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Mahendrakumar Ishwarlal and Co. and ors. Vs. Union of India (Uoi) and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberWrit Petition Nos. 2043 and 2044 of 1966, 1722 of 1967 and 3606 of 1969
Judge
Reported in[1973]91ITR101(Mad)
ActsIncome Tax Act, 1961 - Sections 139(1); Constitution of India - Article 14
AppellantMahendrakumar Ishwarlal and Co. and ors.
RespondentUnion of India (Uoi) and ors.
Appellant AdvocateT.S. Viswanatha Rao, Adv. in W.P. Nos. 2043 and 2044 of 1966, ;S. Padmanabhan, Adv. in W.P. No. 1722 of 1967 and ;K. Srinivasan, Adv. in W.P. No. 3606 of 1969
Respondent AdvocateV. Balasubrahmanyan and ;J. Jayaraman, Advs.
Cases ReferredAswini Kumar Ghose v. Arabinda Bose
Excerpt:
direct taxation - interpretation - section 139 (1) of income tax act, 1961 and article 14 of constitution of india - section 139 (1) provides for imposing penalty on registered firms for delayed returns - penalty to be imposed on amount of tax payable by such firm if firm had been assessed as unregistered firm - such provision not discriminatory - such firms entitle to credit advance tax paid by them. - - strong reliance is placed upon the advantages gainedby a registered firm in the matter of payment of tax and advance tax andthe impugned provision is intended to induce such firms to file the returnsin time and primarily to act as a deterrent against submission of delayedreturns. such credit, under certain circumstances, shall be given in a provisional assessment as well if one is.....ramaprasada rao, j. 1. in this batch of writ petitions common questions are involved. it is, therefore, sufficient to refer to the material facts in one of the writ petitions. i am narrating the facts in w.p. no. 1722 of 1967, for purposes of convenience. at the outset i may mention that the only point urged before me by the counsel appearing in this batch of writ petitions is that section 139(1), proviso (iii)(a) and (b), of the income-tax act, 1961, is ultra vires because the same is discriminatory in character and, therefore, violative of article 14 of the constitution of india. it is not in dispute that in these writ petitions the petitioners as assessees under the act in the status of registered firms filed returns beyond time and made necessary applications to the income-tax officer.....
Judgment:

Ramaprasada Rao, J.

1. In this batch of writ petitions common questions are involved. It is, therefore, sufficient to refer to the material facts in one of the writ petitions. I am narrating the facts in W.P. No. 1722 of 1967, for purposes of convenience. At the outset I may mention that the only point urged before me by the counsel appearing in this batch of writ petitions is that Section 139(1), proviso (iii)(a) and (b), of the Income-tax Act, 1961, is ultra vires because the same is discriminatory in character and, therefore, violative of article 14 of the Constitution of India. It is not in dispute that in these writ petitions the petitioners as assessees under the Act in the status of registered firms filed returns beyond time and made necessary applications to the Income-tax Officer to excuse the delay in the non-submission of the return within time. Having obtained such an order by invoking the statutory discretion of the income-tax authorities it is said that the provision as above which provides for the payment of interest, for non-submission of the returns within the time allowed, on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm, while in the case of any other assessee the amount of interest payable is to be calculated on the amount of tax payable on the total income reduced by the advance tax, if any, paid, is challenged on the ground that such a provision is illegal, savours of discrimination and ultra vires. The further contention is that the denial of counter interest towards advance tax paid by the firm is an open negation of a just right. It is stated that the modus operandi envisaged in the above section for the calculation of interest on the hypothetical tax or notional income-tax payble by the defaulting registered firm is an abuse of legislative power and hence unconstitutional. The mere fact that the return was not submitted in time would not authorise the creation of such a discrimination as between a registered firm and any other assessee. Mainly for this reason the petitioners have come up to this court for the issue of a writ of certiorari to quash the impugned orders which are admittedly based and worked out on the formula provided in the above section. Even though each petitioner has set out in detail various other factual details in the affidavit they were not even referred to before me. The argument of the learned counsel for he petitioner centres round the language of Section 139(1), proviso (iii)(a)and (b), of the Act. The contention is that even on a lair reading of thesection a discrimination is writ large in the textual content of the aboveclause and it offends article 14 of the Constitution. In any event it isstated that a registered firm defaulting in the submission of returns in timeis entitled to the credit for the advance tax, if any, paid by it for theassessment year in question and this benefit cannot be tagged on only toassessees other than a registered firm who did not file their returns in time.Though it was hesitantly contended that by implementing the content andtext of the proviso as above, it would virtually be imposing a penaltv onthe petitioners, this argument was not pressed fully in view of the decisionof the Supreme Court in Jain Brothers v. Union of India, : [1970]77ITR107(SC) .. Reliance was,however, placed on Twyford Tea Company v. Kerala State, A.I.R. 1970 S.C. 1198.. On the strengthof the observations made therein and in particular to the question that thedifferences in treatment must be capable of being reasonably explained inthe light of the object for which the particular legislation is undertaken, itwas said that the differential treatment in the instant case is not reasonably explained and justified and, therefore, the treatment is discriminatory.On the other question as to how the interest should be arrived at, it isstated that the ordinary concept of interest envisages a definite amountlawfully payable by the debtor to the creditor, but would not include asum notionally or fictionally adjudged as the amount due, though understatutory power. It is said that as interest is calculated as if the petitioners are unregistered firms and not registered firms it is against allaccepted canons of payment of interest. It is also contended that in anyevent advance tax has to be given credit to while working out the ultimateliability and this relief being available to other assessees, ought not to bedenied to the petitioners, registered firms. Lastly, it is urged that the text,punctuation and the set up of the proviso supports the contention thatinterest on advance tax has to be necessarily given to the petitioners andall other assessees making a default in the submission of return. Therevenue, on the other hand, would say that the proviso in question wasintroduced in the new Act on the basis of the report of the Direct TaxesAdministration Enquiry Committee, whilst the old Act did not make anysuch provision at all. Strong reliance is placed upon the advantages gainedby a registered firm in the matter of payment of tax and advance tax andthe impugned provision is intended to induce such firms to file the returnsin time and primarily to act as a deterrent against submission of delayedreturns. If it is discovered that the conduct of a particular assessee, whois a registered firm, in filing delayed returns was contumacious, thenpenalty was leviable under Section 271. If, however, sufficient cause isshown for the delay in the submission of returns, the Income-tax Officer isvested with a discretion to excuse such delay but condition it in accordance with the proviso as above and compel the assessee to pay such interest as indicated by the statute, as a solatium for the exercise of the statutory discretion by the officer. What is sought to be achieved is to fix a scale for working out the interest payable for obtaining a relief in the matter of the delay. The purpose is achieved by the proviso by increasing notionally the quantum of tax payable by the defaulting assessee. A registered firm is treated as an unregistered firm not for any other purpose but for the purpose of arriving at the deemed quantum of tax payable by it and finally to arrive at the interest payable by such an assessee in such circumstances. As that does not ex facie show any discrimination as such, but only reflects the intention of the legislature to make a defaulting registered firm suffer a quasi-penalty in case the delay in the submission of returns is excused so that the registered firm may sustain its privileges under the Act, it is contended that no question of discrimination arises. The process of calculation is prescribed by statute and the differentia has a purpose to serve and an object to achieve and, therefore, article 14 is not violated. V. Venugopala Ravi Varma Raja v. Union of India, : [1969]74ITR49(SC) . was relied on. As in tax laws a wider discretion is vested in the legislature to single out persons and classify them for various purposes so that the avowed objects of the particular Act may be achieved, it is not open to the petitioners to say that in the peculiar circumstances in which they are placed, if they are called upon to pay an interest on an amount statutorily quantified as per the proviso, it amounts to discrimination in the eye of law. On the question of interpretation of the language of the proviso and on the claim as to interest on advance tax paid it is said that the text is clear and reliance is placed upon the Income-tax Manual and the Gazette in which the provision has been reproduced, wherein the intention of the legislature is made obvious, to give relief to persons other than those similarly placed as the petitioners, in case such assessees have paid advance tax for the assessment year in question. It is contended that punctuation cannot be a guide to interpret statutes and reliance is placed upon a passage in Odgers on the Construction of Deeds and Statutes and R.M.D. Chamarbaugwalla v. Union of India, : [1957]1SCR930 .

2. I shall now refer to the scheme of the Act. An ' assessee ' is defined in the Act under Section 2(7). It means and includes a person by whom any tax or any other sum of money is payable under the Act, and every person who is deemed to be an assessee under any of the provisions of the Act and also an assessee in default. Section 143 deals with returns to be made by an assessee. Sections 182 and 183 in Chapter XVI of the Actdeal with assessment of firms, both registered and unregistered. In the case of a registered firm, the main limbs of the section postulate the determination of the income-tax payable by the firm itself and for such determination of the share of each partner in the income of the firm which shall be included in his total income and assessed to tax accordingly. A partner in a registered firm has the privilege of setting of? the loss, if any, sustained by him in the registered partnership business against his other income or carrying forward and setting off in accordance with the provisions of Sections 70 to 75 of the Act. Besides, a registered firm has certain benefits in the matter of the rate of taxation and limit of exemption from tax. Under Section 183, an unregistered firm is assessed on the basis of the total income, of the firm and tax is determined accordingly. Under Section 183(b) the Income-tax Officer has an option ; if, in his opinion, the aggregate amount of the tax payable by the partners if the firm were treated as a registered firm would be greater than the aggregate amount of the tax which would be payable by the unregistered firm on the basis of its total income and the tax which would be payable by the partners individually, he may proceed to make the assessment under Clause (ii) of Sub-section (1) of Section 182 as if the firm were a registered firm. Section 184 provides for registration of firms. It is, therefore, seen that these special provisions applicable to firms, appearing in Chapter XVI, are inducted into the statute so as to confer a privilege or a benefit according to prescribed circumstances on registered firms. A registered firm as an assessee is also bound to pay advance tax. Such advance tax paid by an assessee shall be treated, under Section 219 of the Act, as payment of tax in respect of the income of the period which would be the previous year for an assessment for the assessment year next following the financial year in which it was payable, and credit therefor shall be given to the assessee in the regular assessment. Such credit, under certain circumstances, shall be given in a provisional assessment as well if one is made before the regular assessment is completed. If an assessee fails to furnish the returns as prescribed, then he is liable to pay penalty under Section 271 of the Act. In the above context Section 139, which appears in the chapter ' Procedure for assessment ' should be analysed for purposes of the instant case. A registered firm, if an assessee within the meaning of the Act, is bound to submit the returns within the time prescribed and in the prescribed form. If the non-furnishing of such returns springs from a deliberate motive to evade tax, it is punishable under Section 271 of the Act. If, however, the circumstances do not disclose any contumacious conduct on the part of the assessee which is a registered firm, it may apply in the prescribed manner to the concerned Income-tax Officer for extending the date for furnishing such returns. The proviso to Section 139(1) read as follows :

' Provided that, on an application made in the prescribed manner, the Income-tax Officer may, in his discretion, extend the date for furnishing the return-

(i) in the case of any person whose total income includes any income from business or profession the previous year in respect of which expired on or before the 31st day of December of the year immediately preceding the assessment year, and in the case of any person referred to in Clause (b), up to a period not extending beyond the 30th day of September of the assessment year without charging any interest ;

(ii) in the case of any person whose total income includes any income from business or profession the previous year in respect of which expired after the 31st day of December of the year immediately preceding the assessment year, up to the 31st day of December of the assessment year without charging any interest; and

(iii) up to any period falling beyond the dates mentioned in Clauses (i) and (ii), in which case, interest at six per cent. per annum shall be payable from the 1st day of October or the 1st day of January, as the case may be, of the assessment year to the date of the furnishing of the return,--

(a) in the case of a registered firm or an unregistered firm which has been assessed under Clause (b) of Section 183, on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm ; and

(b) in any other case, on the amount of tax payable on the total income, reduced by the advance tax, if any, paid or by any tax deducted at source, as the case may be.'

3. This proviso contains certain details and particulars as to when and in what circumstances such an application for extension can be filed and the conditions under which the Income-tax Officer could exercise his discretion in granting the same with or without charging any intererst. If the extension is sought beyond the dates mentioned in Clauses (i) and (ii) of the proviso, interest at nine per cent. per annum shall be payable as prescribed in Clause (iii) of the proviso from 1st day of October or 1st day of January, as the case may be, of the assessment year to the date of furnishing of the return. But, if the applicant for extension is a registered firm or an unregistered linn which has been assessed under Clause (b) of Section 183, then interest is payable on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm. But, in any other case, such interest is reckoned on the amount of tax payable on the total income. Credit of course has to be given for the advance tax, if any, paid or any tax deducted at source, as the case may be. There is divergence of opinion between the petitioner on the one hand and the revenue on the other, as to whether such a deduction of advance tax is obligatory if theassessee in default is a registered firm or an unregistered firm assessed under Section 183(b). In the light of these provisions, the contentions of the parties have to be considered.

4. When the Income-tax Act, 1961, was passed, the proviso to Section 139(1) was introduced. This was based upon the report of the Direct Taxes Administration Enquiry Committee. While dealing with the power of the assessing authority to grant extension of time to file a return of income beyond the prescribed date, the Committee suggested that one of the conditions which may be imposed might include the furnishing of adequate security for the tax due. They further observed :

' Assessees should be required to apply for extension of time in a prescribed form, undertaking to pay, for the period of extension, interest at six per cent. per annum of the tax, that may become due on assessment. The levy of such an interest in all cases of extension should be compulsory and should be statutorily laid down.'

5. It, therefore, follows that when the proviso to Section 139(1), which is a departure from the earlier Act, was inserted, the legislature applied its mind and in its wisdom thought of a special classification by treating defaulting registered firms as a class by itself. When it imposed such stringent conditions for the exercise of the discretion to extend the time for filing of returns, the legislature bore in mind the privileges enjoyed by the registered firm in the matter of exemption, rates of tax, etc., and this was possibly the basis for the differentia which was thought of. On a fair reading of the above provisions it cannot be doubted that the classification created in the above situation subserves the object of sustaining the privileges which a registered firm could claim under the Act and also to act as a deterrent against delayed submission of returns. There is, therefore, a nexus between the object with which the provision has been made and the differentia projected in the proviso to Section 139(1).

6. Let us now consider some of the privileges and the benefits which a registered firm has both under the ordinary law and under the taxing statute. A partnership firm has the right to continue as an unregistered one and suffer the hazards attendant upon it both under the taxing statute as well as under the ordinary civil law. If once a firm seeks registration under the provisions of the Income-tax Act and the other laws such as the Partnership Act, it secures certain privileges. In so far as the Income-tax Act, 1961, is concerned, it is not in dispute before me that a registered firm has certain benefits in the rates of tax, in the matter of the payment of advance tax so as to gain certain exemptions in the payment of the total tax, etc. In order to sustain those privileges and exemptions it is the duty of the assessee, as a registered firm, to submit returns of income within the prescribed time and with alacrity. If there is a wilful delay in the filingof returns, the assessee is penalised. If the delay is explainable by sufficient cause, then the legislature, more as a preventive rather than for purpose of imposing a penalty, has thought of increasing notionally the quantum of tax ultimately payable by the defaulting registered firm and by compelling such an assessee to pay interest on a particular fictional or notional amount of income. Such additional compulsive impost is in the nature of additional tax.

7. Mr, Srinivasan suggests that the proviso to Section 139(1) is not necessarily attracted in the case of a delayed return. There is a fallacy in the argument. So long as the firm does not admit that there was wilful abstention from the submission of returns, the firm is conscious of its laches in having delayed such returns and therefore it invokes the discretion of the Income-tax Officer to excuse such delay after showing sufficient cause. If the delay is excused, then the conduct of the assessee ceases to be contumacious, which, if found, is liable to attract Section 271 of the Income-tax Act. Hence, the assessee who sets the proviso to Section 139(1) into motion cannot ignore all these implications including the effect of the proviso thereto and in such a situation he has to be dealt with under Section 139 and not under any other provision of the Income-tax Act.

8. Now, the further question is whether in the application and adoption of the proviso to Section 139(1) and its various limbs, Article 14 of the Constitution is violated. The argument is that while in all other cases where there is delay in the filing of returns the amount of tax payable on the total income is not varied, in the case of registered firms committing a similar default in filing its returns, which delay is laterly excused by the statutory authority, the amount of tax is varied, as the tax is reckoned as if the registered firm is an unregistered one, though only for the purpose of reckoning the interest payable. Invariably the tax liability, in one sense, is increased by such a deemed quantification of income. The argument, however, proceeds that the classification introduced by the proviso in treating a defaulting registered firm in a manner different from that of other assessees, by itself, is indicative of discrimination and, therefore, violative of Article 14.

9. I have already dealt with the privileges which a registered firm enjoys by getting itself registered after due application under the Income-tax Act. After securing such privileges it is obligatory on its part to sustain such privileges without committing any default on its part. In order to induce it to be prompt and so as to deter it from filing returns beyond time, a classification as above has been thought of. No doubt, by reason of the classification the defaulting registered firm suffers in effect a higher quantum of income-tax, in the garb of interest. But, could it be said On this ground alone that the principles of Article 14 have been violated I am ofthe view that the classification is intended to subserve a particular purpose, namely, to compel the registered firms to be cautious and prompt in the matter of submission of their returns lest they should suffer a higher quantum of tax and the object so projected has an intelligible nexus with the differentia that is thought of. It is in these circumstances that we have to consider the scope and extent of the fundamental right guaranteed under Article 14 of the Constitution.

10. Article 14 though it contains a passionate exposition of the sociological concept of the principle of equality, yet its apparent overtone has been considerably subdued by judicial interpretation. By introducing the beneficial doctrine of reasonable classification judge-made law has made several dents on the apparent unrestrictive scope of Article 14. The true intent and scope of Article 14 of the Constitution appears to be that no one should be denied equality before law or equal protection of the law provided, however, that nothing could prevent the State from designing a law based on or involving a classification which is founded on an intelligible differentia which distinguishes persons or things that are grouped together from those left out of the group and such a differentia must have a rational relation to the object sought to be achieved by the statute in question. If, thus, therefore, there is a methodology in classification, then the resultant difterentia would be maintained as valid. If there is total absence of any connection whatsoever between the object sought to be achieved and that of the legislation in question, then such a law would lead to invidious discrimination. But, if the basis of the classification is made for any reason, may be historical or otherwise, or difference in the nature, trade, calling or occupation of a person sought to be affected by the legislation, or even the difference in the position or nature of different business concerns, then such a classification which is referable to occupation, point of time, locality, etc., may be sustained as an intelligible classification. It is indeed very difficult to exhaust the circumstances under which a classification could be thought of or made. It is by now well-settled that Article 14 does not envisage a fanatical approach to the problem of equality before law. Unless a well instructed person on a study of the law impugned comes to a reasonable conclusion that there is total lack of rational classification, then the methodology adopted is open to challenge. If the classification is intended to lay down a policy and incidentally exercise effective control over persons for whom certain privileges and exemptions are granted under the taxing law and in case they are classified for the particular purpose of imposing a heavier quantum of liability in a particular situation, then it cannot be said that the discrimination achieved is hopelessly unguided and not prompted by any public interest or based upon rational principles. Such adifference, as is made in the instant case, is on an intelligible differentia and has a rational relationship to the purpose of the statute.

11. The case law has gone one step further to uphold classifications in a taxing statute. As a matter of fact, the field of discretion vested in the legislature to create methods to classify assessees and treat them differently from others is wider in the field of taxation. Notwithstanding the relaxation of such rigidity in the matter of the application of the general principles as to the method of classification when applied to taxing law, yet the classification should even in such circumstances satisfy the test of reasonableness and rationality and the object achieved must have a distinct connection with the differentia created. It is by now well-settled that the levy of penalty under Section 297(2)(g) of the Income-tax Act does not offend Article 14 of the Constitution of India. In Jain Brothers v. Union of India the Supreme Court, observed :

'Both Section 271(1) and Section 297(2)(g) have to be read together and in harmony...... '

12. and held that it is not possible to say that while applying the penalty provisions contained in the Act of 1961 to persons whose assessments are completed after April 1, 1962, any class has been singled out for special treatment. They also add :

' It is open to the legislature to say that once a registered firm committed a default attracting penalty it should be deemed or considered to be an unregistered firm for the purpose of the imposition of penalty. No question of discrimination under Article 14 can arise in such a situation. There is nothing to prevent the legislature from giving the benefit of a reduced rate to a registered firm for the purpose of tax but withholding the same when it committed a default and became liable to imposition of penalty.... It is well-settled that in fiscal enactments the legislature has a larger discretion in the matter of classification so long as there is no departure from the rule that persons included in a class are not singled out for special treatment. '

13. While I respectfully adopt the observations of the Supreme Court as above, I would add that it is open to the legislature to say that once a registered firm fails to submit its returns within the prescribed time and it applies for extension of time before the Income-tax Officer, then it can prescribe certain conditions for the exercise of such a discretion in favour of the defaulting assessee and, consequentially, impose an additional burden of paying interest at the prescribed rate for the period of extension. No question of discrimination under Article 14 can arise in such a situation. There is nothing to interdict the legislature from conferring certain privileges and benefits on a registered firm under certain situations and impose additionalburdens in the nature of payment of interest over a deemed income fixed by the legislature, when it is not disputed that the registered firm committed a default in the matter of submission of the returns in time and became liable to be dealt with as such. A classification has been made in the Act with the avowed object of preventing such delayed returns and, consequentially, further delay in the payment of lawful dues to the State. The position is made more clearer in V. Venugopala Ravi Varma Rajah v. Union of India:

' The equal protection clause of the Constitution does not enjoin equal protection of the laws as an abstract proposition. Laws being the expression of legislative will intended to solve specific problems or to achieve definite objectives by specific remedies, absolute equality or uniformity of treatment is impossible of achievement. Again, tax laws are aimed at dealing with complex problems of infinite variety necessitating adjustment of several disparate elements. The courts accordingly admit, subject to adherence to the fundamental principles of the doctrine of equality, a larger play to legislative discretion in the matter of classification. The power to classify may be exercised so as to adjust the system of taxation in all proper and reasonable ways ; the legislature may select persons, properties, transactions and objects, and apply different methods and even rates for tax, if the legislature does so reasonably. The equality clause does not predicate a mathematically precise or logically complete or symmetrical classification : it is not a condition of the guarantee of equal protection that all transactions, properties, objects or persons of the same genus must be affected by it or none at all. If the classification is rational, the legislature is free to choose objects of taxation, impose different rates, exempt classes of property from taxation, subject different classes of property to tax in different ways and adopt different modes of assessment. A taxing statute may contravene Article 14 of the Constitution if it seeks to impose on the same class of property, persons, transactions or occupations similarly situate, incidence of taxation which leads to obvious inequality. A taxing statute is not, therefore, exposed to attack on the ground of discrimination merely because different rates of taxation are prescribed for different categories of persons, transactions, occupations or objects.

It is for the legislature to determine the objects on which the tax shall be levied and the rates thereof. The courts will not strike down an Act as denying the equal protection of the laws merely because other objects could have been, but are not, taxed by the legislature.'

14. The above principle in toto applies to the case under consideration. Again, as pointed out by the Supreme Court in Twyford Tea Co. v. Kerala State:

' There is a wide range of selection and freedom in appraisal not only in the objects of taxation and the manner of taxation but also in the determination of the rate or rates applicable.

The burden of proving discrimination is always heavy and heavier still when a taxing statute is under attack, and it is on a person complaining of discrimination. The burden is proving not possible 'inequality' but hostile 'unequal' treatment. This is more so when uniform taxes are levied. When the legislature reasonably applies an uniform rate after equalising matters between diversely situated persons differences in treatment must be capable of being reasonably explained in the light of the object for which the particular legislation is undertaken. This must be based on some reasonable distinction between the cases differentially treated. To be able to succeed in the charge of discrimination, a person must establish conclusively that persons equally circumstanced have been treated unequally and vice versa. '

15. Bearing in mind the above principles and my own view of the matter already explained, I am unable to agree with the learned counsel for the petitioner that by the differential treatment accorded to a defaulting registered firm as envisaged in the proviso to Section 139(1), any discrimination under Article 14 of the Constitution would arise.

16. The other argument that even if the earlier portion of the proviso is not hit by Article 14 yet the disentitlement contemplated in the proviso for interest on advance tax on registered firms dealt with as unregistered firms due to late submission of returns, is discriminatory appears to be well-founded. Reliance was placed upon the main intention of the legislature and also the punctuation marks used in the proviso. This contention is countered by the revenue stating that the text is clear and the authorised publication gives out that the petitioner and persons similar to the petitioner are not entitled to interest on advance tax paid for purposes of reckoning the ultimate tax liability. It is pressed that punctuation cannot be a guide to interpret statutes.

17. The authorised publication (The Gazette of India, Extraordinary) reproduces the relevant portion of the proviso in this form :

' Provided that, on an application made in the prescribed manner, the Income-tax Officer may, in his discretion, extend the date for furnishing the return--...

(iii) up to any period falling beyond the dates mentioned in Clauses (i) and (ii), in which case, interest at six per cent. per annum shall be payable from the 1st day of October or the 1st day of January, as the case may be, of the assessment year to the date of the furnishing of the return-

(a) in the case of a registered firm or an unregistered firm which has been assessed under Clause (b) of Section 183, on the amount of tax whichwould have been payable if the firm had been assessed as an unregistered firm; and

(b) in any other case, on the amount of tax payable on the total income, reduced by the advance tax, if any, paid or by any tax deducted at source, as the case may be.'

18. We are here concerned with the text and the punctuation of sub- Clauses (a) and (b) to Clause (iii) of the proviso. As in every other case, a registered firm being an assessee within the meaning of the Act, is entitled to pay advance tax and secure the benefits consequential upon such a payment. All such persons who pay advance tax and as a result thereof secure certain privileges in the matter of counter-interest thereon, do belong to a class by themselves. A registered firm which has committed a default in the submission of returns as well as any other assessee are on the same level and are to be treated equally when the question arises as to what are the benefits they would be entitled to in law when they pay advance tax. It is not in dispute that the Government is obliged to give credit for advance tax under Section 219 of the Act and pay such interest as is prescribed under Section 214 in the circumstances stated therein. These benefits apply uniformly to all assessees. If, therefore, the registered firm who made a mistake in filing delayed returns is to be discriminated against and its right to obtain a deduction of the amount of advance tax is negatived, then the legislature must expressly say so or such a situation should appear by necessary intendment. Even if it does, as it creates an unequal situation amongst equals, it should stand the test of reasonableness and the differential treatment should have a relation to the object sought to be achieved. I am unable to find any reasonable ground for such a differentia. Advance tax is paid by an assessee at a time when it cannot be comprehended that it is going to make a delayed submission or a default prospectively. The payment of advance tax is a normal and uniform event which applies both to registered firms as well as to all other assessees. It, therefore, follows that the benefit which is attributable to such payment of advance tax should be equally available to all the assessees and there should be no discrimination in this behalf. It cannot be said in the instant case that, by reason of the textual exposition of sub-clauses (a) and (b) as above in the official publication, the legislature has given out strongly by necessary intendment its intention to treat a defaulting registered firm differently from any other assessee. On this ground alone the petitioner is entitled to succeed partially.

19. Even on the question whether the punctuation adopted in sub- Clauses (a) and (b) gives a guide to the interpretation put upon it by the learned counsel for the petitioner, I am inclined to agree with him. No doubt, for historic reasons, English courts were chary to be guided bypunctuation marks in statutes as no parliamentary rule contained any punctuation. But, in an enactment like the Indian Income-tax Act, where meticulous care has been taken to punctuate the provisions and the sections contained therein, it would not be inappropriate if such a punctuation of a particular provision is also taken into consideration for purposes of interpreting the relevant provision. This is on the principles of contemporaneo expositio. The Supreme Court in Aswini Kumar Ghose v. Arabinda Bose, : [1953]4SCR1 ., observed thus :

' Punctuation is after all a minor element in the construction of a statute, and very little attention is paid to it by English courts. When a statute is carefully punctuated and there is doubt about its meaning, weight should undoubtedly be given to the punctuation. Punctuation may have its uses in some cases, but it cannot certainly be regarded as a controlling element arid cannot be allowed to control the plain meaning of a text. '

20. In the instant case I am of the view that the punctuation is 'useful. Though, however, I am not inclined to place weight on the punctuation of the clause in question as if they are controlling the very problem before us, I am inclined to consider the punctuation since there is a doubt entertained whether the petitioner is entitled to the benefit expressly ' provided for in the punctuation itself. In case of doubt, an interpretation favourable to the assessee has to be rendered.

21. What is sought to be made out is that all assessees other than persons in the position of the petitioner are entitled to a reduction by the advance tax, if any, paid or by any tax deducted at source, as the case may be. The. parenthesis 'reduced by the advance tax, if any, paid or by any tax deducted at source, as the case may be ' is tagged on to Sub-clause (b) of Clause (iii) to the proviso in the official publication. On the basis of this it is contended that reduction could be claimed by assessees other than the petitioner or persons similarly placed. In Clause (a) after the words ' assessed as an unregistered firm' the punctuation mark is a semi-colon. It is followed up immediately by the conjunction ' and '. Normally, interpreting such a punctuation and a conjunction the continuity of Sub-clause (a) is maintained and there is no snapping as between Sub-clauses (a) and (b) in so far as the main aspect posed therein is concerned. The main aspect is as to what is the amount of tax payable by each of the assessees referred to in Sub-clauses (a) and (b). The earlier portion of Sub-clause (b), which deals with this aspect, is to be normally considered as the clause which conjuncts Sub-clauses (a) and (b). It is only then that we could properly understand the intendment of the legislature and the force of the punctuation and the conjunction used therein. In any even t a doubt has arisen as to whetherthe concession of reduction on advance tax contemplated in Sub-clause (b) is to be restricted to assessees other than the petitioner and persons similarly placed. There is no warrant for accepting this interpretation as urged by the revenue, as it would not only lead to a discrimination between similar assessees liable to pay advance tax under the Indian Income-tax Act but it would also do violence to the well-established principle of contemporaneo expositio. As a matter of fact, the learned author, Palkhivala, in his edition has reproduced the clauses and the parenthesis above referred to in a manner suggested by the learned counsel for the petitioner. There is everything intrinsic in the sub-clauses to interpret the parenthesis as reproduced by the reputed author. As preservation of equality before law is a fundamental aspect of the rule of law, I am of the view that the parenthesis ' reduced by the advance tax, if any, paid or by any tax deducted at source, ay the case may be ' governs both Sub-clauses (a) and (b) and is not to be tagged on only to Sub-clause (b) of Clause (iii) of the proviso.

22. In the result the petitioners cannot succeed on the ground that the provisions of Section 139(1), proviso (iii) (a) and (b) of the Income-tax Act, 1961, are ultra vires ; but they would be entitled, on a reasonable interpretation of the text of the clause, to the credit for advance tax which is available to other assessees and in this view the petitioners are entitled partially to a relief. These writ petitions are, therefore, allowed in part. The assessments, if any, made have to be revised in the light of the observations contained in this judgment and no further direction is necessary. As the petitioners did not succeed entirely there will be no order as to costs.


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