RAJOO BROTHERS VS COMMISSIONER OF INCOME-TAX, 2001 PTD-MADRAS-HIGH-COURT-INDIA 3691 (1998)

Income‑tax‑‑‑

‑‑‑‑Interest‑‑‑Delay in filing return‑‑‑Levy of interest is compensatory and not penal‑‑‑Registered firm‑‑‑Advance tax paid covering entire tax assessed‑‑‑Firm was not liable to pay interest for delay in filing return‑‑ Indian Income Tax Act, 1961, S. 139(8).

Where the advance tax duly paid covers the entire amount of tax assessed, there is no question of charging the registered firm with interest under section 139(8) of the Income Tax Act, 1961, even though the return was, filed by it beyond the time allowed, regard being had to the fact that payment of interest is only compensatory in nature.

The assessee, a registered firm filed its return of income for the assessment year 1979‑80 after a delay of 28 months. The assessment was completed but the Commissioner of Income‑tax exercising his revisional jurisdiction under section 263 directed the Income‑tax Officer to complete the assessment after levy of interest under section 139(8) of the Income Tax Act, 1961, for delay in filing return. The Tribunal confirmed the order of the Commissioner of Income‑tax. On a reference:

Held, that interest is only compensatory in nature. Since the assessee had paid the entire advance lax which was more than the ultimate tax determined there was no question of levy of interest under section 139(8) even though the return was filed belatedly. Hence, levy of interest under section 139(8) was not justified.

Ganesh Dass Sreeram v. ITO (1988) 169 ITR 221 (SC).fol.

P. P. S. Janarthana Raja for Subbaraya Aiyar, Padmanabhan and Ramamani for the Assessee.

C.V. Rajan for the Commissioner.

JUDGMENT

N.V. BALASUBRAMANIAN, J.‑‑‑ The above tax case can be disposed of on the short ground that the assessee which is a registered firm had paid the excess advance tax over and above the tax determined and, therefore, the question of levy of interest under section 139(8) of the Income Tax Act, 1961, does not arise.

The facts leading to the tax case are the following: The assessee is a registered firm and for the assessment year 1979‑80, the assessee filed a return of income on December 22, 1981, after a delay of 28 months. The Income‑tax Officer did not charge any interest under section 139(8) of the Income‑tax Act but under section 263 of the Income‑tax Act, the Commissioner of Income‑tax invoked the revisional jurisdiction and directed the Income‑tax Officer to amend the assessment order for the assessment year 1979‑80 to include .the amount of interest payable by the assessee under section 139(8) of the Income‑tax Act. The Income‑tax Appellate Tribunal, on appeal by the assessee, dismissed the appeal on the ground that the provisions of section 139 of the Income‑tax Act were attracted in the case of a registered firm and for calculating the interest under section' 139(8) of the Act, the Income‑tax Officer had to determine the tax payable on the total income adopting the status as an unregistered firm and from the tax so determined the advance tax has to be deducted. On the ultimate tax liability determined in the above manner, the assessee would be liable to pay interest under section 139(8) of the Act. On an application by the assessee, the following question of law has been referred by the Appellate Tribunal for our consideration:

"Whether, the Tribunal is justified in holding that the charge of interest under section 139(8) would be attracted in the case of the assessee registered firm although no tax is found to be payable on assessment after adjustment of advance tax?"

At the time of hearing of the case Mr.P.P.S. Janarthana Raja, learned counsel appearing for the assessee, brought to our notice a decision of the Supreme Court in Ganesh Dass Sreeram v. ITO (1988) 169 ITR 221 wherein the Supreme Court held that interest charged for late filing of the return is levied by way of compensation and not by way of penalty and treating registered firms as unregistered firths for the purpose of charging interest for late filing of returns cannot be said to be arbitrary and violative of Article 14 of the Constitution of India. The Supreme Court also clarified that where the advance tax duly paid covers the entire amount of tax assessed, there is no question of charging the registered firm with interest, even though the return was filed by it beyond the time allowed, regard being had to the fact that payment of interest is only compensatory in nature. In this case, it is seen that the entire amount of tax was paid by the assessee by way of advance tax. The assessee had paid Rs.25,300 and the ultimate tax liability arrived at was only Rs.21,367.

Applying the principles and the law laid down by the Supreme Court in Ganesh Dass Sreeram v. ITO (1988) 169 ITR 221, the interest being only compensatory and since the assessee has paid the entire advance tax which is more than the ultimate tax determined, there is no question of levy of any interest on the assessee though it has filed the return. Hence; we are not in agreement with the views of the Tribunal that interest is chargeable under section 139 of the Income‑tax Act. Accordingly, we answer the question of law referred to us in the negative and in favour of the assessee. However, in the circumstances of the case, there will be no order as to costs.

M.B.A./588/FC

Reference answered.