TMI Blog1974 (4) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... petitions. The concerned Income-tax Officer, the Union of India and the Commissioner of Income-tax have been impleaded as respondents. In all these cases, interest under section 139 is calculated at the prevailing rate on the amount of tax which would have been payable if the concerned firm had been assessed as an unregistered firm. The contention of the petitioners is that section 139(1) read with section 139(4) (as they stood prior to April 1, 1971) which authorised collection of interest from a registered firm at the prescribed rate on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm is discriminatory and violative of article 14 of the Constitution. They claim that they are liable to pay interest on the actual tax payable by them like all other assessees and that there is no justification to levy interest on the tax which they are not in law liable to pay under the Act. In order to sustain an attack based on article 14 of the Constitution of India, the classification made by the legislature should satisfy two tests : (1) that there is an intelligible differentia between persons and things which are grouped together and thos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r payable by such firm. On the contrary, the registered firm will have to pay the same penalty as an unregistered firm which may far exceed the maximum limit of 50% prescribed by the above provision. This, according to the appellants, constitutes discrimination under article 14 of the Constitution. Now a firm when registered is treated as a separate entity liable to tax. After 1956 it has to pay tax at a special reduced rate. If a firm got itself registered the partners were entitled to certain benefits and advantages. It was, however, 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 its imposition, No question of discrimination under article 14 can arise in such a situation. We fully share the view of the High Court that there was nothing to prevent the legislature from giving the benefit of a reduced rate to a registered firm for the purpose of tax but withhold the same when it committed a default and became liable to imposition of penalty." It is seen from the foregoing that the Supreme Court was of the view that since the provision in question was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under sub-section (1) of section 139. If we look at clause (iii) of the proviso to sub-section (1) of section 139, it is clear that even where the Income-tax Officer grants extension of time to a person to file his return of income, the person to whom extension of time is granted is liable to pay interest, if the extended date falls beyond a particular date. There is no question in such a case of levying any penalty on the person concerned, because extension of time having been granted to him, he is not in default. Interest is not charged to him by way of penalty but he is required to pay it, because by reason of extension of time, the filing of the return would be delayed and that would in its turn delay the assessment and consequent realisation of tax from the assessee. It is, therefore, by way of compensation for delay in realisation of tax that interest is required to be paid by the assessee. Now, obviously, if a person who obtains extension of time beyond a certain date is required to pay interest, a person who does not seek extension of time but files the return of income under sub-section (4) of section 139 after the time specified in sub-section (1) of section 139 cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 139(1) is compensatory in character, its incidence on all the assessees dealt with by that provision should be the same. Having regard to the loss which the Government would suffer by the assessee withholding the payment of arrears of tax the legislature has specified the interest payable by the assessee. While construing section 139(1) the court should place emphasis on the loss, which the Government suffers by the delayed filing of return resulting in delayed payment of arrears of tax and not on the kind of assessee who has committed default. The loss suffered by the Government which is sought to be compensated by the legislative measure should be the same in all cases, irrespective of the fact that the assessee who is responsible for it is a registered firm or any other kind of assessee. If that is the case, then the amount claimed by way of interest should be directly correlated to the amount of tax withheld by the assessee without reference to the kind of assessee concerned in a given case. The object of levy of interest being just reimbursement of what the Government would lose by delayed payment of tax resulting from the delayed filing of the return, it is clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement with their view. Ramaprasada Rao J., who decided the first case, proceeded on the basis that the intention of the legislature in enacting the impugned provision was to levy a "quasi-penalty" on a defaulting registered firm and the Division Bench consisting of Ramanujam and Ramaswami JJ. proceeded to decide the second case on the basis that the interest collected need not always be compensatory. The Division Bench decided the above case on December 6, 1972. It is seen from the certified copy of the said decision that the Division Bench did not fully share the view of the Andhra Pradesh High Court in the case of T. Venkata Krishnaiah Co. that the interest levied under section 139(1) was compensatory in character. But the very same Bench had on November 21, 1972, in the case of Express Newspapers (P.) Ltd. accepted that the levy of interest under section 139(1) was a compensatory measure. The ultimate view reached by the Madras High Court in the two decisions referred to above was largely influenced by the view that the interest levied either was in the nature of quasi-penalty or that it was not always compensatory. It is quite probable that the conclusion of the Madras High ..... X X X X Extracts X X X X X X X X Extracts X X X X
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