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PETITIONER: GURSAHAI SAIGAL

       Vs.

RESPONDENT: COMMISSIONER OF INCOME-TAX, PUNJAB

DATE OF JUDGMENT: 31/08/1962

BENCH: SARKAR, A.K. BENCH: SARKAR, A.K. KAPUR, J.L. HIDAYATULLAH, M.

CITATION:  1963 AIR 1062            1963 SCR  Supl. (3) 893  CITATOR INFO :  RF         1963 SC1066  (13)  R          1963 SC1456  (8)  R          1964 SC1742  (8)  RF         1968 SC 623  (28)  F          1971 SC2039  (18,23)  D          1976 SC 313  (31,55,56)  R          1978 SC 533  (5,7)  R          1981 SC1887  (12,28,29,31,32)  RF         1985 SC 537  (15)  R          1986 SC1099  (9)  RF         1988 SC 361  (9)  R          1989 SC 611  (6)  RF         1990 SC1676  (6)  RF         1992 SC 224  (11)

ACT: Income, Tax-Advance payment-Construction of  enactment-Rule- Penalty  in  addition to liability-Indian income-tax  Act, 1922 (II of 1922), s.18A, Sub-ss. (2),(3),(6),(8),(9).

HEADNOTE: By  Sub-s.  (8) of s. 18 A, " where on  making  the  regular assessment, the Income-tax Officer finds that no payment  of the  tax  has  been made in accordance  with  the  foregoing provisions  of  this  section, interest  calculated  in  the manner  laid down in sub-section (6) shall be added  to  the tax  as determined on the basis of the regular  assessment". Sub.  section (6) of s. 18A provided, "where in any year  an assessee has paid tax under ..sub-section(3) on the basis of his  own estimate, and the tax so paid is less  than  eighty percent  of  the  tax determined on  the  basis  of  regular assessment... .. simple interest at the rate of six per cent per  annum from the first day of.’ January in the  financial year  in which the tax was paid up to the date of  the  said regular assessment shall be payable by the assessee upon the amount  by  which the tax so paid falls short  of  the  said eighty per cent." The  assessee should have under sub-s.(3) of s.18A  made  an estimate  of his income and paid tax according to it but  he did  neither.  He was thereupon charged with interest  under sub-s.(8) of s.18A. He contended that interest could

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894 not be so charged because under sub-s.(8) interest could  be charged only in the manner laid down in sub-s. (6) that  is, from  January 1. of a year in which tax was paid and on  the shortfall  between  eighty per cent of the  tax  payable  on regular assessment and the amount actually paid, neither  of which  could be done in his case as he had not paid any  tax at all. Held,  the  rule that in a taxing statute one  has  to  look merely  at what is clearly said and that in such  a  statute there is no room for any intendment applies only to a taxing provision  and does not apply to a provision not creating  a charge  for  the tax but laying down the machinery  for  its calculation or procedure for its collection.  The provisions in  a taxing statute dealing with machinery  for  assessment have to be construed by the ordinary rules of- construction, that  is to say, in accordance with the clear  intention  of the legislature which is to make a charge levied effective. Commissioner  of  Income-tax v. Mahaliram  Ramjidas,  A.I.R. 1940  P.C. 124, Indian United Mills Ltd. v. Commissioner  of Excess   Profits  Tax,  [1955]  1  S.C.R  810   Whitney   v. Commissioners of Inland Revenue, (1925) 10 ’C. 88 and  Allen v. Trehearne, (1938) 22 T. C. 15, referred to. Sub-s   of  s.  18A  is a  provision  which  lays  down  the machinery  for(8)  the assessment of  interest.   Its  plain affect is to impose a liability to pay interest and then  it provides that in calculating the interest the machinery laid down  in  sub-s. (6) should be applied.  Sub-s.  (6)  should therefore  be read in a manner which makes it  workable  and prevents  the clear intention of the legislature from  being defeated.   That  sub.  section should, where it  is  to  be applied because of sub-s. (8), therefore, be read, as  "from the  1st day of January in the financial year in  which  the tax  ought  to  have  been paid" and  in  such  a  case  the shortfall  contemplated  in sub-s. (6) would be  the  entire eighty per cent. The penalty under sub-s. (9) of s. 18A is in addition to the liability  under  sub-ss (6) and (8).  Sub-s. (9)  does  not arise in the construction of sub-ss. (6) and (8).

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 10 to 12 of 1962. Appeals  from the judgment and order dated February 5,  1960 of the Punjab High Court in T. R. No. 20 of 1956.                             895 A.V.  Viswanath  Sastri  and R.  Gopalakrishnan  for  the Appellant. Gopal Singh and R. N. Sachthey for the Respondent. 1962.   August 31.  The Judgment of the Court was  delivered by SARKAR,  J.-In  certain  assessment  proceedings  under  the Indian  Income-tax Act, 1922, the assessee was charged  with interest under sub-see. (8) of P. 18A of that Act, That  sub section provided that in the cases there mentioned  interest calculated in the manner laid down in sub-sec. (6) of a. 18A shall  be added to the tax assessed.  The assessee  contends that  he could not be made liable to pay the interest as  in his case it could not be calculated in the manner indicated. The only question that arises in this appeal is whether this contention is right. The  assessee’s  contention was rejected  by  the  Appellate Commissioner  but  not  by  the  Appellate  Tribunal.    The

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respondent  Commissioner thereupon obtained a  reference  of the  following question to the High Court of Punjab for  its decision :               "Whether,  on  a  true  construction  of  sub-               Sections(6),(8)  and(9 of Section 18A  of  the               Indian  Income-tax Act, the interest  referred               to  in  sub-Section  (8)  is  chargeable   for               failure  on the part of an assessee to  submit               an  estimate  of his income and  pay  tax,  as               required  by the terms of sub-Section  (3)  of               that Section". The High Court answered that question against the  assessee. Hence  the present appeals by him.  There are three  appeals because there are three 896 orders  charging interest under s-18A(8), one in respect  of each of three assessment years. It would help now to refer briefly to some of the provisions of  s.  18A.   That Section deals with  advance  payment  of income-tax and Super-tax, that is, payment of such taxes  on income  of  the year in which taxes are paid  and  therefore before  assessment  Sub-section (1) of  this  section  gives power  in certain cases to an Income-tax Officer to make  an order  directing a person to make an advance payment of  tax of an amount equal to the amount of the tax payable for  the latest  previous  year  in  respect of  which  he  has  been assessed.   Sub-section  (2) gives an assessee  on  whom  an orders  under sub-see. (1) has been make, power to make  his own  estimate of the advance tax payable by him and  to  pay according  to  such estimate instead of  according  to  that order.  Sub-section (3) deals with the case of a person  who has  not been assessed before and requires him to  make  his own  estimate of the tax payable by him in advance  and  pay accordingly.   This sub-section applies to the  assessee  in the present case for he had not been assessed earlier.   The assessee however neither submitted any estimate nor paid any tax.   It remains now to states that the payment of  tax  in advance  has to be made on June 15, September  15,  December 15, and March 15 in each financial year or on such of  these dates  as may not have expired in the cases contemplated  by sub-secs.  (2) and (3), and that the income on which tax  is payable in advance under the section does not include income in respect of which provision is made by s. 18 for deduction of the tax at the source of the income. Now we shall take up Sub-secs. (6) and (8) of s. 18A both of which  have to be considered in some detail as the  decision in  this case depends on the words used in them  Sub-section (6) is the  897 sub-section  which has created the difficulty felt  in  this case and the relevant portion of it is in these terms               "Where  in any year an assessee has  paid  tax               under  sub-section (2) or sub-section  (3)  on               the basis of his own estimate, and the tax  so               paid  is less than eighty per cent of the  tax               determined on the basis of regular  assessment               simple  interest at the rate of six  per  cent               per annum from the 1st day of January, in  the               financial year in which the tax was paid up to                             the  date of the said regular assessment  shal l               be payable by the assessee upon the amount  by               which the tax so paid fails short of the  said               eighty per cent".               It  is designed to apply to cases  ’where  tax

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             has been paid by the assessee according to his               own  estimate but that estimate is on  regular               assessment found to be deficient.  Under  this               sub-section interest has to be calculated from               January 1, in the financial year in which  the               tax  mentioned was paid and  such  calculation               has  to be made on the shortfall  between  the               amount  paid  and eighty per cent of  the  tax               which  was  found  payable on  the   regular               assessment sub-section (8) provides:               " where, on making the, regular assessment the               income-tax  Officer finds that no  payment  of               tax  has  been  made in  accordance  with  the               foregoing provisions of this section, interest               calculated  in  the manner laid down  in  sub-               section  (6)  shall  be added to  the  tax  as               determined   on  the  basis  of  the   regular               assessment. The  assessee  does not dispute that sub-secs (3)of  s.  18A applies to him and that he should have made an estimate  and paid  tax  according to it but he has not done  either.   He admits that he is a person to whom sub-sec. (8)applies.  His contention is that in 898 his  case  since  he  has not paid tax at  all,  it  is  not possible  to calculate interest in the manner laid  down  in sub-sec.(6).      Now  sub sec. (8) by its terms applies to a case  where no payment of tax has been made and, therefore, there is  no first  day of January of a financial year in which  tax  was paid,  from  which day the calculation of  interest  has  to commence.  Neither, the assessee contends, can any  question of a shortfall between eighty per cent of the tax payable on regular  assessment and the amount paid arise where  nothing had  been  paid.   The  assessee really  says  that  as  the language of sub-sec. (6) stands, it can have no operation in his  case  and therefore he has been  wrongly  charged  with interest.    To  clear  the  ground  we  may  state   before proceeding further that the assessee has no other  objection to  the  orders  under sub-sec. (8) making  him  liable  for interest. The question thus raised is one of construction of sub-secs. (6)and  (8).  The assessee relies on a rule of  construction applicable  to  taxing  statutes which  has  been  variously stated.   Rowlatt  J.put it in these words  in  Cape  Brandy Syndicate v.Inland Revenue Commission, (1).               "In  a  taxing Act one has to look  merely  at               what  is clearly said.  There is no  room  for               any  intendment.  There is no equity  about  a               tax.   There  is no presumption as to  a  tax.               Nothing  is  to be read in, nothing is  to  be               implied.   One  can only look  fairly  at  the               language used." The object of this rule is to prevent a taxing statute being construed "according to its intent, though not according  to its  words":  In re Bethlem Hospital (2).   This  Court  has accepted this rule. (1) (1921) 1 K.B. 64, 71. (2) (1875) L.R. 19 Eq. 475, 459.  899 Bhagwati  J. in A. V. Fernandez v. The State of  Kerala  (1) said,               "If..........  the case is not covered  within               the four corners of the provisions of the tax-               ing   statute,  no  tax  can  be  imposed   by

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             inference or by analogy or by trying to  probe               into the intentions of the legislature and  by               considering  what  was the  substance  of  the               matter." It  has  been said that "If the provision is so  wanting  in clarity  that  no meaning is responsibly clear,  the  courts will be unable to regard it at; of any effect." : see Inland Revenue  Commissioners v. Baldnoch Distillery Co.  Ltd.  (2) The  assessee therefore contends that on the plain words  of sub-as. (8) and (6) he cannot be charged any interest and in fact  in a case like his, subsection (8) has to be  regarded as of no effect. Now  it is well recognised that the rule of construction  on which the assessee relies applies only to a taxing provision and has no application to all provisions in a taxing statue. It does not, for example, apply to a provision not  creating a  charge for the tax but laying down the machinery for  its calculation or procedure for its collection.  The provisions in  a taxing statute dealing with machinery  for  assessment have to be construed by the ordinary rules of  construction, that  is to say, in accordance with the clear  intention  of the legislature which is to make a charge levied  effective. Reference  may  be  made to a few  oases  laying  down  this distinction.   In  Commissioner of Income-tax  v.  Mahaliram Ramjidas (3) it was said,               "The Section, although it is part of a  taxing               Act,  imposes  no charge on the  subject,  and               deals merely with the machinery of                (1) [1957] S.C.R. 83 7, 847.                (2) (1948) 1 All.  E. R. 676, 625.                (3) A.I.R. (1940) P.C. 124.126-127.               900               assessment.   In  interpreting  provisions  of               this kind the rule is that construction should               be preferred which make the machinery workable               utres valeat potius quam pereat."               In India United Mills Ltd. v. Commissioner  of               Excess Profits Tax (1) This Court observed,               "That section is, it should be emphasised, not               a  charging section, but a machinery  section.               And a machinery section should be so construed               as to effectuate the charging sections."               We  may now profitably read what Lord  Dunedin               said in Whitney v. Commissioners(2) of  Inland               Revenue :               "My Lords, I shall now permit myself a general               observation.  Once that it is fixed that there               is   liability,  it  is  antecedently   highly               improbable  that the statute should not go  on               to  make that liability effective.  A  statute               is designed to be workable and the interpreta-               tion  thereof by a Court should be  to  secure               that object, unless crucial omission or  clear               direction  makes that end  unattainable.   Now               there are three stages in the imposition of  a               tax:  there is the declaration  of  liability,               that   is  the  part  of  the  statute   which               determines  what  persons in respect  of  what               property  are  liable.   Next,  there  is  the               assessment,  Liability  does  not  depend   on               assessment.  That, ex hypothesis, has  already               been fixed.  But assessment particularises the               exact  sum which a person liable has  to  pay.               Lastly,  come the methods of recovery, if  the               person taxed does

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             not voluntarily pay."               (1) (1955) 1 S.C. R. 810, 816.               (2) (1925) 10 T.C. 88, 110.               901               There  is one other case to which we think  it               useful to refer and that is Allen v. Trehearne               where  s.  45(5) of the English  Finance  Act,               1927  which laid down that "Where in any  year               of  assessment  a  person ceases  to  hold  an               office  or employment......  chargeable  under               Schedule  ’E’  tax shall be charged  for  that               year  on the amount of his emoluments for  the               period beginning on the sixth day of April  in               that  year  and  ending on  the  date  of  the               cessation"  came up for construction.  It  was               contended  that  a sum of pound  10,000  which               became payable to the assessee as the executor               of the deceased holder of an office under  the               terms  on  which the office was held  was  not               liable  to tax under the section as  it  could               not  be said to be " his emoluments" since  it               was payable after his death.  It was  observed               by Scott L.J.,               "the  rules...... in Section  45,  Sub-section               (5)  and (6), are rules  affecting  assessment               and  collection,  and  that if  there  is  any               difficulty in the precise applicability of the               language  of those Sub-sections, it should  be               interpreted  largely and generously  in  order               not  to  defeat the main object  of  liability               laid down by Rule 1 of Schedule E."               Dealing   with  the  words   "his   emoluments               occurring  in the subsection the learned  Lord               Justice said,               "It  is quite true that strictly speaking  the               emoluments in question never became his in the               sense  that the quantitative amount  of  pound               10,000  became his property, It  never  became               payable to him, because he died.  But that  it               was  his emoluments under the  agreement  with               the Company in a broad sense seems to me to be               obvious, and in order to prevent the Revenue’s               failure  to get the tax which was  intended  b               Rule  1 of schedule E, it appears to me to  be               legitimate to treat the words in               (1)   (1938) 22 T.C. 25, 26 27.               902               question  as  meaning  on the  amount  of  the               emoluments  attaching to the office  which  he               held’."      On  this  interpretation  of Sub-section  (5)  tax  was assessed in this case. Now it seems to us that we are dealing here with a provision which  lays  down  the  machinery  for  the  assessment   of interest.   That sub-section (8) intended to and did in  the clearest term impose a charge for interest seems to us to be beyond  dispute.   It  says that interest  calculated  in  a certain mariner "shall be added to the tax." We do not  here have  to resort to any equitable rule of constructing or  to alter the meaning of the language used or to add to or  vary it  in order to arrive at the conclusion that the  provision intended to impose a liability to pay interest.  That is the plain affect of the language used.  But the Subsection  also provides that the interest for which liability was  created, has  to  be  calculated in a certain  manner.   It  is  this

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provision  which  has  given rise to  the  difficulty.   But obviously  this provision only lays down the  machinery  for assessing  the  amount of interest for which  liability  was clearly  created; it in substance says that  in  calculating the  amount  of interest the machinery of  calculation  laid down  in sub, sec. (6) shall be applied.  The proper way  to deal  with such a provision is to give it an  interpretation which,  to  use the words of the Privy Council  in  Mahairam Kamjidas’s(1)case  ’,’makes  the machinery  workable,  utres valeat  potius quam pereat".  We, therefore, think  that  we should read sub-sec.(6), according to the provision of which interest has to be calculated as provided in sub-sec.(8)  in a  manner  which makes it workable and thereby  prevent  the clear intention of sub-sec.(8) being defeated.  Now, how  is that best done?  As we have (1)  A.I.R. (1940) P.C. 124,126-127.                             903 earlier said sub-sec.(6) deals with a case in which tax  has been  pail  and  therefore it says that  interest  would  be calculated  "from the I at day of January in  the  financial year  in  which the tax was paid".   This  obviously  cannot literarily be applied to a case where no tax has been  paid. If however the portion of sub-see. (6) which we have  quoted above is read as, "from the 1st day of January in the finan- cial  ear  in which the tax ought to have  been  paid",  the provisions becomes workable.  It would not be doing  too much  violence to the words used to read them in  this  way. The tax ought to have been paid on one or other of the dates earlier  mentioned.  The intention was that interest  should be charged from January 1 of the financial year in which the tax  ought to have been paid.  Those who paid the tax but  a smaller  amount and those who did not pay tax at  all  would than  be  put in the same position  substantially  which  is obviously  fair  and  was clearly intended.   Which  is  the precise financial year in any case would depend on its facts and  this, would make no difference in the  construction  of the provision. With  regard  to  the other question about  there  being  no shortfall  between  eighty per cent. of the  amount  of  tax found  payable on the regular assessment and the  amount  of tax paid in a case where no tax was paid, it seems to us the position is much simpler.  If no tax is paid, the amount  of such shortfall will naturally be the entire eighty per cent. We  also  think  that the case before us  is  very  near  to Allen’s case(1) It  remains  now  to refer to sub-s,(9)  of  s.  18A.   That subsection provides for payment of penalty in terms of s. 28 upon  submission  of estimates under sub-sees. (2)  and  (3) known  or reasonably believed to be untrue or  upon  failure without (1) (138) 22 T.C. 15. 16, 17. 904 reasonable  cause  to  comply with the  provisions  of  sub- sec.(3). We are unable to see that this provision in any way affects  the construction of sub secs.(6) or (8) or  assists in the solution of the, difficulty which has arisen in  this case.   The penalty under sub-sec.(9) is in addition to  the liability  under sub-sec. (6) and (8) which his not  penalty in  the  real sence, and is leviable for  reasons  different from those on which the levy of interest under sub-secs. (6) and (8) is besad. The  result, therefore, is that these appeals are  dismissed and  the decision of the High Court answering  the  question framed  is  upheld for the reasons earlier  mentioned.   The respondent will get the costs of these appeals.

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Appeals dismissed.