(a) Interpretation of statutes-------

----Principles---First and safest principle of interpretation of fiscal statute is to remain within the language of law and not going beyond the intendments---Literal construction is the only safeguard rule in interpreting a fiscal statute.

M. O. Devassia & Co. v. Commissioner of Income-tax (1973) 90 ITR 525 (Ker.); Ballarpur Collieries Co. v. Commissioner of Income-tax (1973) 92 ITR 219 (Bom.-Nag.); K. T. Wire Products v. Union of India (1973) 92 ITR 459 (All.); Commissioner of Income-tax v. Dhanji Shamji (1974) 97 ITR 173) (Guj.) and Commissioner of Income-tax v. Garden Silk Wvg. Factory (1975) 101 ITR 658 (Guj.) ref.

(b) Income Tax Ordinance (XXXI of 1979)---

----S. 89---C.B.R. Circular No.8 of 1991---Additional tax---Levy-- Meaning--- Commissioner of Income-tax (Appeals) setting aside the assessment---Held, for calculating additional tax intervening period (for the period during which the order of Assessing Officer remained non-existent due to set aside order, was not to be included---Department was directed to reduce the additional tax for the said period from the demand of additional tax as communicated to the assessee.

1987 PTD 89 and 1994 PTD 189 distinguished.

Muhammad Naeem Shah for Appellant.

Shafqat Mehmood Chohan, L.A. for Respondent.

Date of hearing: 13th January, 1998.

ORDER

KHAWAJA FAROOQ SAEED (JUDICIAL MEMBER). ---This appeal filed by the assessee calls for indulgence of this Court on the issue of charge of additional tax under section 89 for the period during which the order of the I.T.O. remained set aside under directions of the first appellate authority till reversal of the same by the learned Tribunal.

2. The facts in brief are that the assessee was assessed to tax by the I.T.O. and a demand of Rs.9,08,449 was created through an order, dated 30-5-1992. The assessee filed an appeal before the first appellate authority which was disposed of vide order, dated 14-8-1992. In this order the learned first appellate authority set aside the order of the assessing officer. Cross appeals were filed by the assessee as well as by the department which were decided on 13-9-1995 vide I.T.A. No.1542/LB of 1992-93. The learned Tribunal through this order accepted the plea of the department and restored the order of the I.T.O. The department prepared I.T.-30 on the basis of this order and charged additional tax amounting to Rs.7,89,688 from the date of the order of the assessing officer and date of preparation of I.T.-30 including the period during which the order remained set aside in consequence to the decision of the Commissioner (Appeals). The question which now agitated before us is as to whether the provisions of section 89 are applicable for the intervening period, during which the order remained set aside i.e., from 15-8-1992 to 22-11-1995. It has been argued by the A.R. that the provisions of section 89 are applicable on the demand outstanding and not on the demand which was not in existence during the intervening period in consequence to set aside of the I.T.Os. order by the C.I.T. and restoration by the Tribunal. He brought our attention to the provision of section 89 which is as follows: ------

"Section 89.Where any assessee fails to pay the whole or any part of the tax levied under Chapter VII or the whole or any part of and penalty levied under Chapter XI, (or has been allowed stay o payment or payment in instalments of tax under subsection (2) of section 85), he shall be liable to pay additional tax at the rate of fifteen per cent per annum on the amount of such tax or penalty or any part thereof, as the case may be, which has not been paid; and such additional tax shall be calculated from the date on which such tax or penalty or part thereof as the case may be, was originally payable to the date on which it is paid or, in respect of each instalment, the date on which it is paid. "

Going through the above provisions of law he said that the key words are 'tax levied under Chapter VII or penalty levied under Chapter XI'. He further added that the additional tax is to be calculated from the date on which such tax was 'originally payable.' It is argued that admittedly the tax was payable up till the date of set aside and on the period after restoration by the Tribunal till the date of payment but not during the intervening period. He said that the I.T.O. relied upon C.B.R's. Circular No.8 of 1991 which has been approved by the first appellate authority also. The referred circular only repeats the instructions given in the proviso of section 89 mentioned supra. The proviso speaks of charge of additional tax in respect of tax demand which remains under automatic stay pending the appeal. The proviso has charged to additional tax, such taxes which have been levied and were payable during the appeal period but were allowed the facility of stay through special legislation. The A.R. says that it is a distinguishable situation. The period of automatic stay starts from the date of filing of the appeal to the date of disposal by him in term of set aside for which he has already offered to pay additional tax. During the subsequent period he said that no tax remains levied after set aside of the order. During this period he said that neither the department asked nor he could ask for any payment or any demand as there was non-payable the order having been set aside. The additional tax he continued could only be charged if there was a tax as there was none there was no question of payment of any.

The learned A.R. conceded to the extent that there was no direct judgment in this favour. However, he produced before us copies of the judgments reported as 1987 PTD 89 and 1994 PTD 189.

The abovenoted judgments charge penalty to those actions which are established to be intentional. The judgments speak of charge of penalty only on those omissions which have been done by the assessee consciously and with intention to cheat the department. The judgments speaks of ' mens rea' and say that it is duty of the department to establish that the action of the assessee of concealing income was a conscious attempt to deprive the department of its well-deserved revenue and it was not under a mistaken notion of law or fact. However, these cases are not applicable on the facts and circumstances of the impugned case. The question before us is of charge of additional tax and not of penalty.

The learned A.R. brought our attention to section 102 which says that where a refund is due, the department shall pay an additional sum by way of compensation a 15 % per annum. In subsection (2) of section 102 the term "due" for the purpose of this clause has been defined. The same is as follows: ---

"Section 102. Additional payment for delayed refunds.--- (1) Where a refund due, or deemed under subsection (5) of section 99 to be due, to an assessee is not paid within three months of the date on which it becomes due, there shall be paid to the assessee, a further sum by way of compensation at the rate of fifteen per cent per annum of the amount of refund from the expiration of the said three months up to the date on which the refund order is made.

(2) For the purposes of his section, a refund shall be deemed to havebecome due---

(a)in any case where the refund is required to be made in consequence of any order on an appeal or revision or a reference to the High Court or an appeal to the Supreme Court, on the date of receipt of such order by the Deputy Commissioner;

(b)in any case to which subsection (5) of section 99 applies, on the thirtieth day of June of the financial year next following the date on which the application for refund was made; and

(c) in other cases, on the date which refund order is made."

The learned A.R. says that the word 'due' here means refundable after the order of the Supreme Court or its finality below at an early stage. The word due he argued is synonymous to the word payable. If due in the case of department means from the date of the; final order than why in the case of payable, department is considering the original order to be applicable for this purpose, This argument of learned A.R. have some force. However, the legislature has made this provision purposely to avoid the ambiguities. The same exists in section 102 but not in section 89. The same is also not applicable on the impugned situation.

The learned L.A. also could not produce before us any reported judgment. He only supported the comments of the Tribunal which we have already mentioned above by saying that the case-law is not relevant and the provisions of section 102 are not directly applicable on the facts and circumstances of the impugned case.

Reverting back to the main argument that after set aside the department cannot demand tax as the same becomes non-existent in pursuance of such decision of the concerned authority, we are partially convinced. The provision of section 89 speaks of charging additional tax on non-payment of tax 'levied'. The calculation is to be made from the date the tax was originally "payable". These two words are the key words of the impugned sections.

Since the Ordinance has not defined the word 'levy' we shall have to go by the dictionary meanings: Levy means:- V., To assess; raise; execute; exact; tax; collect, gather; take up; seize, (Blacks Law Dictionary 5th Edition). Levy v. levied, levying means the impose and collect by authority or force, as a tax, fine, etc. (Webster Comprehensive English Dictionary).

Now if we apply these meanings keeping in view the language of the impugned section the tax was levied by the I.T.O. but set aside by the first appellate authority. The department filed an appeal and learned Tribunal levied it again by confirming the order of the assessing officer, meaning thereby, there was no levy during the intervening period as the department could not ask to pay the assessee any amount during this set aside period. If there is no levy or demand no question of additional tax arises as there being no tax there was no default of non-payment. While giving the above observation we have in our mind the first and the safest principle of interpretation of fiscal statutes i.e., to remain within the language of law and not going beyond the intendments. If we accept the contention of the department we shall be violating the language of section 89.

The principle that the literal construction is the only safeguard rule in interpreting a taxing statute is supported by the decisions of Kerala, Bombay, Allahabad and Gujarat High Courts; M.O. Devassia & Co. v.Commissioner of Income-tax (1973) 90 ITR 525 (Ker.), Ballarpur Collieries Co. v. Commissioner of Income-tax (1973) 92 ITR 219 (Bom-Nag), K.T. Wire Products v. Union of India (1973) 92 ITR 459 (All), Commissioner of Income-tax v. Dhanji Shamji (1974) 97 ITR 173) (Guj) and Commissioner of income-tax v. Garden Silk Wvg. Factory (1975) 101 ITR 658 (GUI). "In construing an Act like the Income-tax Act which has an all India application, there would be uniformity of construction as for as possible, as this principle', also compels us to reject the construction submitted by the assessee".

Similarly the word 'payable' means capable of being paid, suitable to be paid, admitting or demanding payment, justly due, legally enforceable. A sum or money is said to be payable when a person is under an obligation to pay it.

Now while calculating additional tax if we look back we find that because of set aside there was no sum payable during the impugned period. The same, therefore, is to be ignored for calculation purposes. When nothing is payable from 14-8-1992 to 13-9-1995, non-deposit of any amount of tax during the same shall not constitute any default. When there is no default no question of additional tax arises.

At this juncture we are reminded of the famous verdict of Mr. Rowlatt, J. which he gave in his land-mark judgment and which has been quoted and followed by the Superior Courts. The same is re-produced as under: ---

"All the principles of construction of taxing statutes were considered by the Supreme Court in Murarilal Mahabir Prasad v. B.R. Vad (1976, 37 STC 77) and the rule of construction has been laid down succinctly by Chandrachud, J. (as his Lordship then was). The rule stated by Rowlatt, J. in Cape Brandy Syndicate (1921, 1 KB 64) (KB) which had been approved and adopted by the Supreme Court in a number of cases has been accepted as the correct principle which is applicable in interpreting our taxing statutes. The relevant observations in (1976, 37 STC 77) supra are extracted below:

In that famous passage marked by a happy turn of phrase, Rowlatt, J., said, there is no equity about a tax. There is no presumption as to a tax' There is no equity about a tax in the sense that a provision by which a tax is imposed has to be construed strictly regardless of the hardship that such a construction may cause either to the treasury or to the taxpayer. If the subject falls squarely within the. letter of law he must be taxed, howsoever, inequitable the consequences may appear to the judicial mind. In the revenue seeking to tax cannot bring the subject within the letter of the law, the subject is free no matter that such a construction may cause serious prejudice to the revenue. In other words, though what is equitable construction may be admissible in relation to other statutes or other provisions of a taxing statute, such a construction is not admissible in the interpretation of a charging or taxing provision of a taxing statute'. "

In view of above discussion we hold that the tax levied by I.T.O. because non-existent from 14-8-1992 to 13-9-1995 in consequence to the set aside order of the learned C.I.T.(A). for calculating additional tax this intervening period is, therefore, not to be included. The department is directed to reduce the additional tax for this period from the demand of Rs.789,688 as communicated to the assessee.

The assessee appeal, therefore, succeeds accordingly.

M.B.A./521/Trib Appeal accepted.