1. The assessee, a private limited company, has challenged the levy of interest in the sum of Rs. 85,110 under Section 217 of the Income-tax Act, 1961 ('the Act') Some antecedent facts have to be noticed first.
2. The assessee-company has been a regular assessee for the past many years. The accounting year followed is the financial year. Assessment was completed for this year on 27-3-1982 on a total income of Rs. 6,58,140. As part of this order, the ITO had directed as under: 3. On receipt of the copy of the assessment order, the assessee wrote to the ITO, on 8-4-1982, as under: While calculating the tax on the assessed income, a sum of Rs. 85,110 has been charged towards interest under Section 217. This action is patently incorrect and such provisions are not applicable to the company as no notice under Section 210 was issued by the department and, accordingly, the assessee-company was not obliged to file any statement of income under Section 209A or any estimate in respect thereof, which may kindly be rectified and a revised order and a challan to this effect be issued. This will also affect the interest charged under Section 139(8).
Evidently, there was no response from the ITO. Meanwhile, the assessee filed an appeal to the Commissioner (Appeals), contesting the assessment itself. One of the objections taken there was to the levy of the said interest under Section 217. The Commissioner (Appeals) disposed of this particular objection as under: 217. This interest has been charged in routine manner without taking into account the objections raised by the appellant in this regard.
It is submitted that the charge of the interest is legally incorrect since this interest can be charged only if there is failure to comply with the provisions of Section 209A. In this connection, no notice under Section 210 was issued by the ITO, while the latest assessment was completed on a loss and, therefore, no estimate was called for under Section 209A. As mentioned above, this objection was raised before the ITO on which he has not given any finding. I, therefore, deem it fair to restore this point to the file of the ITO and he is directed to charge interest under Section 217, if any, after taking into consideration the objections raised by the appellant.
4. After the Commissioner (Appeals)' order, dated 31-12-1982, was received, the ITO took up for consideration the assessee's petition, dated 8-4-1982, supra. He also took note of the Commissioner (Appeals)' directions in his order of 31-12-1982 supra. He then passed an order under Section 154 of the Act on 9-6-1983. In this order, he held as follows: I have also considered the point No. (ii) above, regarding chargeability of interest under Section 217 in view of the petition under Section 154 along with directions of the Commissioner (Appeals) and it is found that vide the Finance Act, 1978, Section 24, with effect from 1-6-1978, which amended the whole structure of advance tax and in view of these amendments, every assessee is bound to file statement or estimate of advance tax before the due date(s) without waiting for a notice under Section 210 to be issued by the department. As the assessee-company has neither filed statement nor the estimate, the interest charged under Section 217 is correct and the petition on this point is, therefore, rejected.
5. The Commissioner (Appeals) disposed of the appeal by an order, dated 24-4-1984. He rejected the assessee's objections to the levy of the said interest under Section 217 for the following reasons briefly: (i) The assessment order was passed in this case for the assessment year 1975-76 on 7-12-1976. This was on a total income of Rs. 3,73,663. Assessment for the year 1976-77 was completed on 25-1-1977. This was on a loss of Rs. 5,91,110. Assessments for the years 1977-78 and 1978-79 had not been completed till after the end of the previous year for the assessment year in appeal here.
(ii) There was no merit in the assessee's claim that since the assessment for the latest previous year, i.e., 1976-77, has been framed on a loss, there was no liability on the part of the assessee to send any statement or estimate under Section 209A of the Act.
That section had to be read with other relevant sections, e.g., Section 207 to Section 219 of the Act.
(iii) The words 'income' and 'total income' used in Section 209 and Section 208 cannot mean 'loss'. These sections related to payment of advance tax and, hence, could not have dealt with loss cases. (iv) Similarly, the words 'the amount of advance tax payable by an assessee in the financial year' used in Section 209(1) have to be read with Section 209(1)(a)(i), where the phrase 'his total income of the latest previous year in respect of which he has been assessed by way of regular assessment', has been used. This phrase again would not refer to a 'loss'. The phrase refers only to a figure of positive income, if any, determined for any earlier previous year that happens to be the latest previous year of positive income. The latest previous year does not refer to the last assessed year but the last assessed year in which positive income has been assessed.
(v) The above reading of Sections 209 and 209A makes for a harmonious and meaningful result. Under such an interpretation, an assessee has the obligation to file a statement in accordance with Section 209A. Such obligation would be on the basis of the positive income last assessed. He has the option otherwise to file an estimate in accordance with Section 209A(2) or Section 209A(3).
Accordingly, the appellant should have paid advance tax on the basis of income assessed for the assessment year 1975-76 or under Section 209A(2) or (3) or (4).
(vi) On the other hand, if the words 'income' or 'total income' found in Sections 207, 208 and 209 are to be read as including 'loss', as determined in the latest previous year on regular basis, it would mean that the words 'if his current income is likely to exceed the amount specified in Sub-section (2) of Section 208' are redundant. Moreover, the assessee always has the option to revise the estimate and pay less tax, as noted above, or not to pay any tax if the current income is estimated to be a loss.
(vii) In the instant case, the current income, as it came to be reflected in the return for this assessment year 1979-80, was Rs. 3,82,784. Solely because of the facts that the last completed assessment was on a loss, the assessee did not pay advance tax. This was not permissible under Section 209A. If that section was read correctly as outlined above, the assessee would have been obliged to pay advance tax amounting to more than Rs. 2 lakhs. Interest was, therefore, rightly levied.
(a) where the total income, exclusive of capital gains and income referred to in Sub-clause (ix) of Clause (24) of Section 2, of the assessee, referred to in Sub-clause (i) of Clause (a) of Section 209, exceeds the amount specified in Sub-section (2), or (2) The amount referred to in Clause (a) of Sub-section (1) shall be-- 209. (1) The amount of advance tax payable by an assessee in the financial year shall, subject to the provisions of Sub-sections (2) and (3), be computed as follows:-- (a) (i) his total income of the latest previous year in respect of which he has been assessed by way of regular assessment shall first be ascertained: (iii) the income-tax so calculated shall be reduced by the amount of income-tax which would be deductible during the said financial year in accordance with the provisions of Sections 192 to 194, Section 194A, Section 194 C, Section 194D and Section 195 on any income (as computed before allowing any deductions admissible under this Act) on which tax is required to be deducted under the said sections and which has been taken into account in computing the said total income ; (i) the total income of the latest previous year being a year later than the previous year referred to in Clause (a) on the basis of which tax has been paid by the assessee under Section 140A exceeds the total income referred to in Clause (a), or 209A. (1) Every person shall, in each financial year, on or before the date on which the first instalment, or where he has not previously been assessed by way of regular assessment under this Act, on or before the date on which the last instalment, of advance tax is due in his case under Sub-section (1) of Section 211, if his current income is likely to exceed the amount specified in Sub-section (2) of Section 208 send to the Income-tax Officer-- (a) where he has been previously assessed by way of regular assessment under this Act, a statement of advance tax payable by him computed in the manner laid down in Clause (a) or, as the case may be, Sub-clause (i) of Clause (d) of Sub-section (1) of Section 209, or 7. We have to understand what Section 209A lays down. There is no dispute that the assessee has been previously assessed by way of regular assessment. This was the position before the date on which the first instalment of advance tax was due in the financial year 1978-79, i.e., the assessee was an old assessee. The question is: how was advance tax to be calculated by the assessee for being shown in the statement to be filed by the assessee in terms of Section 209A(1)(a).
The basis of such a calculation is laid down in Section 209(1)(a)(i)/209(1)(J). Section 209(1)(a)(i) says the basis of the computation of the advance tax is the total income of the latest previous year in which the assessee has been assessed by way of regular assessment. What is the meaning of the phrase 'total income of the latest previous year' for which there has been a regular assessment 'Total income' is defined in Section 2(45) to mean 'the total amount of income referred to in Section 5, computed in the manner laid down in this Act'. Section 5(1) of the Act says that subject to the provisions of this Act, the 'total income' of any previous year of a person who is a resident includes all income from whatever source derived. There is also a definition of the word 'income' in Section 2(24). But this is an inclusive definition and Clause (i) of this definition refers to 'profits and gains'. Another provision requiring notice is Explanation 2 of Section 64(2) of the Act, which reads as under: 8. The point for decision is: does the term 'total income' occurring in Section 209(1)(a)(/) so operate, as to exclude a loss assessment. Shri S.D. Kapila, the departmental representative, submits that it does. He referred to the decision in the case of Dayalbhai Madhavji Vadera v.CIT  60 ITR 551 (Guj.). That was under the Indian Income-tax Act, 1922 ('the 1922 Act'). The dispute was regarding the interpretation of Section 16(3)(a) of the 1922 Act. The assessee, Vadera, was a non-resident individual. The assessment year was 1958-59. He had share income from a partnership firm, carrying on business in India. The income of his wife and his minor son (who were also non-residents) from interest and share in the aforesaid firm was being included in the assessee's total income under the provisions of Section 16(3) [corresponding to Section 64(1) of the 1961 Act]. For the assessment year 1958-59, there was a loss determined in the case of the firm. The ITO apportioned the loss (as the firm was registered) amongst the partners in the order passed in the case of the firm. Losses apportioned to the assessee's wife and the minor son were, however, not given set off in the assessment of the assessee, though such interest income from the firm was brought to tax. The Court held that the term 'income' was not defined in Section 16(3) ; income may, in certain cases, include negative income, namely, loss but such a construction was not favoured by Section 16(3). The section created an artificial liability. Hence, the section had to be read as carrying the concept of adding rather than subtracting, deducting or setting off. This decision was relied on for the revenue to contend before us that the concept of income cannot include loss. On the other hand, Shri R.K. Relhan, the authorised representative of the assessee, relied on the decision of the Mysore High Court in Dr. T.P. Kapadia v. CIT  87 ITR 511.
That was also a case under the 1922 Act, involving interpretation of Section 16(3). The Court held here that the share of loss of the wife in a registered firm, in which the husband-assessee was also a partner, can be set off against the income of the assessee, while computing his total income. It noticed the decision of the Gujarat High Court in Dayalbhai Madhavji Vadera's case (supra), but did not follow it. In fact, it referred to a circular of the Central Board of Revenue (Circular No. 20 of 1944) to the effect that an "equally tenable view was that such loss should be treated as if it were a loss sustained by the assessee in whose total income the share of profit of the loss from the partnership firm would be includible". Thus, there were two views as regards the meaning of the term 'income' occurring in Section 16(3)(a). One view was that the term 'income' included loss also. The other view was that it did not. The Legislature, however, has made the statutory position quite clear by insertion of Explanation 2, with effect from 1-4-1980, in Section 64.
9. There being two views possible, we were inclined to prefer the broader construction put on the word 'income' by the Mysore High Court in Dr. T.P. Kapadid's case (supra), i.e., the word 'income' includes the concept of loss also.
10. But then (Shri Kapila submits) the matter does not stand concluded against the revenue merely on the authority of the Mysore High Court in Dr. T.P. Kapadia's case (supra). As is made clear in Explanation 2 of Section 64 itself, it is only for the specific purpose of Section 64 that the concept of income has been broadened to include loss also but not for any other purpose. Shri Kapila points out further that there is a separate set of rules of computation for the loss returned. There are other points of distinction as well. In fact under the charging section, the revenue cannot compel the filing of a loss return. It is for the assessee to file the loss return in terms of Section 139(3) of the Act. Even after such a return is filed, the cluster of provisions from Sections 71 to 79 of the Act deal with the treatment of losses specifically, either for set off or for carry forward. Attention is also invited to Section 80 of the Act, which says that no loss which has not been determined in pursuance of a return filed under Section 139, shall be carried forward and set off, as laid down in the Act. On the other hand, the Act bristles with sanctions for compelling the filing of income returns. The thesis is: a loss is clearly distinguished as regards assessment from income and only as regards one explicit exception, the concept of income has been made to include a loss also, i.e., Section 64, but for no other purpose.
11. Shri Kapila then goes on to the legislative intent behind the provisions relating to the advance tax. He submits that the central idea of these provisions is to collect the tax as and when the income is earned. This is an essential step for the protection of revenue and that is why the Legislature has fixed the base as the total income of the last completed assessment. To say that if the last completed assessment is on a loss, no advance tax need be paid, even if the current income is as high as Rs. 3,82,784 (this was the income returned by the assessee on 10-3-1980 for this year), would be to render the entire scheme of advance collection of tax unworkable. The submission is that statutory language should not be so construed as to make any part of the statute meaningless or ineffective. In reply, Shri Relhan submits that prior to the introduction of Section 209A, an old assessee was entitled to receive a notice under Section 210 from the ITO on the basis of the last completed assessment. (Section 209A was introduced by the Finance Act, 1978, with effect from 1-6-1978). Under that old law, if the ITO failed to serve a notice under Section 210 on an old assessee for any fiscal year, there was no liability on the part of such an assessee to pay any advance tax. That was so, even if the asses-see's income for that year was in lakhs. This did not mean that the Legislature had thrown the interest of the revenue to the winds under the old dispensation. The Legislature, no doubt, introduced Section 209A, with effect from 1-6-1978, but that section referred to computation of advance tax in terms of Section 209(1). If indeed the intention of the Legislature had been that every old assessee had to pay advance tax on the basis of an assessment for the latest previous year, resulting in positive income, it would have taken care to exclude a loss assessment for the 'latest previous year' specifically. It did not do so. It also did not specifically state that the advance tax would have to be paid in terms of the income of the current year, if that was higher than the total income of the latest previous year. In other words (according to Shri Relhan), in the absence of the support of specific statutory language, to accept the interpretation suggested by the departmental representative based on what his idea of the legislative intent was, would be to rewrite the statute and not to interpret it. After all legislative intent is best manifest in the plain words of the statute and is not to be gathered on the basis of a tortuous subjective reasoning outside the four corners of the Act.
12. We have considered the position. No doubt, there are specific provisions relating to losses. There is also a restriction built into Section 139 itself for submission of loss returns. Further, Shri Kapila is not wide of the mark when he says losses are clearly distinguishable from income, in the light of the special provisions relating to set off and carry forward of losses as also in view of the charging sections compelling the filing of returns of income. Quite apart from this, Shri Kapila also based his arguments on what would have been the legislative intent. He found it impossible to believe that the Legislature would have permitted a taxpayer with a huge income for the current year (as in this case) to go scot-free from paying even a rupee of advance tax.
To permit such an interpretation of the relevant provision, was neither equitable nor in accord with commonsense and certainly not good law according to Shri Kapila. We agree that these considerations cannot be lightly brushed aside. But then what appeals to one as what should be the law and what the law is actually in terms of the statute, do not always coincide. That is why the Courts have repeatedly laid down that interpretation should not proceed upon subjective ideas of what is correct and what is not correct. Legisla-lative intent is of importance no doubt, but such intent is most manifest in the words of the statute and it is to these words we will turn, to resolve the dispute before us. We have already referred to the phrase 'total income' occurring in Section 209(1)(a)(i)/209(1)(d)(f). There is not much difficulty in understanding the term 'the latest previous year in which he has been assessed by way of regular assessment', if that phrase stood by itself.
In that event, it would simply mean the last completed regular assessment. In the case before us, the assessment for the year 1976-77 was completed on 2-1-1977 but, according to Shri Kapila, since this assessment resulted in a loss of Rs. 5,91,110, we must keep on pushing back into the assessment history of the assessee until we come to a positive income year. Logically, it would mean it does not matter if such first year of positive income is the one immediately preceding the assessment year 1976-77 or if it is some 20 years earlier. We cannot assert that, that is what is meant or indicated by the expression 'total income of the latest previous year in respect of which the assessee has been assessed by way of regular assessment'. For one thing, such a state of affairs may have no relevance at all to the position reflected by current year and, hence, such an argument is self-defeating. Secondly, 'total income' as we said before, has been defined in Section 2(45). It means, total amount of income referred to in Section 5 computed in the manner laid down in this Act. The computation itself is on a schedular basis though assessment is on a globular basis. There are different heads of income, each with its own rules of computation. These are enumerated in Chapter IV of the Act.
These heads of income are "Salaries, Interest on securities, Income from house property, Profits and gains Of business or profession, Capital gains and Income from other sources". Take the head of income: 'Income from house property'. If the word 'income' automatically and invariably excludes the concept of loss as argued for the revenue, then there could be no loss computed at all under the charging section as regards income from house property. On the other hand, the following comment from V.S. Sundaram's Law of Income-tax in India, 11th edn., volume 1, is of some significance: 20. Net loss on the income from house property.--It will be seen from Subsection (2) of Section 24 that the income of a building governed by Subsection (3), viz., house not occupied because of residence elsewhere for employment, etc., cannot be negative, i.e., the deductions will be limited to the annual value as worked out under Section 23. The value shall be 'nil'. Similarly it is clear, though only by implication, that the income under the second proviso to Sub-section (1) (small tenements) cannot be negative. In other cases, there is nothing to prevent the income from being negative, i.e., resulting in a net loss that can be set off against other income under Section 70 et seq. Hence, where a case falls within Section 23(2), i.e., where the house is in the occupation of the owner, it is possible to take a view that the deductions under Sub-section (1) can exceed the income from the house property and convert the income into a negative figure.
We have extracted the above passage for the purpose of showing that income is not such an invariably rigid concept under the Act as the departmental representative would have us believe. No doubt, there is a specific Explanation enacted in Section 64 but it could be argued that the amendment was merely clarificatory and that it did not really carve out a new area for the concept of income ; especially so, in view of the Board's circular No. 20 of 1944 supra.
13. From the above discussion, whatever is clear or not clear, it is evident that the interpretation sought to be placed on the term 'total income' by the assessee's authorised representative is also a reasonable interpretation. It was rightly pointed out for the assessee that the question of the assessee's escaping wholly without paying any advance tax even if the current year's income was a big one, was not so unique or novel as to excite comment, that under the law, as it stood before 1-6-1978, an old assessee had no liability to pay advance tax unless he was served with a notice under Section 210 by the ITO. This was so, even if his income for the current year was in lakhs. This submission is not without force. No doubt, it is open to the Legislature to take away an existing privilege. But in doing so, the words used must be clear and must not leave room for any other reasonable interpretation. In the instant case, we find that both the interpretations (as argued for the revenue as well as for the assessee) are reasonable and in such a situation, it is settled law that the one beneficial to the taxpayer should be preferred. Doing so, we find that there is no case for the charge of interest under Section 217. The interest shall be deleted.