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Banamali Tea Estate Vs. State of Assam and ors. - Court Judgment

LegalCrystal Citation
Subject;Direct Taxation
CourtGuwahati High Court
Decided On
Case NumberCivil Rule No. 519 of 1972
Judge
ActsAssam Agricultural Income Tax Act, 1939 - Sections 19 and 19(1); Assam Agricultural Income Tax Rules, 1939 - Rule 11 and 11(2)
AppellantBanamali Tea Estate
RespondentState of Assam and ors.
Appellant AdvocateA.K. Bordoloi, Adv.
Respondent AdvocateS.N. Bhuyan, B.P. Saraf, A.B. Choudhury and B. Choudhury, Advs.
Excerpt:
.....at what is clearly said. we can at best iron out the creases but we cannot alter the materials of which the provision is..........prescribed in section 6, shall furnish before the 31st day of december of the relevant financial year, a return of his agricultural income or the agricultural income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed:provided that, on an application made in the prescribed manner, the superintendent of taxes or agricultural income-tax officer may, in his discretion, extend the date for furnishing the return up to a period not beyond the 28th day of february of the relevant financial year and simple interest at six per cent. per annum shall be payable from the 1st day of january of the relevant financial year to the date of furnishing the return as extended by the.....
Judgment:

K. Lahiri, Actg. C.J.

1. By this application under Article 226 of the Constitution, the petitioner questions the vires of Rule 11(2)(b)(i) to (ix) of the Assam Agricultural Income-tax Rules, 1939 (for short 'the Rules'), as well as the validity of the order of assessment and demand of interest on agricultural income-tax at Rs. 6,093 made by the Agricultural income-tax Officer, Assam, Gauhati (for short 'the AITO').

2. The relevant facts are that for the assessment year 1970-71, corresponding to accounting year ending December 31, 1969, the petitioner was finally assessed to pay agricultural income-tax at Rs. 20,628 by the assessment order made by the Agricultural Income-tax Officer on March 14, 1972, who also levied interest of Rs. 6,093, up to March 31, 1972, on the finally assessed agricultural income-tax. The petitioner had submitted its return of agricultural income on February 24, 1972, which was found correct by the Agricultural Income-tax Officer.

3. Learned counsel for the petitioner has submitted that the assessment of interest at the sliding rate of 8% to 24% from May 1, 1970, to March 31, 1972, in exercise of the purported power under Rule 11(2)(b)(i) to (ix) is illegal, void and accordingly it should be set aside. Learned counsel submits that the provisions of Rule 11(2)(b)(i) to (ix) and the proviso thereto are illegal, void and ultra vires Section 19 of the Assam Agricultural Income-tax Act, 1939 (for short 'the Act'). The second contention is that the levy of interest beyond the date of submission of the return by the petitioner on February 24, 1972, is illegal and void and, accordingly, the impugned orders marked annexures A and B are liable to be quashed. The third contention is that the petitioner is liable to pay simple interest at 6 per cent, per annum from January 1, 1970, to February 28, 1970, and is not liable to pay any interest beyond February 28, 1970, as levied and demanded by the impugned orders.

4. The first two questions are no longer 'res Integra'. In New Assam Valley Tea Company Limited v. Agrl. ITO [1976] ALR 46, a Division Bench of the High Court has held that the provisions contained in Rule 11(2){b)(i) to (ix) and the proviso thereto are ultra vires Section 19 of the Act. It has been ruled that the provisions of Rule 11(2)(b) were beyond the rule-making power of the State Government and accordingly they were declared illegal, void and ultra vires. The provisions of Rule 11(2)(b) read with Section 19 empowered the Agricultural Income-tax Officer to levy interest at the rate of over 6 per cent, to the maximum of 24 per cent. Mr. S.N. Bhuyan, learned Advocate-General, Assam, appearing for the respondents has very fairly submitted that in view of the law laid down by this court in New Assam Valley Tea Co. Ltd. [1976] ALR 46, the Agricultural Income-tax Officer had no jurisdiction vested in him by law to assess interest beyond 6 per cent. and the order of assessment of interest over 6 per cent. is liable to be quashed. We hold, on the authority of New Assam Valley Tea Co. Ltd.'s case [1976] ALR 46, that the impugned orders marked annexures A and B are invalid to the extent of the levy of interest beyond 6 per cent. purported to have been made by the Agricultural Income-tax Officer acting under void and invalid Rule 11(2)(b)(i) to (ix) of the Rules.

5. The second contention of the petitioner also must be accepted on the authority of New Assam Valley Tea, Co. Ltd. [1976] ALR 46, wherein it has been ruled that interest could be charged only up to 'the date of submission of the return' and not beyond that date. As such, the impugned orders marked annexures A and B commanding the petitioner to pay interest beyond February 24, 1972, that is, the date of submission of the return, is also invalid and quashed accordingly.

6. Now, we turn to the last contention of Mr. Bordoloi, learned counsel for the petitioner. Learned counsel has contended that under Section 19 of the Act read with Rules 11(1) and 11(2)(a) of the Rules, the petitioner is only liable to pay simple interest at the rate of 6 per cent, per annum on the finally assessed agricultural income-tax up to February 28, 1970, and not beyond that date and, as such, the impugned order of assessment of interest beyond February 28, 1970, is liable to be quashed. To appreciate the contention, it is necessary to extract the relevant portion of Section 19(1) of the Act which we do hereunder :

'19. Return of income.--(1) Every person, if his total agricultural income or the total agricultural income in respect of which he is assessable under this Act during the previous year exceeded the limit of the taxable income prescribed in Section 6, shall furnish before the 31st day of December of the relevant financial year, a return of his agricultural income or the agricultural income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed:

Provided that, on an application made in the prescribed manner, the Superintendent of Taxes or Agricultural Income-tax Officer may, in his discretion, extend the date for furnishing the return up to a period not beyond the 28th day of February of the relevant financial year and simple interest at six per cent. per annum shall be payable from the 1st day of January of the relevant financial year to the date of furnishing the return as extended by the Superintendent of Taxes or Agricultural Income-tax Officer on the amount of agricultural income-tax payable on the total agricultural income as finally assessed, reduced by the advance tax, if any, paid.

If the return is not furnished within the 28th February of the relevant financial year as extended by the Superintendent of Taxes or Agricultural Income-tax Officer, simple interest up to a maximum of 24 per cent. per annum as may be prescribed shall be payable from the 1st day of March of the relevant financial year to the date of furnishing the return on the amount of agricultural income-tax payable on the total agricultural income as finally assessed, reduced by the advance tax, if any, paid:

Provided further that no interest under the Sub-section shall be levied if the amount of tax paid within the aforesaid 31st December, is not less than ninety per centum of tax as finally assessed '.

7. It is thus seen that under Section 19(1) of the Act, returns must be filed before the 31st December of the relevant financial year. Where the time-limit is extended by the Agricultural Income-tax Officer, an assessee has to pay simple interest at the rate of 6 per cent. per annum from the 1st January of the relevant financial year to the date of furnishing the return as extended by the officer. If no return is submitted within 28th February of the relevant financial year, an assessee is liable to pay simple interest up to a maximum of 24 per cent. 'as may be prescribed' by the Rules from the 1st day of March of the relevant financial year to the date of furnishing the return. A set of rules were framed prescribing rates of interest up to a maximum of 24 per cent. but the said Rule 11(2)(b)(i) to (ix) and the relevant proviso thereto have been declared ultra vires and void in New Assam Valley Tea Co. Ltd. [1976] ALR 46. At all relevant times, no such rule existed. So, there was no authority of law to assess simple interest beyond the 28th day of February of the relevant financial year to the date of furnishing the return. Accordingly, it has been contended that under Section 19(1) read with Rule 11(1) and (2)(a), the Agricultural Income-tax Officer had no authority to levy any interest from the 1st day of March, 1970, onwards.

8. To delve into the question, we are also to turn to Rules 11(1) and 11(2)(a) of the Rules, which we extract hereunder:

'11. (1) If any person fails to file the return of agricultural income under Section 19 within 31st December and applies for extension of time as per provisions of the Act, he shall be liable to pay simple interest at six per centum per annum on the amount of agricultural income-tax due as per return with effect from the first day of January up to the date of filing the return or the 28th/29th day of February of the relevant financial year, whichever is earlier.

(2) If any person submits the return of agricultural income under Section 19 after the 28th/29th day of February of the relevant financial year or does not submit the return at all, he shall be liable to pay simple interest on the amount of agricultural income-tax as finally assessed, at the following rates:

(a) at 6 per cent. per annum from the first day of January to the 28th/29th day of February... '

9. It is thus seen that Rule 11(1) and (2)(a) of the Rules prescribe the liability of a person who fails to file the return of agricultural income under Section 19 of the Act. Rule 11(1) prescribes the rate of interest leviable and the period during which he shall be liable to pay interest if he fails to comply with the terms of Section 19 of the Act. Such a defaulter is liable to pay interest at the rate of 6 per cent. per annum on the amount of agricultural income-tax with effect from the 1st day of January to the date of filing of the return or the last day of February of the relevant financial year, whichever is earlier. Rule 11(2)(a) prescribes that if any person submits the return of agricultural income under Section 19 after the last date of February of the relevant financial year or does not sub-mil the return at all, he shall be liable to pay simple interest on the amount of agricultural income-tax as finally assessed at the rate of 6 per cent. per annum from the 1st day of January to the last day of February of the relevant financial year. Rule 11(2)(b)(i) to (ix) had provided for imposition of interest from the 1st day of March onwards at the sliding rate of 8 per cent. to 24 per cent. for failure to submit the return. However, this rule has been declared void and it is no longer in the statute book. As such, we find that if a person submits his return of agricultural income under Section 19 of the Act after the last day of February of the relevant financial year or does not submit his return at all, he is liable to pay simple interest at the rate of 6 per cent. per annum from the 1st day of January to the last day of February and there the matter ends. At the relevant time, there was no provision including rules prescribing the rate of interest chargeable from the 28th February of the relevant financial year. Under these circumstances, we are of the view that the order of assessment charging interest beyond 28th February, 1970, cannot be sustained.

10. It thus appears that if a person applies for extension of time for furnishing the return and furnishes the same, he is liable to pay simple interest at the rate of 6 per cent per annum from the first day of January of the relevant financial year to the date of furnishing the return on the 28th/29th day of February of the relevant financial year, whichever is earlier. Similarly, if a person does not apply for extension, but submits his return on or before the 28th day of February of the relevant financial year, he is also liable to pay interest at the same rate of 6% simple interest from the 1st day of January of the relevant financial year to the date of furnishing of the return or the last date of February of the relevant financial year. It appears incongruous. But that is the law. Again, we find that if the return is not furnished within 28th day of February of the relevant financial year, the person is liable to pay simple interest up to a maximum of 24% per annum 'as may be prescribed' payable from the first day of March of the relevant financial year to the date of furnishing the return. As alluded, the rate of interest from the first day of January to the last day of February has been fixed under Section 19 of the Act at 6% per annum. However, under Section 19, there is no provision prescribing the rate of interest beyond the last day of February of the relevant financial year. The rates were prescribed under Rule 11(2)(b)(i) to (ix). But the rule has been declared void. As such, the said rule is no longer in existence. Situated thus, we find that there was no law prescribing the rate of interest payable by a person who does not furnish the return beyond the 28th day of February of the relevant financial year. This appears to be inequitable. One may argue that the intendment of the Legislature is that until the rates are prescribed, the defaulter shall continue to pay interest at 6% per annum. But, admittedly, there is no prescription of the rate at which a defaulter shall be liable for non-submission of return, beyond the 28th day of February of the relevant financial year. As such, there is no authority of law to levy and realise any interest after the 28th day of February. Is there any provision which lays down the rate of liability of a person who fails to submit a return beyond the 28th day of February of the relevant financial year We find that the liability has been prescribed but subject to a condition. The condition lays down prior prescription of the rate of interest. There is no rule prescribing any rate of interest for non-submission of return beyond the 28th day of February and so no interest can be levied under such a situation. As such, until the rate of interest is prescribed for non-submission of return beyond the 28th February, there is no jurisdiction for the authorities to levy interest. In a taxing statute, one is to look merely at what is clearly stated. There is no room for any intendment. There is no equity about the tax. We are only to look fairly at what has been stated and to interpret the Section accordingly. Even if it appears, on perusal of a fiscal statute, that there may be two views, the court should accept the view in favour of the assessee. The said view has been expressed by Krishnaswamy Ayangar J. in CIT v. Bosotto Bros. Ltd. : [1940]8ITR41(Cal) in the following words :

'If a case appears to be governed by either of two provisions, it is clearly the right of the assessee to claim that he should be taxed under that one which leaves him with a lighter burden.'

11. We are to bear in mind the famous observations of Rowlatt J. in Cape Brandy Syndicate v. CIR [1921] 1 KB 64 (which was approved by the House of Lords in Canadian Eagle Oil Co. Ltd. v. King [1945] 27 TC 205, which we extract hereinbelow:

'In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.'

12. As such, while construing the provisions, we are to bear in mind that there is no room for any intendment or equity nor should we go for presumption. We are to look fairly at the language used and to take the law.

13. In Fernandas v. State of Kerala : [1957]1SCR837 , Bhagwati J. observed as follows ;

'It is no doubt true that in construing fiscal statutes and in determining the liability of a subject to tax, one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law. If the Revenue satisfies the court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the Legislature and by considering what was the substance of the matter.'

14. One may cry hoarse that the construction that we favour leaves an easy loophole through which many persons may find an escape. That may be so, yet we must Dear in mind that while construing a fiscal statute, the function of the court is not to give a strained and unnatural meaning to the provisions. We cannot strain the scope of the provisions by analogy or place upon it what is called a beneficial or equitable construction in order to prevent an anomaly or a supposed anomaly. There is no scope for repairs or reconstruction of a provision. The intention of the Legislature manifested in plain words must be accepted. If a provision of a taxing statute is doubtful or ambiguous, it is not possible to remove the ambiguity and create a new and added obligation not cast upon it by the Legislature. We can at best iron out the creases but we cannot alter the materials of which the provision is woven. So said, Lord Denning in Seaford Court Estates Ltd. v. Asher [1949J 2 All ER 155:

'A judge must not alter the material of which the Act is woven, but he can and should iron out the creases.'

15. In the jungle of fiscal law, common sense is a frail guide. Certainly common sense cannot be the master, for then, it would usurp the function of the statute book. To this effect said Megarry J. in Simpson v. Jones [1968] 44 TC 599.

16. A subject cannot be taxed unless he comes within the strict letter of the law. He cannot be charged even if he falls within the spirit of law.

Tax and equity are strangers and an equitable construction has no room in a taxing statute. If the interpretation of a fiscal enactment is open to doubt, the construction most beneficial to the subject should be adopted, even if it results in granting a double advantage. A provision for exemption or relief should be construed liberally and in favour of the assessee, but the court must disregard any assumption or presumption as the construction on the basis of belief and assumptions will amount to making of a new law.

17. In Venkataramana v. State of Mysore AIR SC 675, Mahadeolal Kanodia v. Administrator-General, West Bengal : [1960]3SCR578 and Commissioner of Sales Tax v. Parson Tools and Plants : [1975]3SCR743 , it has been held that it is the duty of the court to give effect to the words used without scanning the wisdom or policy of the legislature and without engrafting, adding or implying anything which is not congenial to or consistent with such express intent of the law-giver. If the statute is a taxing statute, we must assume that the law making authority does not commit a mistake or make an omission. In Tarulata Shyam v. CIT : [1977]108ITR345(SC) , the Supreme Court held that in a taxing statute, one has to look merely at what is normally stated, there is no room for any intendment, there is no equity as to a tax, there is no presumption as to a tax, nothing is to be read in, nothing is to be implied, one can only look fairly at the language used. Even if there be casus omissus, the defect can be remedied only by legislation and not by judicial interpretation. Similar view has been expressed in Polestar Electronics (Pvt.) Ltd. v. Additional Commissioner of Sales Tax : [1978]3SCR98 .

18. Now let us turn to the moot question:

Whether the petitioner who did not ask for extension of time and submitted the return far beyond the 28th day of February, 1970, is liable to pay any interest from March 1, 1970, onwards? The first proviso to Section 19(1) of the Act provides that when an application is made to the concerned officer to extend the date for furnishing the return, the officer may so extend the date but not beyond the 28th day of February of the relevant financial year. However, the person, notwithstanding the said extension, is liable to pay simple interest at the rate of 6% per annum from the first day of January of the relevant financial year to the date of furnishing the return as extended by the officer. The proviso deals with the case of a person who makes an application for extension of time for furnishing the return. If the applicant fails to furnish return within the 28th day of February of the relevant year, he is also liable to pay interest @ 6% per annum from the first day of January of the relevant year to the 28th day of February. The paragraph subsequent to the first proviso lays down that if the return is not furnished within the 28th day of February of the relevant financial year as extended by the officer, the defaulter is liable to pay interest up to a maximum of 24% per annum 'as may be prescribed'. Admittedly, there was no such rule or provision prescribing the rate of interest payable from the first day of March of the relevant financial year onwards. The rule so made, namely, Rule 11(2)(b) of the Rules, has been struck down. As such no interest is leviable for non-submission of return beyond 28th February of the relevant financial year. Rule 11(1) of the Rules provides that if a person fails to furnish the return of agricultural income under Section 19 of the Act within 31st December and applies for extension, he is liable to pay simple interest at 6 per centum per annum with effect from the first day of January up to the date of filing of the return or the 28th day of February of the relevant financial year, whichever is earlier. Rule 11(2)(a) provides that any person who fails to submit the return by 28th/29th February of the relevant financial year or does not submit return at all shall be liable to pay simple interest at 6 per centum per annum from the first day of January to 28th/29th day of February. In the instant case, the petitioner did not file the return by or before 28th/29th day of February, 1970, of the relevant financial year. As such, under Rule 11(2)(b) of the Rules, the petitioner is liable to pay interest at 6 per centum per annum only from the first day of January, 1970, to the 28th day of February, 1970. No liability for payment of interest at any rate has been prescribed in the provisions of the Act and the Rules. Accordingly, the petitioner cannot be made liable to pay any interest beyond the 28th day of February, 1970. This is what we find on a plain reading of the provisions of the Act and the Rules. As such, the impugned order imposing interest on the petitioner from March 1, 1970, to March 31, 1972, must be declared to be invalid, void and without jurisdiction for the reasons set forth above and on the authorities referred to above.

19. In the result, we hold that the petitioner is liable to pay simple interest at 6 per centum per annum on the amount of agricultural income-tax as finally assessed from the 1st day of January, 1970, to February 28, 1970, only. The impugned order of assessment and demand of interest beyond February 28, 1970, is declared invalid. The impugned order marked annexures A and B are quashed. However, the petitioner is liable to pay interest at the rate of 6 per centum per annum from January 1, 1970, to February 28, 1970. Accordingly, we direct that the Agricultural Income-tax Officer, Assam at Gauhati, to assess the interest as directed.

20. In the result, the petition is accepted to the extent indicated above. However, there will be no order as to costs.


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