Section 234A of the Act, has come to the conclusion that interest is not a penalty and that the interest is levied by way of compensation to compensate the revenue in order to avoid it from being deprived of the payment of tax on the due date. The High Court also held that interest would be payable in a case, where tax has not been deposited prior to the due date of filing of the income-tax return.
Supreme Court of India
CIT vs Pranoy Roy
Civil Appeal No. 448 of 2003 with C.A. No. 3125 of 2006
Equivalent Citations- 179 Taxman 53, 222 CTR 6, 309 ITR 231
Ashok Bhan and V.S. Sirpurkar, JJ
Dated- 17 September 2008
P.V. Shetty, Sr. Adv., Sweta Garg and B.V. Balaram Das, Advs. for the Appellant
M.S. Syali, Sr. Adv., Ravi Varma, Surbhi Sharma, Sheena Piplani, Mallika Poswal, Aseem Mohap and M.A. Chinnasamy, Advs. for the Respondent
This appeal has been preferred against the order of the High Court of Delhi in C.W.P.No. 1745 of 1999 passed on 21st December 2001.
The respondent-assessees earned substantial capital gains for the assessment year 1995-96 for which income-tax return was due to be filed on 31st October 1995. The return was filed on 29th September 1996, i.e., after a delay of about 11 months. However, taxes due were paid on 25th September 1995, i.e., before the due date of filing of the return. Though the returned income was accepted on 29th January 1998, yet interest was charged under the provisions of Section 234A of the Income-tax Act, 1961 (for short ‘the Act’) on the ground that tax paid on 25th September 1995 could not be reduced from the tax due on assessment. Being aggrieved, the assessees filed revision petition under Section 264 of the Act on 09th November 1998 before the Administrative Commissioner requesting to delete interest charged under Section 234 of the Act. The Administrative Commissioner, vide order dated 09th March 1999, upheld the action of the assessing authority and dismissed the revision petition.
The assessees, being further aggrieved, filed writ petition in the High Court of Delhi which has been disposed of by the impugned order. The High Court, while accepting the writ petition and setting aside the interest charged under Section 234A of the Act, has come to the conclusion that interest is not a penalty and that the interest is levied by way of compensation to compensate the revenue in order to avoid it from being deprived of the payment of tax on the due date. The High Court also held that interest would be payable in a case, where tax has not been deposited prior to the due date of filing of the income-tax return.
The revenue has challenged the aforesaid decision by filing Special Leave Petition before this Court wherein leave was granted on 20th January 2003.
Having heard counsel on both sides, we entirely agree with the finding recorded by the High Court as also the interpretation of Section 234A of the Act as it stood at the relevant time. Since the tax due had already been paid which was not less than the tax payable on the returned income which was accepted, the question of levy of interest does not arise. Thus, we find no merit in this appeal and the same is dismissed.
The order of the High Court which is under challenge in C.A.No. 448 of 2003 is reported in 254 ITR 755. On a concession made by the counsel for the revenue before the High Court that the issue raised in the appeal is covered against the revenue by the decision of the High Court of Delhi in the case of Prannoy Roy v. CIT 254 ITR 755, the appeal filed by the revenue was dismissed by the High Court. The order of the High Court of Delhi in the aforementioned case has been upheld by us today while disposing of C.A.No. 448 of 2003. Accordingly, we do not find any merit in this appeal as well and dismiss the same.