TMI Blog1994 (2) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1964 (hereinafter referred to as " the Surtax Act "), deduction of interest payable under section 217(1A) and section 139 of the Income-tax Act should be reduced as provided under rule 2 of the First Schedule to the Surtax Act. The assessee contended that as per rule 2, the amount of income-tax is required to be reduced and the amount of income-tax would include interest payable by the assessee on the same tax, as it was part of the tax or was in the nature of compensation for delay in payment of the tax. That claim was rejected by the Income-tax Officer and in appeal by the Commissioner of Income-tax (Appeals). The Tribunal confirmed the said decision and at the instance of the assessee the aforesaid question is referred. For appreciating the contentions, it is necessary to refer to rule 2 of the Rules for computing chargeable profits as provided in the First Schedule to the Surtax Act, as under : " 2. The balance of the total income arrived at after making the exclusions mentioned in rule 1 shall be reduced by-- (i) the amount of income-tax payable by the company in respect of its total income under the provisions of the Income-tax Act after making allowance for any relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Income-tax Act shall be adjusted as provided in rules 1, 2 and 3. Rule 1 provides for exclusion from the total income of specified income which is component part of the total income with which we are not concerned in the present reference. Rule 2 provides that the balance of the total income arrived at after making the exclusions mentioned in rule 1 shall be reduced, inter alia, by the amount of income-tax payable by the company in respect of its total income under the provisions of the Income-tax Act after making allowances for any relief, rebate or deduction in respect of income-tax to which the company may be entitled under the provisions of the said Act and after excluding from such amount, the amount of income-tax as mentioned in clauses (a), (b) and (c) of sub-rule (1) of rule 2. Rule 3 of the First Schedule provides for increasing the net amount of income calculated in accordance with rule 2 upon the expenditure mentioned therein to the extent such expenditure, in the opinion of the Assessing Officer, is excessive having regard to the circumstances of the case. So, from the aforesaid scheme of the First Schedule, it appears that it extensively provides for adjustmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 139 of the Income-tax Act, the interest payable under section 139(8) would be a component part of the tax. In our view, this submission is without any substance because sub-section (8) of section 139 specifically provides that where the return under sub-section (1) or sub-section (2) or sub-section (4) for an assessment year is furnished after the specified date, or is not furnished, then the assessee shall be liable to pay simple interest at 12 per cent. per annum, reckoned from the day immediately following the specified date to the date of the furnishing of the return, or, where no return has been furnished, the date of completion of the assessment under section 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source. This, in our view, would indicate that the concept of tax is totally different from the concept of interest. Further, under the proviso to the said sub-section, interest in such cases and under such circumstances can be waived by the Income-tax Officer. For the income-tax payable by the assessee there is no question of waiver. Similarly, under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered by the Supreme Court. The court was dealing with the contention whether penalty can be imposed on a firm after dissolution and proceedings for imposing penalty under section 28 of the Indian Income-tax Act, 1922, can be continued against such a firm. The aforesaid phrase used in the case of Abraham [1961] 41 ITR 425 (SC), is clarified by the Supreme Court in the case of CIT v. Bhikaji Dadabhai and Co. [1961] 42 ITR 123, wherein it is observed : " This court regarded penalty as an additional tax imposed upon a person in view of his dishonest or contumacious conduct. It is true that under the Hyderabad Income-tax Act, distinct provisions are made for recovery of tax due and penalty, but that in our judgment does not alter the true character of penalty imposed under the two Acts." The observations in the case of Abraham [1961] 41 ITR 425 (SC) were further explained by the Supreme Court in the case of CIT v. Anwar Ali [1970] 76 ITR 696, wherein the court has held as under : " It is significant that in C. A. Abraham's case [1961] 41 ITR 425 (SC), this court was not called upon to determine whether penalty proceedings were penal or of quasi-penal nature and the observations ..... X X X X Extracts X X X X X X X X Extracts X X X X
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