TMI Blog1997 (1) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to be struck down as ultra vires. It was argued in the alternative that in case the sections are not declared unconstitutional, the court may give such an interpretation, which may require the authorities under the Act to afford an opportunity of being heard, before any order is passed under the aforesaid provisions. The case of the respondents was that the impugned provisions were only compensatory in nature and not penal, as urged by the appellants. The applicability of the principles of natural justice in favour of the appellants was vehemently denied. It was submitted that the provisions were constitutionally valid and did not suffer from any vice of unconstitutionality, requiring interference by this court. In order to appreciate the rival contentions of the parties, it is necessary to have a glimpse of the offending provisions of the Act. Section 234A provides: "Interest for defaults in furnishing return of income.---(1) Where the return of income for any assessment year under sub-section (1) or sub-section (4) of section 139, or in response to a notice under sub-section (1) of section 142, is furnished after the due date, or is not furnished, the assessee shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... increased, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly ; (ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded. (5) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years." Section 234B provides : "Interest for defaults in payment of advance tax.---(1) Subject to the other provisions of this section, where, in any financial year, an assessee who is liable to pay advance tax under section 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of section 210 is less than ninety per cent. of the assessed tax, the assessee shall be liable to pay simple interest at the rate of two per cent. for every month or part of a month comprised in the period from the 1st day of April next following such financial year to the date of determination of total income under sub-section (1) of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice under section 156 and the provisions of this Act shall apply accordingly ; (ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded. (5) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years." Section 234C provides: "Interest for deferment of advance tax.---(1) Where in any financial year,--- (a) the company which is liable to pay advance tax under section 208 has failed to pay such tax or--- (i) the advance tax paid by the company on its current income on or before the 15th day of June is less than fifteen per cent. of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of September is less than forty-five per cent. of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than seventy-five per cent. of the tax due on the returned income, then, the company shall be liable to pay simple interest at the rate of one and one-half per cent. per month for a period of three months on the amount of the shortfa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e instalment of advance tax which is immediately due or where no such instalment is so due, by the 31st day of March of the financial year : Provided further that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of--- (a) restricting the amount of deduction under the third proviso to clause (ii) of sub-section (1) of section 32 ; (b) increase in the rate of surcharge under section 2 of the Finance Act, 1990 (12 of 1990), as amended by the Taxation Laws (Amendment) Act, 1991 (2 of 1991), and the assessee has paid the amount of shortfall,--- (i) where it is a domestic company and--- (1) the case falls under clause (a) as part of the instalment of advance tax which is immediately due ; (2) the case falls under clause (b), on or before the 15th day of November, 1990, in respect of the instalment of advance tax due on the 15th day of September, 1990 ; (ii) where it is not a domestic company and--- (1) the case falls under clause (a), as part of the instalment of advance tax which is immediately due ; (2) the case falls under clause (b), as part of the instalment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y well settled that the Statement of Objects and Reasons accompanying a Bill cannot be used except for the limited purpose of understanding the background and the antecedent state of affairs leading up to the legislation. All that the Statement of Objects and Reasons can possibly show is to explain what reasons induced the mover to introduce the Bill in the House and what objects it sought to achieve. Those objects and reasons may or may not correspond to the objective which the majority of members had in view when they passed it into law. The Bill may have undergone radical changes during its passage through the Houses, as there is no guarantee that the reasons which led to its introduction and the objects thereby sought to be achieved have remained the same throughout till the Bill emerges from the House as an Act of the Legislature. It is, therefore, very rarely and rather sparingly that the Statement of Objects and Reasons behind the introduction of the Bill is called in aid for arriving at the true legislative intent behind a particular statutory provision. Reference in this connection may be made to Aswini Kumar Ghose v. Arabinda Bose [1952] AIR 1952 SC 369, Central Bank of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 142(1) of the Act has either failed to pay the advance tax or the advance tax already paid is less than 90 per cent. of the tax assessed against him. No person can make a grievance as to any provision which enjoins upon him the obligation to submit the return in respect of his taxable income or to pay advance tax at the appropriate time and within the prescribed period. It is clear, therefore, that any default committed in that regard even though likely to visit him with evil consequences is of his own making. The consequence thus cannot be said to be penal. The amount on which the interest is levied is the amount which can legitimately be said to be public revenue which although payable by the assessee, has actually not been paid by him. Levy of interest on such amount which the assessee withholds and makes use of cannot be said to be anything but a compensatory measure meant to offset the loss which the Revenue suffers on account of non-payment of the said amount. This becomes evident also from the fact that the sections contain specific provisions in regard to the period for which this additional liability is imposed on the defaulting assessees." It was further h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him. The learned single judge has rightly held that the amount at which the interest is levied by the impugned sections, is an amount, which can legitimately be said to be public revenue though payable by the assessee, but not paid by him, despite his knowledge of the position of law. Levy, of interest on such amount which is utilised by the assessee for his own purposes has rightly been directed to be compensated by means of directing him to pay the interest at the rates specified under the sections. Dealing minutely with the offending sections, the learned single judge was right in holding that the provisions of the aforesaid three sections were meant to cater to different situations, and that: "Each situation is distinctly different from the other and attracts a liability by way of interest. The question whether the provision making interest payable on the happening of any event is a provision which is compensatory in character will have to be answered in the context of the language and the purpose behind the provision and not by reference to other provisions of similar or analogous nature. Viewed thus, it is not possible to hold that the provisions of sections 234A, 234B a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TC 214, wherein it was held: "The second part of the challenge under article 14 was with respect to the rates at which interest is payable under sub-section (2) of section 8 on the amount of tax paid after the expiry of the prescribed date for payment. It is true that the rate of two per cent per month and particularly the rate of three per cent, per month can be said to be on the high side, but we fail to see how this would render the provisions of that sub-section void or unconstitutional. Providing for payment of interest in case of delayed payment of tax is a method usually adopted in fiscal legislation to ensure that the amount of tax which is due is paid by the prescribed time and provisions in that behalf form part of the recovery machinery provided in a taxing statute. It is for the State to provide by what means payment of tax is to be enforced and a person who does not pay the amount of tax lawfully and admittedly due by him can hardly complain of the measures adopted by the State to compel him to pay such amount. It neither lies in the defaulter's mouth to protest against the rate of interest charged to him nor is it open to him to dictate to the State the methods whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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