TMI Blog1984 (7) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered as perquisite and should not be taken into consideration for computing the disallowance that has to be made under section 40A(5) of the Income-tax Act, 1961, for the assessment year 1972-73 ? " We answer the last question, which is covered by the decision of this court in CIT v. Toshiba Anand Lamps Ltd. [1984] 145 ITR 563, in favour of the assessee and against the Revenue. We shall now deal with the first two questions. The assessee is company owning tea estates and carrying on the business of manufacture and sale of tea. For the assessment year 1972-73, the ITO made a demand for payment of advance tax under s. 210 of the I.T. Act, 1961. The amount demanded was Rs. 8,52,803 which was based on the last completed assessment for the assessment year 1969-70. On June 14, 1971, the assessee filed an estimate in terms of s. 212(1) stating that its income was Rs. 7,00,000 and the tax payable thereon was Rs. 4,90,000. On the basis of that estimate, the assessee paid on June 16, 1971, September 8, 1971 and December. 15, 1971, a "sum of Rs. 1,63333 "each. However, on March 4, 1972, a revised estimate was submitted by the 'assessee' in terms of s. 212(3A) estimating its income at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruary 17, 1979 (annexure F), rectified under s. 254(2) its earlier order dated July 28, 1978, and held that the ITO had rightly levied interest on the difference between the amount paid by the assessee in each of the first two instalments and one-third of the aggregate advance tax actually paid by it. Advance tax payable in terms of ss. 207 to 209 was demanded by the ITO in terms of s. 210, as the law stood at the relevant time. The tax was payable in three instalments on the dates specified in s. 211. However, the assessee had the option not to pay the tax as demanded under s. 210, but to make an estimate of its income and pay tax thereon in terms of s. 212. Sub-s. (1) of s. 212 says that where the assessee estimates, that the advance tax payable by him is less than the amount computed by the ITO, he has the option to send to the officer an estimate of his current income and the advance tax payable thereon and to pay such tax in three equal instalments on the dates specified under s. 211 or in one sum on or before the expiry of the date specified for payment of the last instalment. Subs. (2) gives him the right to file a revised estimate of such tax before the expiry of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the regular assessment, the Income-tax Officer finds that any assessee has (a) under sub-section (1) or sub-section (2) or sub-section (3) or subsection (3A) of section 212 underestimated the advance tax payable by him and thereby reduced the amount payable in either of the first two instalments ; or (b) under section 213 wrongly deferred the payment of advance tax on a part of his income, he may direct that the assessee shall pay simple interest at twelve per cent. per annum (i) in the case referred to in clause (a), for the period during which the payment was deficient, on the difference between the amount paid in each such instalment and the amount which should have been paid, having regard to the aggregate advance tax actually paid during the year; and (ii) in the case referred to in clause (b) for the period during which the payment of advance tax was so deferred. Explanation.-For the purposes of this section, any instalment due before the expiry of six months from the commencement of the previous year in respect of which it is to be paid shall be deemed to have become due fifteen days after the expiry of the said six months."(emphasis supplied) This section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt paid in each of the first two instalments and the amount which should have been paid. Section 216, for the purpose of levy of interest, refers only to the first two instalments. If either of these two instalments is not paid in full and on time, money payable to the Revenue in terms of ss. 207 to 212 is withheld as a result of which loss is caused to it. It is to compensate the Revenue for such loss that interest is levied under s. 216. But in levying that interest, the legislature says that the officer must have due regard to the aggregate advance tax actually paid during the year. Counsel for the Revenue would contend that the interest levied under s. 216 being compensatory in character, the section must be read as mandatory and not directory. Once the officer has found that either cl. (a) or (b) is attracted, he has no choice in regard to the direction. He must necessarily make an order directing the assessee to pay the prescribed interest. Counsel would, therefore, read " may " as " shall ". Then he submits that the section being so understood to be mandatory, the words " having regard to the aggregate advance tax actually paid during the year " would make no sense unles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time of regular assessment, in regard to the exercise of discretion as to the levy of interest on the deficiency in the first two instalments. Apart from such guidance as to the discretion indicated by " may ", the words " having regard to, etc. " have no relevance to the calculation of the interest, for which purpose the preceding words are in themselves complete. We do not, therefore, agree that " paid " should be read as " payable or " may as "shall". When the section is read literally, and not as suggested by the counsel for the Revenue, the words " may " and " paid " fall in proper and meaningful places. The officer may or may not direct, but before he decides either way, he must have due regard to the aggregate advance tax actually paid during the year. This is particularly so in the light of s. 212(1) which permits the assessee to pay the advance tax as estimated by him in one sum before the expiry of the date for payment of the last instalment. So it is with the rest of that section, the object of which is to help the assessee pay on the basis of his own estimate before the expiry of the specified dates. In a case where the assessee paid the total amount payable (or eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given the discretion to waive the interest, where he is of the opinion that the assessee has made an honest mistake as to the applicability of s. 213. The ITO may either waive or reduce the interest according to his discretion. Although the section does not specifically say so, as does s. 215(4), we are of the opinion that the wider power to waive must necessarily include the narrower power to reduce. Accordingly, dependent on the facts and circumstances, the officer may, in his discretion, levy the full interest, or reduce or waive the same. As regards the claim for exclusion of the amount paid as car allowance, counsel for the Revenue points out that such payment falls under s. 40A(5)(a)(ii). He says that it is either a perquisite or an expenditure directly or indirectly incurred in respect of an asset of the assessee by the employee. It must be remembered that what is paid as car allowance was paid in addition to a car supplied to each of the three employees. The car allowance was thus a cash payment periodically made in addition to salary. Sub-s. 5(a) of s. 40A reads : " 40A. Expenses or payments not deductible in certain circumstances.... (5) (a) Where the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment would be a payment in respect of an obligation which, but for such payment, would have been payable by the employee. Where the payment is made directly to the employee, that would not be a payment in respect of any obligation owed by the employee and it could not, therefore, fall as a perquisite under sub-cl. (iv) of cl. (b) of Explanation 2. Nor can such payment, in our view, constitute an expenditure in respect of any asset of the assessee used by an employee to attract cl. (ii) of sub-s. (5)(a). A payment in respect of an asset must be a payment having a direct nexus with the asset. For example, an allowance paid for the repair of a car would be an expenditure falling under sub-cl. (ii) of subs. (5)(a), but an allowance periodically paid for the purpose of buying petrol for the car would not fall under sub-cl. (ii), for the petrol purchased is not in respect of the car, as in the case of repair, but for running the car. A car is complete as an asset without the petrol, although the petrol is the fuel on which it runs. In the present case, the Revenue has not contended that the car allowance was for the purpose of repair of the car. Considering the amount periodically ..... X X X X Extracts X X X X X X X X Extracts X X X X
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