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Wahab Bros. Vs. Inspecting Asstt. Commissioner and anr. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberWrit Petn. No. 704 of 1977
Judge
Reported in[1987]163ITR27(Mad)
ActsIncome Tax Act, 1961 - Sections 139(1), 139(4) and 139(8); Constitution of India - Article 14
AppellantWahab Bros.
Respondentinspecting Asstt. Commissioner and anr.
Appellant AdvocateK.S. Sivaraman, Adv.
Respondent AdvocateNalini Chidambaram, Adv.
Cases ReferredMahendra Kumar Ishwarlal & Co. & Anr. v. Union of India
Excerpt:
- .....its disagreement with the view taken by this court in mahendra kumar ishwarlal & co. & anr. v. union of india : [1974]94itr65(mad) where in s. 139(8) in so far as it treats the registered firms as unregistered for the purpose of the levy of interest is valid and not violative of art. 14. 3. however, we find that the view taken by this court in maharaj kumar ishwarlal & co. & anr. v. union of india : [1973]91itr101(mad) and : [1974]94itr65(mad) (mahendra kumar ishwarlal & co. & anr. v. union of india) has been accepted by the gauhati high court in ganesh das sreeram v. ito, 'a' ward, shillong & ors. , chhotalal & co. v. ito, morvi & ors. (gujarat) : [1976]105itr230(guj) , jiwanlal hospital v. ito (assessment ii), raipur (mp), madhya pradesh high court : [1979]119itr439(mp) ,.....
Judgment:

Ramanujam, J.

1. The petitioner herein has prayed in this Writ Petition for the issue of a writ of certiorari to quash the order dt. 10-10-1975 of the CIT, the 2nd respondent herein, confirming the order dt. 20-12-1973 of the IAC, the first respondent herein, so far as it directs the payment of interest u/s 139(8) of the IT Act, 1916 (hereinafter referred to as 'the Act') for the asst. yr. 1972-73.

2. The petitioner is a firm carrying on business as Esso Dealers in Thanjavur. The firm was assessed to income tax on a total income of Rs. 70,300 by the ITO for the year 1972-73 as against the return of income filed by the assessee on 26-5-1973 admitting a total income of Rs. 60,406. While making the assessment on a total income of Rs. 3,416 towards interest treating the firm as an unregistered firm for the purpose of calculation of interest as per s. 139(8). The petitioner made a request to the IAC to waive the interest. But that request was rejected. Thereupon, the petitioner filed a revision petition to the CIT u/s 264 of the Act contending that it was discriminatory to treat the registered firm as unregistered for the purpose of the levy of interest u/s 139(8) inasmuch as the levy of interest is to compensate for the delay in completion of assessment and the consequent realisation of tax. Reliance was placed in support of the contention on the decision of the Karnataka High Court in : [1975]99ITR32(KAR) Nagappa M. & Ors. v. ITO, Central Circle I, Bangalore.

The CIT by his order dt. 10-10-1975 rejected the said contention. Aggrieved by the said order, the petitioner has come forward before this court with Writ Petition to quash the same on the ground that the charging of interest on the petitioner-firm treating it as unregistered firm is discriminatory when compared with the other assessees who had filed the returns belatedly in the matter of calculation of interest for the delayed filing of the return. According to the petitioner, the levy of interest u/s 139 is for the delayed filing of the return and the consequential delay in the realisation of tax. Therefore, the levy of interest is compensatory in nature and, therefore, its incidence on all assessees who had similarly delayed the filing of the returns and who are covered by the provision should be the same. Besides, the chargeability of interest is directly related to the amount that is recoverable from an assessee and hence could not be tagged on to the status in which the assessee is assessed to income-tax. The classification of registered firms which have not filed the return within the specified time as a separate class for the purposes of payment of interest u/s 139(8) does not bear any relationship to the object that is to be achieved by the relevant section and hence it is violative of Act. 14 of the Constitution of India. Reliance is also placed by the ld. counsel for the petitioner on the decision of a single Judge of the Karnataka High Court in : [1975]99ITR32(KAR) (Nagappa, M. & Ors. v. ITO, Central Circle I, Bangalore) and his order dt. 10-10-1975 rejected the said contention. Aggrieved by the said order, the petitioner has come forward before this court with this Writ Petition to quash the same on the ground that the charging of interest on the petitioner-firm treating it as unregistered firm is discriminatory when compared with the other assessees who had filed the returns belatedly in the matter of calculation of interest for the delayed filing of the return. According to the petitioner, the levy of the return and the consequential delay in the realisation of tax. Therefore, the levy of interest on compensatory in nature and, therefore, its incidence on all assessees who had similarly delayed the filing of the returns and who are covered by the provision should be the same. Besides, the chargeability of interest is directly related to the amount that is recoverable from an assessee and hence could not tagged on to the status in which the assessee is assessed to income-tax. The classification of registered firms which have not filed the return within the specified time as a separate class for the purposes of payment of interest u/s 139(8) does not bear any relationship to the object that is to be achieved by the relevant section and hence it is violative of Art. 14 of the Constitution of India. Reliance is also placed by the ld. counsel for the petitioner on the decision of a single Judge of the Karnataka High Court in : [1975]99ITR32(KAR) (Nagappa, M. & Ors. v. ITO, Central circle I, Bangalore) and : [1981]129ITR516(KAR) (Addl. CIT, Mysore & Ors. v. Mahadeshwara Lorry Service). In Nagappa M. & Ors. v. ITO : [1975]99ITR32(KAR) , Venkatramiah, J. (as he then was) held that the object of levy of interest being just reimbursement of what the Government would lose by delayed filing of the return, provision in s. 139(8) for the levy of interest in the tax which would have been payable if the firm had been assessed as an unregistered firm is outside the said object, that the levy is more in the nature of a penalty than mere compensation, that the classification of registered firms which have not filed the return within the specified time as a separate class for purposes of payment of interest u/s 139(2) does not bear any relationship to the object to be achieved by that section. Section 139(1) as it stood prior to 1-4-1971, r/w s. 139(4), to the extent it required a registered firm to pay interest at the specified rate on the tax assessed as if it were an unregistered firm whenever the registered firm whenever the registered firm did not file the return within the specified time, was violative of Act. 14 of the Constitution and was therefore void. Divisional Bench of the same High Court in Addl. CIT, Mysore & Ors. v. Mahadeshwara Lorry service : [1981]129ITR516(KAR) expressed its disagreement with the view taken by this court in Mahendra Kumar Ishwarlal & Co. & Anr. v. Union of India : [1974]94ITR65(Mad) where in s. 139(8) in so far as it treats the registered firms as unregistered for the purpose of the levy of interest is valid and not violative of Art. 14.

3. However, we find that the view taken by this court in Maharaj Kumar Ishwarlal & Co. & Anr. v. Union of India : [1973]91ITR101(Mad) and : [1974]94ITR65(Mad) (Mahendra Kumar Ishwarlal & Co. & Anr. v. Union of India) has been accepted by the Gauhati High Court in Ganesh Das Sreeram v. ITO, 'A' Ward, Shillong & Ors. , Chhotalal & Co. v. ITO, Morvi & Ors. (Gujarat) : [1976]105ITR230(Guj) , Jiwanlal Hospital v. ITO (Assessment II), Raipur (MP), Madhya Pradesh High Court : [1979]119ITR439(MP) , Hindusthan Steel Forging v. CIT (Patiala), Punjab and Haryana High Court and Mohanlal Soni v. Union of India & Ors. (Calcutta High Court) : [1983]143ITR436(Cal) . Mahendra Kumar Ishwerlal & Co. & Anr. v. Union of India : [1974]94ITR65(Mad) is a decision of a Division Bench of this court to which one of us was a party wherein an identical question as is now being raised by the petitioner has been specifically dealt with and this court has held that subjecting registered firms to the same treatment as unregistered firms in the matter of levy of interest cannot be said to be in any way arbitrary or colourable exercise of legislative power and as such does not violate Art. 14 oft he Constitution and the reasons given by the IT Act to a registered firm, it would be in the same position as an unregistered firm and hence it is open to the legislature to say that one ore other of the privileges granted to a registered firm will not be available to such firms which have defaulted in submitting the return in time. It cannot be contended that the Legislature which granted the privileges given to the registered firms at all events and when the legislature chooses to withdraw the privileges given to a registered firm and unregistered firms. Though the Karnataka decisions referred to above deal with the above reasoning set out in the decision of this court in Mahendra Kumar Ishwarlal & Co. & Anr. v. Union of India : [1974]94ITR65(Mad) . The reasons given by this court in the said decisions for holding s. 139(8) as not violating Art. 14 have found acceptance from the other High Courts such Gauhati High Court, Madhya Pradesh High Court, Punjab and Haryana High Court and the Calcutta High Court. It is, therefore, not possible for us to accept the contention of the ld. counsel that the decision in Mahendra Kumar Ishwarlal & Co. & Anr. v. Union of India : [1974]94ITR65(Mad) requires reconsideration in view of the decision of the Karnataka High Court. Since the question raised in this case is squarely covered by the said decision of Division Bench of this court in Mahendra Kumar Ishwarlal Co. v. Union of India : [1974]94ITR65(Mad) which decision has also found acceptance in the other High Courts. And having regard to the reasoning given by the Division Bench in Mahendra Kumar Ishwarlal & Co. & Anr. v. Union of India : [1974]94ITR65(Mad) which has not been specifically dealt with by the Karnataka High Court in the said decisions, we are not in a position to accept the decision of the Karnataka High court as correct in preference to the view taken by the Division Bench of this court. Therefore, following the decision in Mahendra Kumar Ishwarlal & Co. & Anr. v. Union of India : [1974]94ITR65(Mad) this writ petition is dismissed. There will be no order as to costs. The ld. counsel for the petitioner makes an oral application for leave to appeal to Supreme Court against the Judgment just now pronounced. But having regard to the fact that this court has taken a uniform view as to the constitutional validity of s. 139(8) of the IT Act, 1961 and the said view of this court has been accepted by other High Courts except the Karnataka High Court and as already the decision of the Karnataka High Court which has taken a different view is the subject matter of an appeal before the Supreme Court, we do not feel that this is a fit case for grant of leave to appeal to Supreme Court. We, therefore, reject the oral application for grant of leave to appeal to Supreme Court.


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