Case: Gursahai Saigal Vs. Commissioner Of Income-Tax, Punjab

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 isassessees contention was rejected by the Appellate Commissioner but not by the Appellate Tribunal. The 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 thatHigh Court answered that question against the assessee. Hence the present appeals by him. There are three appeals because there are three orders charging interest under s-18A(8), one in respect of each of three assessment years.

Reasoning: 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 ((1875) L.R. 19 Eq. 475, 459.). This Court has accepted this rule. Bhagwati J. in A. V. Fernandez v. The State of Kerala ([1957] S.C.R. 83 7, 847.) 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 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 InlandRevenue Commissioners v. Baldnoch Distillery Co. Ltd. ((1948) 1 All. E. R. 676,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 leviedit 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 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 Kamjidass(A.I.R. (1940) P.C. 124, 126-127.) 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 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 Allens case((138) 22 T.C. 15. 16, 17.) 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 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.