TMI Blog1972 (12) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in January, 1968. The firm submitted its return of income for the assessment year 1964-65, under section 139(1) of the Income-tax Act, 1961, after obtaining extension of time from the respondent. On the basis of the said return the respondent by his order of assessment dated February 28, 1965, determined the total income at Rs. 1,03 021 and the tax payable thereon at Rs. 7,034. In the, said order of assessment the respondent determined the interest payable by the firm under section 139 at Rs. 3,868. The said interest has been calculated at 6 per cent. on the total income of Rs. 1,03,021 treating the firm as an unregistered firm as per proviso (iii)(a) of that section. The petitioner has challenged the said assessment so far as it relates to the levy of interest. The challenge has been made on two grounds, (1) the proviso (iii)(a) to section 139(1) enabling the Income-tax Officer to treat the registered firm as an unregistered firm while calculating the interest payable by the firm is arbitrary and ultra vires being a colourable exercise of the legislative power; (2) the proviso (iii)(b) to section 139(1) which allows deduction of the advance tax paid for purposes of the levy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the revenue that it is open to the legislature to create such a fiction in the matter of levy of interest, that there is no subsantial distinction between registered firms and unregistered firms except in the matter of tax assessment and that even in the matter of tax but for the differentiation created by the statute both registered and unregistered firms have got the same characteristics and, therefore, a registered firm could validly be treated as an unregistered firm for the purpose of the levy of interest. As regards the petitioner's allegation that the denial of benefit of the deduction of advance tax in the computation of interest as per the proviso (iii)(b) to the registered firms alone is discriminatory, the revenue contends that the advance tax paid by the firm is only in its capacity as a registered firm, and not as an unregistered firm, that it has been rightly excladed from deduction for the computation of interest, that this result follows from the legal fiction created under proviso (iii)(a) and that in the matter of calculation of interest a registered firm will have to be treated as an unregistered firm. Before considering the tenability of these rival conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution as being discriminatory and the court should avoid such an interpretation which would invalidate the statutory provision. But, according to the revenue, the said clause quarlified only clause (iii)(b) and not both the clauses and that the benefit of deduction is not intended to be given to the firms on which interest is leviable under sub-clause (a). At this stage we would like to dispose of the said second contention of the petitioner first. The petitioner's contention is that, if the construction of clauses (iii)(a), and (b) of the proviso to section 139(1) as suggested by the revenue is accepted, the same will infringe article 14 in that it would make an invidious distinction between registered firms on the one hand and all other a on the other in the matter of levy of interest and that there is no reasonable basis for making that classification for denying the benefit of deduction of advance tax paid and the tax deducted at source from the amount of tax on which the interest is to be levied, and that it is the duty of the court to construe a statutory provision in such a way as to give it validity. We are inclined to agree with this contention. Proviso to section 199(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia ) and the learned judge has, after an elaborate consideration of the point in all its aspects, if we may say so with respect, held that the interpretation of the proviso as suggested by the revenue cannot be accepted. The reasons given by the learned judge are : (1) the context of the proviso and the punctuation of sub-clauses (a) and (b) to clause (iii) of the proviso make it abundantly clear that the benefit of deduction should go to both the categories referred to in sub-clause (a) and sub-clause (b) of clause (iii) of the proviso ; (2) if the parenthesis " reduced by the advance tax if any, paid or by any tax deducted at source, as the case may be" is taken to govern only clause (b) as urged by the revenue it would not only lead to discrimination between similar assessees liable to pay advance tax but would also violate the well-established principles of contemporaneo expositio. We respectfully agree with the said reasoning. As pointed out by the learned judge, as iu every other case a registered firm also is bound to pay advance tax, and, therefore, it is entitled to secure all the benefits consequential upon such advance payment. All such persons, who pay advance tax and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1)(a) when he had already levied interest under section 139. In dealing with that question the court had to consider the intendment and purpose of clause (iii) to the proviso to sub-section (1) of section 139, and after comparing that provision with the other provisions in the Act such as sections 140A and 141, the court expressed : " Therefore interest payable under clause (iii) of the proviso to sub-section (1) of section 139 is nothing but simple interest or compensation that could accrue or would have accrued to the State, if the assessee had filed his return as required by section 139 and paid the tax as per the provisions of section 140A. It is not, therefore, correct to state that the interest so payable is penal in character nor does it amount to penalty of any kind levied under the Act. The very intendment and purpose of this provision to levy interest on the amount of tax payable by the assessee is to make the assessees feel their responsibility and statutory obligation to furnish the returns of their incomes within the time provided under section 139 of the Act." These general observations dealing with the scope of section 139 do not throw any light oil the question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsel refers to section 271(2) which has used the non obstante clause for treating a registered firm as if it were an unregistered firm for the purpose of levy of penalty under section 271(1) and states that in the absence of such a non obstank clause in the proviso to section 139 it is not open to the legislature to treat a registered firm as if it were an unregistered firm for the purpose of imposition of interest. We are not impressed with this argument. The question does not depend upon the existence or otherwise of the non obstate clause in section 139(1). The question is whether it is open to the legislature to treat a registered firm as an unregistered firm when it has committed a default in submission of the return. It cannot be disputed that, but for the privileges given by the statute to a registered firm, it would be in the same position as an unregistered firm. Therefore, it is open to the legislature to say that one or other of the privileges granted to a registered firm will not be available to such firms who have defaulted to submit the return in time. It is untenable to say that the legislature which granted the privileges cannot take away any of the privilege ..... X X X X Extracts X X X X X X X X Extracts X X X X
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