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TMI Blog1994 (7) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act in his capacity as the karta and manager of the alleged Hindu undivided family of Chimanlal Narbheram Thakore. Again the petitioner submitted a return showing the income as "Nil". Thereafter, the said proceedings were dropped for which the petitioner received a letter dated March 10, 1967. Subsequently, a third notice under section 148 was received by the petitioner on March 28, 1967. Despite the objections raised by the petitioner, the assessment order dated March 18, 1968, was passed by the second respondent assessing the petitioner as liable for capital gains tax for the sum of Rs. 82,046. That order was challenged by the petitioner before the Appellate Assistant Commissioner of Income-tax, Ahmedabad. The Appellate Assistant Commissioner remanded the matter with a specific direction to give a remand report. That remand report was received by the Appellate Assistant Commissioner on September 29, 1973. The Appellate Assistant Commissioner finally allowed the appeal by his order dated August 5, 1976. Against that order, the Department preferred an appeal before the Income-tax Appellate Tribunal. The petitioner filed a cross-appeal. The appeal filed by the Department was d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee after the 31st day of March, 1975, in pursuance of any order of assessment or penalty, which is in excess of the amount which such assessee is liable to pay as tax or penalty, the assessee would be entitled to get refund of the excess amount with interest as specified therein, is illegal, because-- (i) by prescribing a date, artificially two classes of persons who have paid tax or penalty in excess are created--one class of persons is the persons who have paid tax in excess prior to March 31, 1975, and the other class of those persons who have paid tax after March 31, 1975. He further submitted that those persons who have paid tax in excess in pursuance of the order of assessment prior to March 31, 1975, cannot be discriminated against by not paying interest on the refund amount from the date of payment ; and (ii) that there is no reason or nexus sought to be achieved for giving preferential treatment to those persons who have paid tax or penalty in excess after March 31, 1975. He further submitted that when tax in excess is paid, the date of payment is not at all relevant for grant of refund with interest. With regard to the refund of the amount of Rs. 4,102, Mr. Shelat, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant provisions under Chapter XIX pertaining to refunds of excess tax or penalty paid by the assessee under the Income-tax Act. This provision can broadly be divided into two groups -- (i) where the claim for refund is to be made, sections 238, 239 and 243 provide the procedure for it, and (ii) other sections provide for cases where no claim is required to be made and the concerned officer is required to refund the amount in pursuance of the order passed in appeal or in any other proceedings. The said sections are sections 240, 241 and 244. Section 237, inter alia, provides that, if any person satisfies the Income-tax Officer that the amount of tax paid by him for any assessment year exceeds the amount with which he is properly chargeable for that year, he shall be entitled to a refund of the excess. Section 238 provides as to who would be entitled to file an application for refund. Section 239(1), inter alia, provides that every claim for refund shall be made in the prescribed form and verified in the prescribed manner. Sub-section (2) provides limitation within which an application for refund can be filed. Section 243 provides that in the cases where the Income-tax Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct from October 1, 1975. Prior to the addition of sub-section (1A), where refund was payable to the assessee in pursuance of an order passed in an appeal or other proceedings under the Act, the Income-tax Officer was required to refund the said amount within a period of three months from the end of the month in which such order is passed with simple interest at the rate of 12 per cent. per annum on the amount of refund from the date immediately following the expiry of the period of three months aforesaid to the date on which the refund is granted. Because of sub-section (1), the Income-tax Officer was duty bound to refund the excess amount within a period of three months from the end of the month in which such order was passed. If such amount is not paid within the said period, then the assessee was entitled to recover the said amount with simple interest at the rate of 12 per cent. per annum after the expiry of three months from the date of the order by which he is entitled to get a refund. By inserting sub-section (1A), the law with regard to payment of interest is changed and it is provided that on such amount, the assessee shall be entitled to get interest from the date of paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bill was referred to the Select Committee and the Select Committee had presented its report on March 20, 1975. The Select Committee had suggested insertion of sub-section (1A) in section 244 with modification and it was suggested that "only payments of disputed taxes made after March 31, 1975, will be entitled to interest". Further, considering section 244(1) of the Act, it is clear that where, as a result of any order passed in appeal or other proceeding under the Income-tax Act, refund of any amount becomes due to the assessee, and the Income-tax Officer does not grant refund within a period of three months from the end of the month in which such an order is passed, the Central Government is required to pay to the assessee simple interest at the rate of 12 per cent. per annum on the amount of refund due from the date immediately following the expiry of the period of three months till the date on which the refund is granted. With effect from October 1, 1975, sub-section (1A) is added with the specific purpose of granting interest from the date of payment in certain cases. It provides that if such refund is due to the assessee, in cases where (i) the assessee had paid the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from a specific date, i.e., March 31, 1975, because of accounting year which begins from April 1, 1975. However, the learned Advocate-General relied upon the decision of the Supreme Court in the case of B. Prabhakar Rao v. State of A. P. [1985] Supp SCC 432 ; AIR 1986 SC 210, to substantiate his contention that fixation of a cut-off date in the present case is arbitrary. In our view, the said decision would not in any way be helpful in deciding the question involved in the present case, because in that very case, the court has observed that a situation such as the one before them had never presented itself to the court previously. The court further observed as under (at page 221 of AIR 1986 SC) : "Make this case a precedent for justice say one side ; let this not be the first say the other. We have had cases where the age of superannuation had been raised from 55 to 58 years ; we have had cases where having earlier raised the age of superannuation from 55 to 58 years, there was later a change of policy and the age of superannuation was once again reduced to 55 years. But this is the first occasion -- neither our researches nor those of the learned counsel have been able to tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 23 of 1984 and who are the persons most affected by the wrong by denying to them the benefit of the rectification of the injustice. The court has stated that solely on this ground those petitions were allowed and the reliefs were granted. Even in the last paragraph of the supplementary judgment rendered by Khalid J., it is observed (at page 231 of AIR 1986 SC) : "I respectfully agree with the judgment prepared by my learned brother Reddy J., I am also in entire agreement with my learned brother Eradi J., about the limited scope of the principles laid down in these cases on their peculiar facts." From the aforesaid discussion by the Supreme Court, it is apparent that the case was decided because of the peculiar facts and circumstances. The court has also emphasised that alteration can legally be brought about with prospective effect from the date of commencement of the operation of the Act and no question of violation of article 14 will arise merely because the benefit of change is not extended to the employees who have already retired from service. Further, while dealing with the case of D. S. Nakara v. Union of India, AIR 1983 SC 130, the Supreme Court in the case of Krishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... civil liability in respect of post enactment transactions, no discrimination is practised, by a statute which imposes liability in respect of transaction which have taken place after a date fixed by the statute but before its enactment, it cannot be said that discrimination is practised. The court further observed that article 14 strikes at discrimination in the application of the laws between persons similarly circumstanced ; it does not strike at a differentiation which may result by the enactment of a law between transactions governed thereby and those which are not governed thereby. Applying the aforesaid law, it cannot be said that the two groups of assessees, those who have paid excess tax or penalty prior to March 31, 1975, and after March 31, 1975, are similarly circumstanced and, therefore, denial of benefit to one group does not infringe rights guaranteed under the Constitution. By insertion of sub-section (1A), the benefit of granting interest from the date of payment is given in respect of post enactment payment of excess tax or penalty. While dealing with such a contention, the Supreme Court in the case of Union of India v. Parameswaran Match Works, AIR 1974 SC 234 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , wide discretion can be exercised in selecting persons or objects which will be taxed and the statute is not open to attack on the mere ground that it taxes some persons or objects and not others. It is only when within the range of its selection the law operates unequally and cannot be justified on the basis of a valid classification that there would be a violation of article 14." After considering various decisions, the court has observed, "the legislative assumption cannot be condemned as irrational. It is equally well-recognised that judicial veto is to be exercised only in cases that leave no room for reasonable doubt. Constitutionality is presumed". The law on the subject was also considered by the Supreme Court in the case of Spences Hotel Pvt. Ltd. v. State of West Bengal [1991] 2 SCC 154. The court observed that taxation will not be discriminatory if, within the sphere of its operation, it affects alike all persons similarly situated. It, however, does not prohibit special legislation, or legislation that is limited either in the objects to which it is directed, or by the territory within which it is to operate ; the rule of equality requires no more than that the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words of Cooley : 'Absolute equality is impossible. Inequality of taxes means substantial differences, practical equality is constitutional equality. There is no imperative requirement that taxation shall be absolutely equal. If there were, the operations of Government must come to a stop, from the absolute impossibility of fulfilling it. The most casual attention to the nature and operation of taxes will put this beyond question. No single tax can be apportioned so as to be exactly just and any combination of taxes is likely in individual cases to increase instead of diminish the inequality'. " The aforesaid two judgments were referred to and relied upon by the Supreme Court in the case of Sri Srinivasa Theatre v. Govt. of Tamil Nadu, AIR 1992 SC 999. The court observed that Parliament and the Legislatures are accorded a greater freedom and latitude in choosing the persons upon whom and the situations and stages at which it can levy tax. Considering the aforesaid settled law, in our view, the constitutionality of section 244(1A) of the Income-tax Act is required to be presumed. It cannot be said that Parliament has prescribed the cut-off date arbitrarily or capriciously. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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