TMI Blog1979 (9) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. Hence he levied interest on the amount of advance tax withheld, as prescribed in s. 217 of the Act. Their petitions claiming exemption from interest made to the Commissioner were rejected. Aggrieved by the levy of interest, the appellants presented writ petitions challenging the constitutional validity of s. 217 of the Act on the ground that it is discriminatory, and, therefore, void as it offends art. 14 of the Constitution. Their plea was that persons, who are similarly situated and to whom notices calling upon them to pay advance tax under s. 210 of the Act are issued are not liable to pay any interest, even if they do not pay advance tax in terms of the notice, whereas persons like the appellants, who are new assessees, are made liable to pay interest at 12 per cent. on the advance tax withheld and, therefore, s. 217 of the Act is violative of art. 14 of the Constitution. The respondents resisted the case of the appellants on the following grounds : Persons, who are already assessees and to whom notices for payment of advance tax under s. 210 of the Act are issued and persons like the appellants who became assessees for the first time belong to two separate and dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessed tax, he is liable to pay 12 % interest on the amount by which the advance tax so paid falls short of assessed tax. (iv) 216.--Under this section an assessee is made liable to pay interest on the advance tax withheld if he had made an underestimate of his income. (v) 217.--This section applies to new assessees. According to this section, a person who becomes an assessee for the first time and who though liable to pay advance tax under the Act had failed to pay the same, as required under the Act, is liable to pay interest at 12% per annum on the amount not paid. (vi) 218.--This section says that an assessee who fails to pay advance tax in accordance with the notice issued under s. 210 or according to his estimate filed under s. 212, shall be deemed to be a defaulter in respect of instalments not paid. (vii) 221.--This section provides for imposition of penalty, against a defaulter, in any amount, not exceeding the amount of tax in arrears. The contention urged for the appellants is that though every person, who fails to pay advance tax, is made liable to pay interest, on the amount withheld, an assessee to whom notice under s. 210 has been issued and who ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, taxation statute cannot be arbitrary and oppressive. (ii) Court cannot however meticulously scrutinise the impact of the burden of a tax law on different persons or interests but can only strike down if the court is convinced that the method adopted is arbitrary or capricious, fanciful or clearly unjust. (iii) If Legislature has adopted one method for imposition of tax burden, the court cannot strike down the law on the ground that the Legislature should have adopted another method which, in the opinion of the court, is more reasonable. (Khandige Sham Bhat v. Agrl. ITO [1963] 48 ITR 21 (SC)). (i) In view of the intrinsic complexity of fiscal adjustments of diverse elements, there is considerably wide discretion in the matter of classification for taxation purposes. (ii) If the classification by a taxing statute is a reasonable one, it is not vulnerable on the ground of discrimination merely because it taxes or exempts from tax some income or objects and not others. [ITO v. N. Taken Roy Rymbai-- [1976] 103 ITR 82 (SC)]. The validity or otherwise of the impugned provision has to be decided by applying the aforesaid principles enunciated by the Supreme Court. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax is issued under s. 210, but who fails to pay it within the stipulated time, is deemed to be a defaulter under s. 218 of the Act. Not only coercive action for recovery of advance tax could be taken immediately against him, but also he is liable to the imposition of penalty, which may go to the extent of the advance tax payable itself. The said section has no application to persons like the appellants, who are governed by s. 217 of the Act which requires an additional payment of interest at 12% per annum on the amount of advance tax withheld. The Legislature has imposed additional burden on both the classes of persons in a different way. Whether the Legislature should have levied interest only on both or penalty only on both, or interest on one category and penalty on the other is a matter for legislative wisdom and judgment and could not constitute a ground for striking down the provision so long as the additional burden is imposed on both in one way or the other. Learned counsel for the appellants, however, strenuously contended that the levy of interest under s. 217 and levy of penalty tinder s. 221, on an assessee, who is a defaulter in payment of advance tax has nothing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inatory. In the circumstances, it appears to us that while, the argument constructed for the assessees, on the basis of omission,to levy interest on the amount of advance tax omitted to be paid by an assessee falling under s. 210, and the levy of interest on the amount of advance tax omitted to be paid by the new assessees appears to be attractive at first sight, on a deeper scrutiny, we are convinced that there is no violation of art. 14 of the Constitution. Therefore, the view taken by the learned single judge is correct and the appeals are liable to be dismissed. Before concluding it is necessary to refer to another argument constructed on the basis of sub-r. (5) . 40 of the I.T. Rules. We see absolutely no force in this contention. The said sub-rule only empowers the IAC to reduce the interest leviable under the Act, if in his opinion there are good grounds to do so in a genuine case. This is a provision favourable to the appellants and other assessees. But the argument was that as there are no guidelines for the exercise of the power under that sub-rule, levy of 12% interest under s. 217 becomes violative of art. 14. We fail to see that there is any vice in sub-r. (5) of r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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