Rajoo Bros. vs Commissioner of Income Tax

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 u/s 139(8) of the income tax Act, 1961 (''the Act'') 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 22-12-1981, after a delay of 28 months. The ITO did not charge any interest u/s 139(8) but u/s 263 of the Act, the Commissioner invoked the revisional jurisdiction and directed the ITO to amend the assessment order for the assessment year 1979-80 to include the amount of interest payable by the assessee u/s 139(8). The Tribunal, on appeal by the assessee, dismissed the appeal on the ground that the provisions of section 139 were attracted in the case of a registered firm and for calculating the interest u/s 139(8), the ITO has 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 u/s 139(8). On an application by the assessee, the following question of law has been referred by the Tribunal for our consideration :

Whether the Tribunal is justified in holding that the charge of interest u/s 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, the learned counsel appearing for the assessee, brought to our notice a decision of the Supreme Court in Ganesh Dass Sreeram Vs. Income Tax Officer, ''A'' Ward, Shillong and Others, 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 firms 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''s case (supra), 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 belatedly. Hence, we are not in agreement with the view of the Tribunal that interest is chargeable u/s 139. 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.