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Orissa Cement Ltd. Vs. the Central Board of Direct Taxes and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtDelhi High Court
Decided On
Case NumberCivil Writ Appeal No. 1003 of 1970
Judge
Reported inILR1971Delhi51B; [1972]84ITR451(Delhi)
ActsIncome tax Act, 1961 - Sections 220, 280 and 280ZB;
AppellantOrissa Cement Ltd.
RespondentThe Central Board of Direct Taxes and ors.
Advocates: B.N. Sen,; B. Kirpal,; N.P. Khaitan,;
Excerpt:
(i) income-fax act (1961) - section 280-zb, tax credit certificate--udjustment or refund thereof--procedure indicated.; that sub-section (2) of section 280-zb indicates the manner in which the adjustment or refund can be claimed which is on production of the tax credit certificate after it has been granted. if a statute provides the manner in which a certain thing has to be done then such thing must be done in that manner and no other. thereforee, it is not open to the assessed company to make an adjustment of any existing tax liability itself or claim a refund even before the grant and production of the tax credit: certificate. the entitlement to the grant of tax credit certificate accrues only upon assessment by the income-tax officer and right to adjustment to any existing tax.....s.n. andley, j. (1) the question which falls for consideration in this writ petition is whether the expression 'tax payable' used in section 280zb of the income tax act, 1961, hereinafter referred to as ''the act' means the tax payable according to the income-tax officer upon regular assessment as contended by the respondents or the tax payable upon a self assessment as contended by the petitioner. this section appears in chapter xxii-b of the act relating to tax credit certificates. this chapter comprises of sections 280y to 280ze and was inserted by the finance act, 1965 with effect from april 1, 1965. the petitioner is a public limited company and carries on business. inter alia, of the manufacture and sale of cement and refractories etc. it manufactures and produces articles which are.....
Judgment:

S.N. Andley, J.

(1) The question which falls for consideration in this writ petition is whether the expression 'tax payable' used in section 280Zb of the Income Tax Act, 1961, hereinafter referred to as ''the Act' means the tax payable according to the Income-tax Officer upon regular assessment as contended by the respondents or the tax payable upon a self assessment as contended by the petitioner. This section appears in Chapter XXII-B of the Act relating to Tax Credit Certificates. This Chapter comprises of sections 280Y to 280ZE and was inserted by the Finance Act, 1965 with effect from April 1, 1965. The petitioner is a public limited company and carries on business. inter alia, of the manufacture and sale of cement and refractories etc. It manufactures and produces articles which are mentioned in the 1st Schedule to the .Industries (Development & Regulation) Act, 1951. The respondents to the petition are the Central Board of Direct Taxes (respondent No. 1); the Commissioner of Income-tax (respondent No. 2); the Inspecting Assistant Commissioner of Income-tax Central Range Ii (respondent No. 3) and the Income-tax Officer, Central Circle Vii (respondent No. 4).

(2) For the assessment year 1965-66 ending December 31, 1964. the total income returned by the petitioner under section 139 of the Act was Rs. 35,73,589.00. This return was filed on June 29, 1965 and according to the petitioner's self assessment as required by section 140A of the Act, the tax payable on the basis of the return came to Rs. 17,44,887.00. Assessment for this year was completed on March 30. 1970'. The tax first assessed was Rs. 17, 99, 321.00 but it was reduced on rectification to Rs. 17,90,080.00. On August 14, 1967. the petitioner had filed its return of income for the assessment year 1967-68 showing a total income of Rs. l,20,94,450.00 on which the total tax payable upon a self assessment came to Rs. 62,80,678.00. The petitioner's case is that in view of the provisions of section 280ZB of the Act, it became entitled, immediately on the filing on August 14, 1967 of the return for the assessment year 1967-68, to get tax credit certificates for Rs. 6,28,795.00 even before the regular assessment for the assessment year 1965-66 on March 30, 1970. The petitioner, thereforee, wrote a letter dated August 19, 1967 to the concerned Income-tax Officer stating :-

'ACCORDINGto our calculations, the tax payable for the year works out to Rs. 62,80,678.60. Since the tax liability for this year is more than the tax payable for the assessment year 1965-66, a tax credit of Rs. 6,28,795.00 being 10% of tax payable in respect of profits from priority industries i.e. Cement and Refractories is allowable to us under Sec. 280ZB of the Income-tax Act. The net demand payable thus works out to Rs. 56,51,883.60 After adjusting the advance tax payments of Rs. 45,50,848.00 (including Rs. 3,35,619.56 for tax credit certificate) and Rs. 8,285.05 for tax deducted at source, the amount payable remains at Rs. 10,92,750.55 which may please be checked and necessary challan for payment be issued to enable us to deposit the tax as required under the Provisions of Sec. 140A of the Income-tax Act, 1961.'

The petitioner received a challan on September 15, 1967 and paid Rs. 10,92,751.00.

(3) Thereafter, the concerned Income-tax Officer issued to the petitioner the impugned notice dated March 18, 1969, under section 140A of the Act staling that according to the return filed by the petitioner for the assessment year 1967-68, the tax payable on the petitioner's calculations came to Rs. 17,21,545.00 after taking into account advance tax and tax deducted at source and while this amount should have been deposited within 30 days of the filing of the return, the petitioner had deposited only Rs. 10,92,751 leaving a short-fall of Rs. 6,28,795.00. The petitioner was called upon to show cause why a penalty under section 140A should not be levied under the circumstsnces. The petitioner wrote to the concerned Income-tax Officer by its letter dated March 24, 1969 challenging the validity of the aforesaid penalty notice on the main ground that the petitioner was entitled to a tax credit of Rs. 6,28,795.00 under section 280ZB of the Act and there had been no default in payment of the tax payable on the basis of the return filed for the assessment year 1967-68. The petitioner also wrote to the same effect to the concerned Commissioner of Income-tax on March 24, 1969 and requested him to intervene in the matter and direct the Income-tax Officer to drop the proceedings. By letter dated April 7, 1969, purporting to have been.

(4) Issued on behalf of the concerned Commissioner of Income-tax, the petitioner was asked to contact the concerned Income-tax Officer ''to whom necessary instructions have been issued' but the instructions. issued were not specified in this letter. Thereafter, there was further correspondence between the petitioner and the respondents and in the mean time there was provisional assessment of the petitioner on May 27. 1969, with respect to the assessment year 1967-68 under section 141 of the Act as a result of which the tax payable for this assessment year was provisionally assessed as Rs. 5,89,902.00 and a demand for payment of this amount was made. The petitioner protested that this demand had been made without taking into consideration the amount of the tax credit certificate to which the petitioner was entitled under section 280ZB of the Act (which stood reduced to Rs. 6,02,112.00 as a result of the rectification aforesaid) and the petitioner contended that inasmuch as the amount of tax on provisional assessment was less than the amount of the tax credit certifidate there was no tax which remained payable by it for the assessment year 1967-68. The concerned Income-tax Officer did not accept the petitioner's contention and by letter dated July 30, 1969, the petitioner was informed that the outstanding demand of Rs. 5,89,902.00 will be kept in abeyance if the petitioner undertook to pay interest under section 220(2) of the Act at the rate of 9% from after 30 days of the furnishing of the return of income to the date when the tax credit certificate was issued for the assessment year 1967-68. The petitioner continued to correspond with the respondents and to make representations but nothing came out of it except that on July 13. 1970, the concerned Income-tax Officer issued a tax credit certificate for Rs. 6,23,264.00 in respect of the assessment year 1967-68. The concerned Income-tax Officer also made a demand by the impugned order dated August 4, 1970, informing the petitioner that a sum of Rs. 45.422.00 was payable as interest on account of non-payment of the aforesaid balance of Rs. 5,89,902.00 for the assessment year 1967-68 within thirty days of the filing of the return.

(5) The petitioner's case is that by virtue of section 280ZB it was entitled to a tax credit certificate in the sum of Rs. 6,23,264.00 which was in excess of the said demand of Rs. 5,89,902.00 thereforee, the penalty proceedings and the demand for interest were illegal and without jurisdiction. The petitioner has further contended that the order demanding interest was passed in violation of the principles of natural justice as no hearing was afforded to it before passing the order. The petitioner has, thereforee, filed this petition for appropriate writs quashing the aforesaid show-cause notice for imposing penalty dated March 18, 1969 issued under section 140-A(3) of the Act in respect of the assessment year 1967-68; for quashing the order dated August 4, 1970 for payment of interest under section 220(2) of the Act in respect of the assessment year 1967-68 and for prohibiting the respondents from Realizing any amount of penalty and/or interest from the petitioner. Mr. R. M. Malhotra, Income-tax Officer, has filed a counter affidavit on behalf of the respondents. He raised a preliminary objection regarding the maintainability of the petition on the ground that, the petitioner had an alternative remedy by way of revision under section 264(1) of the Act which was an equally efficacious remedy and, thereforee, the extraordinary jurisdiction of this Court under Articles 226 and 227 of the Constitution could not be invoked. Mr. S. T. Desai, learned counsel for the respondents, did not press this preliminary objection at the time of the hearing of the petition.

(6) On the merits it was averred that the delay in the regular assessment of the petitioner for the assessment year 1965-66 on March 30, 1970 was due to the conduct of the petitioner itself in revising its return for this year by letters dated November 4, 1965; June 22, 1966; June 23; 1966; July 14, 1966; September 26, 1966; October 13. 1966; November 26, 1966; March 3, 1967; July 13, 1967, July 21. 1967 December 18, 1968 and July 31, 1969; that the petitioner did not become entitled to the grant of a tax credit certificate for Rs. 6,28,795 under sub-section (1) of section 280ZB immediately upon the filing of the return for the assessment year 1967-68; that under the Tax Credit Certificate (Corporation tax) Scheme, 1966, hereinafter referred to as 'the Scheme', framed under section 280ZB read with section 280ZE, the right to the grant of a tax credit certificate arises only after completion of the regular assessment of the 'base year' which in the present case was the assessment year 1965-66; that since the assessment for the assessment year 1965-66 had not been completed till March 30, 1970, the petitioner was not entitled to a tax credit certificate for Rs. 6,28,795.00 until then and. thereforee, the payment of Rs. 10,92,751.00 on September 15, 1967 being short by Rs. 6,28,795.00 the two impugned notices as to penalty and interest could not be challenged; that the petitioner itself had made a formal application in the prescribed from for the grant of a tax credit certificate for the first time on May 12, 1970, after the reqular assessment for the assessment year 1965-66 had been completed; that interest had been charged only up to the date of this application; that it was not necessary to give an opportunity for a hearing to the Board Of Direct Taxes & OTHERS

(7) Tioner before charging interest because interest was charged in accordance with the provisions of section 220(2) of the Act and that the petitioner was not entitled to the reliefs claimed. An affidavit in rejoinder was filed on behalf of the petitioner where, after asserting the maintainability of the petition, it was stated that the aforesaid letters for revision of the return were sent only becuase the assessment proceedings were pending and were merely to make protective claims in respect of liabilities which arose subsequent to the relevant accounting year but pertained to the said accounting year; that the right conferred by section 280ZB of the Act to a tax credit certificate cannot be taken away or curtailed or postponed by the Scheme and that it is possible to ascertain the excess of the tax payable in respect of the relevant year even without the regular assessment of the base year.

(8) It may here be stated that some averments have been made in the petition and also in the affidavit in rejoinder that the respondents had given the petitioner to understand that the petitioner's contention .that there was entitlement to a tax credit certificate even before the regular assessment of the base year had been accepted. However, at the time of hearing, this part of the case was not adverted to by the petitioner and argument proceeded upon the construction of section 280ZB and the validity of paragraph 3(l)(a) of the Scheme. It will now be proper to set out section 280ZB of the Act which is in these terms :- '(1) Where any company engaged in the manufacture or production of any of the articles mentioned in the First Schdule to the Industries (Development and Regulation) Act, 1951 (LXV of 1951), is, in respect of its profits and gains, attributable to such manufacture or production,- (1) liable to pay any tax for the assessment year commencing on the 1st day of April, 1965 (hereinafter referred to as the base year), and for any one or more of the five assessment years next following that year; or (ii) not liable to pay any tax for the base year but becomes so liable for any succeeding year (hereinafter referred to as the succeeding base year) and also for any one or more of the assessment years following that year, not being an assessment year commencing on the 1st day of April, 1971 or any subsequent assessment year, and the tax for any such succeeding year exceeds.- (a) in the case referred to in clause (i), the tax payable for the base year; (b) in the case referred to in clause (ii), the tax payable for the succeeding base year, then the company shall be granted a tax credit certificate for an amount equal to twenty per cent of such excess: Provided that the amount of the tax credit certificate shall not for any assessment year exceed ten per cent of such tax payable by the company for that year. (2) The amount shown on a tax credit certificate granted to any company under this section shall, on the certificate being produced before the Income-tax Officer, be adjusted against any liability of the company under the Indian Income-tax Act, 1922 (XI of 1922), or this Act, existing on the date on which the certificate was produced before the Income-tax Officer and where the amount of such certificate exceeds such liability, or where there is no such liability, the excess or the whole of such amount, as the case may be, shall, notwithstanding anything contained in Chapter Xix, be deemed on the said date, to be refund due to such company under that Chapter and the provisions of this Act shall apply accordingly. Provided that the adjustment or refund, as the case may be, under this sub-section shall be only for such amount, not exceeding the amount of the certificate, as is used within such period as may be specified in the Scheme.- (i) for repayment of loans taken by the company from any of the financial institutions notified in this behalf by the Central Government, or (ii) for redemption of its debentures, or (iii) for the acquisition of any capital asset in India, including the construction of any building, for the purposes of the business of the company. Explanationn 1.-In this section, 'tax' means income-tax, payable under this Act and surtax, if any, payable under the Companies (Profits) Surtax Act, 1964 (VII of 1964). Explanationn 2.-The amount of income-tax in respect of the profits or gains attributable to the manufacture or production of the articles referred to in sub-section (1) shall be an amount bearing to the total amount of income-tax pay able on the total income (such income-tax being computed in the manner specified hereunder) the same proportion as the amount of such profits or gains bears to the total income. The amount of income-tax payable by the company for any assessment year shall be computed after making allowance for any relief, rebate or deduction in respect of Income-tax to which the company is entitled under the provisions of this Act or the annual Finance Act and after deducting from such amount of income-tax.- (a) the amount of additional income-tax if any, payable by the company under the provisions of section 104; and (b) (i) in respect of the assessment year commencing on the 1st day of April, 1965, the amount, if any, by which the rebate of income-tax admissible to the company under the provisions of the Finance Act, 1965 (X of 1965), is, under the provisions of the said Act, reduced with reference to the face value of any bonus shares or the amount of any bonus issued by the company to its shareholders during the previous year or any previous year prior to that year or with reference to any amount of dividends declared or distributed by it during the previous year or any previous year prior to that year; or (ii) in respect of the assessment year commencing on the 1st day of April, 1966, or any subsequent assessment year, the amount of income-tax, if any, payable by the company under the provisions of the annual Finance Act with reference to the relevant amount of distributions of dividends by it.

(9) Explanationn 3.-The amount of surtax in respect of the chargeable profits attributable to the manufacture or production of the articles referred to in sub-section (1) shall be an amount bearing to the total amount of surtax payable under the Companies (Profits) Surtax Act, 1964 (VII of 1964), the same proportion as the amount of such chargeable profits bears to the whole of the chargeable profits.' In exercise of powers conferred by section 280ZB of the Act the Central Government framed the Scheme by notification dated August 30, 1966. Paragraph 3(l)(a) provides that any company which claims that it is eligible for the grant of a certificate in respect of any relevant year. may apply to the Income-tax Officer at any time after the regular assessment of the company in respect of the base year or the succeeding base year, as the case may be, has been made under the Act and where the profits of the company are chargeable to surtax under the Surtax Act, also under that Act. Forms in which applications have to be made for the grant of a tax credit certificate have been prescribed and such forms have to indicate the date of the order to regular assessment of the base year. Section 280ZB is intended to give encouragement to a company engaged in the manufacture or production of any of the article mentioned in the First Schedule to the Industries (Development and Regulation) Act, 1951, by granting them tax credit certificates This encouragement is available to such a company if an amount equivalent to the amount of the tax credit certificate is used for repayment of loans token by such company from any of the financial institutions of its debentures or for acquisition by the Central Government or for redemption of its debentures or for acquisition of any capital asset in India in cluding the construction of any building,for the purposes of' he business of the company within such period as may be specified in Scheme. The period has been specified by paragraph 6 of the Scheme as the period of three consecutive financial years commencing with the financial year immediately preceding the relevant year Subsection (1) of section 280ZB specifies the qualifications for the grant of a tax credit certificate. These qualifications are:- (i) that in respect of its profits and gains attributable to the manufacture or production of a Scheduled article the company is liable to pay any tax for the assessment year commencing on the 1st day of April, 1965 and for anyone or more of the five assessment years next following that any such succeedingg year exceeds the tax payable for the year commencing on the 1st day of April, 1965. The year commencing on the 1st day of April, 1965 is called the 'base year,' or (ii) that if in respect of its profits and gains as aforesaid such company is not liable to pay any tax for the base year but becomes so liable for any succeeding year (referred to as the succeeding base year) and also for any one or more of the assessment years following the succeeding base year not being an assessment year commencing on the 1st day of April, 1971, or any subsequent assessment year the tax for any such succeeding year exceeds the tax payable for the succeeding base year. If any of these qualifications are satisfied, such company is to be granted a tax credit certificate for an amount equal to 20 per cent of such excess but such amount shall not for any assessment year exceed 10 per cent of such tax payable by the company for that year. The contention of the petitioner is that the expression 'tax payable' does not mean tax payable upon regular assessment by the Income-tax Officer but the tax payable in accordance with the provisions of the Act and includes the tax payable upon self assessment or upon provisional assessment. Because of this interpretation, the provision in paragraph 3(l)(a) of the Scheme that the application for certificate is to be made after the regular assessment of the company in respect of the lease year or the succeeding base year or under the Surtax Act is challenged as being ultra virus sub-section (1) of section 280ZB.

(10) It is further contended that if the expression 'tax payable' were to mean only the tax payable as assessed by the Income-tax Officer on regular assessment, it will be open to the Income-tax Officer to deprive such company of the benefit by not making an assessment for the base year within the period of limitation of four years. It is also contended that the interpretation sought to be placed by the respondents on the expression 'tax payable' would defeat the object of the section which was to give encouragement to such company to effect repayment of loans; redemption of debentures and acquisition of any capital asset in the three years mentioned in the Scheme.

(11) On the other hand, the respondents contend that paragraph 3(1) (a) of the Scheme is consistent with sub-section (1) of section 280ZB because the expression 'tax payable' in the context means the tax payable on regular assessment by the Income-tax Officer and not on self assessment or provisional assessment. It is further contended that if the regular assessment of the base year were unnecessary for the purpose of entitlement to the tax credit certificate, it will beopen to such company to disclose lesser profits in the base year so as to obtain a tax credit certificate in an amount which is much larger than the amount to which it may be found entitled upon regular assessment for the base year. We may state that the inaction of the Income-tax Officer in making the assessment for the base year within the period of limitation or the dishonesty of such company in showing lesser profits for the base year cannot be taken into consideration for the purpose of construing the section because there are ample provisions in the Act as also in the Scheme to safeguard against such contingencies. The real question. thereforee, is only as to the meaning to be given to the expression 'tax payable' used in section 280ZB. Sub-section (2) of section 280ZB indicates the method and manner turn the utilization of the tax credit certificate. It provides that after a grant has been made under sub-section (1), the tax credit certificate has to be produced before the Income-tax officer and thereupon the amount shown therein shall be adjusted against any liability of tile company under the Act or the Indian Income-tax Act, 1922 existing on the date on which the certificate was produced and in cases where there is no such liability or the amount of the tax credit certificate exceeds the existing liability, the excess or the whole of such amount shall be refunded to such company notwithstanding anything contained in Chapter Xix of the Act. Sub-Section (2) of this Section thereforee, indicates the manner in which the adjustment or refund can be claimed which is on production of the tax credit certificate after it has been granted. If a statute provides the manner in which a certain thing has to be done then such thing must be done in that manner and no other. thereforee, it is not open to such company to make an adjustment of any existing tax liability itself or claim a refund even before the grant and production of the tax credit certificate. It is contended by the respondents that there is intrinsic evidence in section 280ZB itself to show that 'tax payable' means the tax payable upon regular assessment by the Income-tax Officer. Reliance is placed upon Explanationn 1 to this section and upon the provisions of the Companies (Profits) Surtax Act, 1964 and upon Expalantion 2 to this section. Now, Explanationn 1 to the section defines 'tax' as used in the section to mean the income-tax payable under the Act and Surtax, if any, payable under the Companies (Profits) Surtax Act, 1964. 'Surtax is charged on the chargeable profits of a company under section 4 of the Companies (Profits) Surtax Act, 1964.' 'Chargeable Profits,' according to sub-section (5) of section 2 of this Act means the total income of an assessed computed under the Act for any previous year or years, as the case may be, and adjusted in accordance with the provisions of the First Schedule. 'Tax payable' means income-tax or surtax payable and this indicates, according to the respondents, that ('tax payable' means the tax payable upon regular assessment by the Income-tax Officer. Explanationn 2 to the section provides that the amount of income-tax in respect of the profits or gains attributable to the manufacture or production of a scheduled article shall be an amount bearing to the total amount of income-tax payable on the total incom', such income-tax being computed in the manner specified the same proportion as the amount of such profits or gains bears to the total income. It further says that the amount of income-tax payable by the company for any assessment year shall be computed after making allowance for any relief, rebate or deduction in respect of income-tax to which the company is entitled under the provisions of the Act or the Annual Finance Act and after making deduction as specified in this Explanationn. On the basis of these provisions it is contended that computation cannot mean computation by such company and that the use of the word 'computation' indicates that it is to be the computation by the Income-tax Officer, at the time of regular assessment.

(12) In our opinion, no argument can be based on the use of the expression ' computation' in the aforesaid provision to persuade us to come to the conclusion that it means computation by the Income-tax Officer, himself. According to the scheme of the Act, there are provisions for self assessment and provisional assessment and these assessments have to be on the basis of the return filed by such company. It, thereforee, follows that the word 'computation' cannot mean only computation by the Income-tax Officer at the time of regular assessment and it may well include computation by such company also particularly at the time of self assessment. The petitioner contends that the expression 'tax payable' is used in various other provisions of the Act and a perusal of those provisions would indicate that 'tax payable' cannot mean only tax payable upon regular assessment by the Income-tax Officer. According to the petitioner the expression 'tax payable' means merely 'tax liable to be paid'. The first section to which attention is invited in section 140-A relating to self assessment. This section provides that where a return has been furnished under section 139 and the tax payable on the basis of that return as reduced by any tax already paid under any provision of the Act exceeds five hundred rupees, the assessed shall pay the tax so payable within thirty days of furnishing the return. In fact, the language of section 140A indicates that the meaning sought to be put on the expression 'tax payable' by the petitioner is wrong. This section undoubtedly uses the words 'tax payable' but the immediately following words 'on the basis of the return' indicate that the expression 'tax payable' has been used in this section as qualified by the words which follow. It cannot, thereforee, be argued that 'tax payable' in section 280ZB means tax payable even upon self assessment. Similarly, in sections 141 and 141-A upon which the petitioner relies the expression 'tax payable' is followed by the words 'on the basis of the return'. If the Legislature had intended to include within the expression 'tax payable' used in section 280ZB, the tax payable upon self assessment or upon provisional assessment, it would have added the words 'on the basis of the return' in this section also as it has done in sections 140-A; 141 and 141-A. The expression ' tax payable' in the various provisions gets its meaning according to the context of the particular provision in which it is used and the petitioner cannot derive any assistance from the said expression in support of its contention. Then it is contended that the expression used in respect of the tax payable upon regular assessment by the Income-tax Officer is 'sum payable' as has been done in sections 143(1); 143(3); 144 and 156. We do not think any assistance can be derived by the petitioner from the expression 'sum payable' used in these sections which deal with assessment; best judgment, assessment and notice of demand in respect of the sum payable. An. order of assessment has to reflect two things : (1) the tax payable and (2) the sum payable after adjustment of advance tax or tax payable on self assessment or other adjustments. The sum determined by the Income-tax Officer as payable after such or other adjustments does not mean that such sum is the tax payable. The tax payable will be a much larger amount which is reduced by the deductions as a result of which the sum payable by the assessed or refundable by the Income-tax Officer is arrived at. In fact, in sections 143, 144 and 156, the expression 'tax payable' cannot be used and the only appropriate term which can be used is 'sum payable'. The petitioner has relied upon a decision of the Supreme Court reported in 72 income Tax Reports 203 in re : Income-tax Officer, Kanpur and others v. Mani Ram and others(1) where construing section 18(1) of the Act it was observed that its language can only lead to the interpretation that the provisions contained in it would become applicable whenever a person has been assessed whatever be the nature of the assessment-whether it be a regular assessment or a provisional assessment. This observation was made to repel the argument that the word 'assessed' used in this section was not meant to cover a provisional assessment under section 23B of the Act. As we have stated, the expression 'tax payable' in section 280Zb means the tax payable upon regular assessment by the Income-tax Officer.

(13) The next contention was that if such company has to wait for the Income-tax Officer to make an assessment of the base year, the amount of adjustment or refund upon the grant of the tax credit certificate cannot be used for repayment of a loan or redemption of its debentures or acquisition of any capital asset as provided within the period specified in the Scheme and the object of the section will be frustrated. In our opinion, it would not be so. The provisions of this section are not to enable such company to repay the loan or redeem its debentures or acquire any capital asset. The object of the section is that if any of these things has been done during the specified three years by such company, then an adjustment or refund will be given to it on production of the tax credit certificate granted to it. The adjustment or refund is by way of reimbursement and not for the purpose of doing any of these three things. thereforee, the mere fact that the adjustment or refund is postponed till after the Income-tax Officer has made a regular assessment for the base year cannot justify the argument that the object of the section will be defeated if the assessed cannot make an adjustment or claim a refund upon self assessment or provisional assessment. Another argument advanced by the petitioner was that if 'tax payable' means only the tax payable upon regular assessment by the Income-tax Officer then clause (b) of sub-para (1) of paragraph 3 of the Scheme would be inconsistent with that meaning. The argument is that while clause (a) of sub-para (1) of paragraph 3 talks of the regular assessment of the company in respect of the base year or the succeeding base year, clause (b) merely requires the filing of the return of income in respect of the relevant year. In the first placa sub-section (1) of section 280ZB talks of 'tax' for the relevant year in contradistinction to the expression 'tax payable' for the base year or the succeeding base year. Secondly, the Central Govmment must have been conscious of the fact that it will be in the interest of such company not to show lesser profits for the relevant year in. its return, and, thereforee, it would not be necessary to insist upon a regular assessment for the relevant year also. If the tax payable for the relevant year is assessed by the Income-tax Officer on regular assessment at a larger sum. such company will be entitled to the grant of a further tax credit certificate. In the rare cases where as a result of regular assessment for the relevant year, the tax payable is found to be less than upon the basis of the return, there are provisions in the Scheme for modification of the certificate. The provision in clause (b) of sub-para (1) of paragraph 3 is in the large majority of cases beneficial to the assessed and we fail to see how it lies in the mouth of the petitioner to challenge the virus of this clause. We may here notice an argument on behalf of the respondents based on sub-section (4) of section 280ZE of the Act. it provides : 'Any scheme made under this section shall be iaid, as soon as may be, after it is made, before each House of Parliament while it is in session for a total period of thirty days which may be comprised in one session or in two successive sessions, and if, before the expiry of the session in which it is so laid or the session immediately following, both Houses agree in making any modification in any provision of the scheme or both Houses agree that any provision in the scheme should not be made, that provision of the scheme shall thereafter have effect only in such modified form or be of no effect, as the case may be; so however that any such modification or annulment shall be without prejudice to the validity of anything previously done under that provision.' The contention is that inasmuch as the scheme made under chapter XXII^B is to be placed before both Houses of Parliament, it assumes the same status as the section itself and, even though it is subordinate legislation, it should be taken as if the provisions of the Scheme are a part of Chapter XXII-B. Reliance is placed upon 1894 Appeal Cases 347 in re: lnstitute of Patent Agents and others v. Joseph Lockwood (2). In our opinion, no assistance can be derived from this case because there sub-section (3) of section 101 of the Patents, Designs and Trade Marks Act, 1883 provided that the general rules which were to be placed before both Houses of Parliament shall be of the same effect as if they were contained in this Act' and it was because of these words that the majority of the Law Lords were of the view that for all purposes of construction or application or otherwise the Rules were to be treated exactly as if they were in the Act. Such words are not to be found in sub-section (4) of section 280ZE of the Act.

(14) For the aforesaid reasons, we are of the view that the expression 'tax payable' in section 280ZB cannot mean the tax payable on self assessment or provisional assessment and, thereforee, it can only mean the tax payable upon regular assessment by the Income-tax Officer for the base year or the succeeding base year and entitlement to the grant of a tax credit certificate accrues only upon such assessment and the right to adjustment of any existing tax liability or to refund accrues only after the grant of the tax credit certificate. The petitioner was, thereforee, not justified in adjusting the amount of the tax credit certificate while paying the tax upon self assessment for the assessment year 1967-68. The petitioner was bound to make payment of the tax payable on the basis of the return for the assessment year 1967-68 and, thereforee, the impugned penalty notice cannot be challenged. The last argument is that the impugned demand for interest must be quashed because no opportunity of hearing was afforded by the Income-tax Officer before making the demand. Sub-section (2) of section 220 of the Act imposes a statutory liability to pay interest if the amount specified in the notice of demand is not paid. The liability is absolute and unconditional if payment is not made within the period limited by sub-section (1). We do not see how any principle of natural justice can be invoked in such a case. If in any case a demand has been made in respect of an amount which has been paid. the fact can be brought to the notice of the Income-tax Officer after receipt of the demand. In that case the demand will be cancelled and with such cancellation the liability to pay interest will also fall. If, however, the demand has not in fact been paid. there is no power in the Income-tax Officer to waive interest because the liability imposed by sub-section (2) of this section is compulsorily to be imposed and there would be no point in affording any opportunity of a hearing before the issuance of the demand. For the aforesaid reasons, this writ petition is dismissed with costs. Counsel's fee is assessed at Rs. 250.00.

(15) We may mention that during the course of hearing Mr. S. T. Desai. learned counsel for the respondents, stated that the penalty proceedings in so far as they relate to a default on the part of the petitioner in complying with notices under section 140-A(3) relating to the assessment years 1966-67, 1967-68 and 1969-70 are concerned will not be proceeded with and will be dropped.


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