a simple scheme of payment of mandatory interest for defaults mentioned therein. The provisions relating to charge of mandatory interest are contained in the new sections 234A, 234B and 234C inserted by the Amending Act, 1987. The mandatory interest chargeable under these sections is not appealable. At the time of filing the return of income, such mandatory interest, if payable, is to be calculated on the basis of the returned income and paid along with tax on self-assessment under section 140A. 10.3. Charge of mandatory interest for non-filing or late filing of the return of income (new section 234A).--The provisions of the new section 234A inserted by the Amending Act, 1987, which have replaced the old provisions of sections 139(8), 140A(3) and 271(1)(a) are as follows: (i) Sub-section (1) provides that where a return of income is furnished after the due date or is not furnished, the assessee shall pay simple interest at 2 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of interest and are in pari materia with the said provisions cannot be anything except compensatory in character. The only material difference in the two situations is that while the old provisions conferred power to waive or reduce the levy of interest, the impugned provisions make the same automatic." The rationale of levy of interest and penalty has been succinctly stated by the apex court in CIT v. M. Chandra Sekhar [1985] 151 ITR 433, while considering section 139(8) of the Act, which is in pari materia with section 234A in the following terms: "Now, it will be apparent that delay in filing a return of income results in the postponement of payment of tax by the assessee resulting in the State being deprived of a corresponding amount of revenue for the period of the delay. It seems that in order to compensate for the loss so occasioned, Parliament enacted the provision for payment of interest." Yet again, in the case of Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961, the apex court observed as under: "At the very outset, it is necessary to consider the nature of the levy of interest under sub-section (8) of section 139 and under section 215 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... swala [2001] 252 ITR 1 (SC)). In relation to beneficent construction, the basic rules of interpretation are not to be applied where (i) the result would be re-legislation of a provision by addition, substitution or alteration of words and violence would be done to the spirit of the provision; (ii) where the words of a provision are capable of being given only one meaning; and (iii) where there is no ambiguity in a pro vision-where there is a doubt, however, the court may apply the rule of beneficent construction in order to advance the object of the Act (see Shyam Sunder v. Ram Kumar [20011 8 SCC 24; [20011 AIR 2001 SC 2472). We are not unmindful that the golden rule of interpretation of a statute is that it should be read liberally. In Gurudevdatta VKSSS Maryadit v. State of Maharashtra [2001] AIR 2001 SC 1980, [2001] 4 SCC 534, it has been held that: "It is a cardinal principle of interpretation of statute that the words of a statute must be understood in their natural, ordinary or popular sense and construed according to their grammatical meaning, unless such construction leads to some absurdity or unless there is something in the context or in the object of the statute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st, on the other hand, is payable either by way of compensation or damages. Even penal interest can be levied only in the case of a chronic defaulter. The question as regards payment of interest came up for consideration before a Full Bench of the Andhra Pradesh High Court recently in SMS Schloemann Siemag, A.G.v. Deputy CIT [2001] 250 ITR 97. While interpreting the provisions of sections 156 and 220(2) of the Income-tax Act, 1961 (in short "the Act"), as inserted by the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964, it was noticed that: "Interest is payable if a sum is due. Where the assessee is in default in making payment of the assessed amount demanded from him he is liable to pay interest. Although interest is payable to the Revenue by an assessee in terms of section 220 of the Income-tax Act by way of compensation, the same would not mean that, although there does not exist any demand, interest would become payable." In the aforementioned case, the court noticed a recent decision of the apex court in Vikrant Tyres Ltd. v. First ITO [2001] 247 ITR 821, 825, wherein it was held: "A bare reading of this section clearly indicates that if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax originally assessed. It is settled principle in law that the courts while construing revenue Acts have to give a fair and reasonable construction to the language of a statute without leaning to one side or the other, meaning thereby that no tax or levy can be imposed on a subject by an Act of Parliament without the words of the statute clearly showing an intention to lay the burden on the subject. In this process, the courts must adhere to the words of the statute and the so called equitable construction of those words of the statute is not permissible. The task of the court is to construe the provisions of the taxing enactments according to the ordinary and natural meaning of the language used and then to apply that meaning to the facts of the case and in that process if the tax payer is brought within the net he is caught, otherwise he has to go free. This principle in law is settled by this court in India Carbon Ltd. v. State of Assam [1997] 106 STC 460; [1997] 6 SCC 479 wherein this court held: 'Interest can be levied and charged on delayed payment of tax only if the statute that levies and charges the tax makes a substantive provision in this behalf.' A Constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e absence of a clear provision. Imposition of penalty would ordinarily attract compliance with the principles of natural justice. It in certain situations would attract the principles of existence of mens rea. While a penalty is to be levied, discretionary power is ordinarily conferred on the authority. Unless such discretion is granted, the provisions may be held to be unconstitutional. In a situation of this nature, we are of the opinion that the doctrine of purposive construction must be taken recourse to. In Ananta Kumar Bej v. State of Bengal [1999] 4 SLR 661, a Division Bench of the Calcutta High Court wherein one of us was a member had held: "It is a well settled principle of law that despite absence of a rule, the Selection Committee is entitled to short list the candidates. Rule 9(c)(ii) of the Rules only gives a statutory recognition to the aforementioned service jurispurdence. In a case of this nature, therefore, the doctrine of purposive interpretation should be invoked, and in such a situation the word 'written test' must be held to be incorporated within the word 'interview'. The answer to the question posed in this appeal, thus in the opinion of this court, sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondition is fulfilled any attempt by a court of justice to repair the omission in the Act cannot be justified as an exercise of its jurisdiction to determine what is the meaning of a written law which Parliament has passed.' It was further noticed: In Hameedia Hardware Stores v.B. Mohan Lal Sowcar [1988] AIR 1988 SC 1060, 1067, the rule of addition of words had been held to be permissible in the following words: 'We are of the view that having regard to the pattern in which clause (a) of sub-section (3) of section 10 of the Act is enacted and also the context, the words' "if the landlord required it for his own use or for the use of any member of his family" which are found in sub-clause (ii) of section 10(3)(a) of the Act have to be read also into sub-clause (iii) of section 10(3)(a) of the Act. Sub-clauses (ii) and (iii) both deal with the non-residential buildings. They could have been enacted as one sub-clause by adding a conjunction "and" between the said two sub-clauses, in which event the clause would have read thus: "in case it is a non-residential building which is used for the purpose of keeping a vehicle or adopted for such use, if the landlord required it for his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , then Chapter to Chapter and then section by section. The purpose and object of the Income-tax Act is to realise a direct tax. It imposes a fiscal burden. When the statute says that an interest, which would be compensatory in nature, would be levied upon the happening of a particular event or inaction, the same by necessary implication would mean that the same can be levied on an ascertained sum. For the purpose of construction of a statute even the history of the legislation can be relied upon (see Municipal Corporation of Greater Bombay v. Hindustan Petroleum Corporation [2001] 8 SCC 143). The interpretation clause, as is well known, is not a positive enactment. The interpretation clause also begins with the word "unless the context otherwise requires". Advance tax has been defined to mean the advance tax payable in accordance with the provisions of Chapter XVII-C. Such a definition is not an exhaustive one. If the word "advance tax" is given a literal meaning, the same apart from being used only for the purpose of Chapter XVII-C may be held to be tax paid in advance before its due date, i.e., tax paid before its due date. The matter might have been otherwise, had there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m to be of a sufficient caliber to excuse or justify a technical violation of the law." If a penal provision is to be read in section 234A, the same may border on unconstitutionality, as therefor the principles of natural justice are not required to be complied with. It is also well settled that when two constructions are possible, the construction, which would uphold the constitutionality of a provision, be applied. Had the Legislature made the amendment only for the purpose of imposition of a penalty, there was no necessity of enacting section 271F later on. We may also keep in mind that the statute should not be construed in a manner so as to lead to a conclusion that it acts in terrorem. It may be true that the purport and object, for which the aforementioned sections 234A, 234B and 234C were enacted, was to see that the income-tax return is filed within the prescribed time. The same, in our opinion, should be construed so as to achieve the object of filing the income-tax return together with the tax inasmuch as in a case where tax is paid, but the income-tax return is not filed, the Income-tax Officer on an information would not only be entitled to issue an appropriate n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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