GURSAHAI SAIGAL versus COMMISSIONER OF INCOME-TAX, PUNJAB

3 S.C.R. SUPREME COURT REPORTS

to file their written statements and then appropriate issues should be framed and the suits tried and disposed of in the light of the findings on those Issues in accordance with law. Under the unusual circumstances in which the litigation has thus secu-red further lease of life, we dire1Jt that the costs incurred so far should be borne by the parties. Appeal allowed. Oases remitted

GURSAHAI SAIGAL

COMMISSIONER OF INCOME-TAX, PUNJAB

(J. L. KAPUR, A.'_K. SARKAR and M. HIDAYATULLAH, JJ.)

Income Tax-Advance payment-Oonstruction of enact-meut-Rule-Penaltg in addition to liability-Indian Income· tax Act, 1922 (II of 1922), a.ISA, Sub-sa.(2),(3),(6),(8),(9).

By Sub-s.(8) of s.ISA. "where on making the regular assesment, 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 (6l 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 Jess than eighty percent or 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 0f 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

1961 Amir Singh •• Ram Singh

11Jlll!

1962 Guf'sohai Saigal •• Oommissioa1r oj J1;c•m1-Tax PunjtJ6

not be so charged because under sub-s.(8) interest could be charged only in the manner laid down in sub-s. 16) that is from January l, of year in which ta" was paid and on th~ shortfall betwem 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.

Hold, the rule that in taxing statute one has to look merely at what is clearly said and that in such statute there is no room for any intendment applies only to taxing provision and does not apply to provision not· creating charge for the tax but laying down the machinery for its calculation or i:rocedure for its collection. The provisions in taxing statute dcaJing 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 charge levied effective.

Cammisaiontr of Income-tax v. Mahaliram Ramjidaa, A.I.R. 1940 P.C. 124, Inaian Unitea Milla Ltd. v. Com-mi11ioner of Exctss Profit• Tax, [1955] I S.C.R, 810, Whitney v. Commisiioners of Inland Revenue, (1925) 10 T. C. 88 and All•n v. Trehwrn•, (1938) 22 T. C. 15, referred to.

Sub-s. (8) of s. IBA is provision which lays down the machinery for the assessment of interest. Its plain affect is to impose liability to pay interest and then it provides that in calculating the interest the machinery laid down in sub·•· (6) should be applied. Sub-s. (6) should therefore be r.ad in 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. 18), therefore, be read, as "from the !st day of January in the financial year in which the tax ought to h~ve been paid" and in such case the shortfall contemplated m sub-s. (6) would be the 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).

CIVIL APPELLATE JuRISDIOTION: Civil Appeals Noa. 10 to 12 of 1962.

Appeals from the judgment and order dated

February 5, 1960 of the Punjab High Court in I. T. R. No. 20 of 195~.

3 S.C.R. SUPREME OURT REPORTS

1962 -Gursah•i SGigal y, Co:rmis•ioner of lnc1me• Tax, Punjab

A. V. Viswanath Sastri and R:Gopalakrishnan for the Appellant.

Gopal Singh and R. N. Sachthey for the Res· pondent.

1962. August 31. The Judgment of the Court was delivered by

SARKAR, J.-In certain ailsessment proceed-

Sarkar Ji

ings under the Indian Income-tax Act, 192!~, the assessee was charged with interest under sub-sec.(8) of I!. 18A of that Act. That sub section provided that in the cases there mentioned interest calculat-ed in the manner laid down in sub·sec. (6) of s. ISA 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 appea I is whether this contention is right.

The asaessee's contention was rejected by the

Appellate Commissioner but not by the Appel· late Tribunal. The respondent Commissioner thereupon obtained referaPce of the following question to the High Court of Punjab for its de-cision :

"Whether, on true construction of sub-Sections(6),(S) and(9) of Section ISA of the Indian Income-tax Act, the interest referred to in sub-Section (S) is chargeable for failure on the part of an assessee to submit an esti-mate 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

Gu1aahai Saigal v. , Crmm;ssioner of lncom1-Tax, Punjab

Sarkar J.

orders chargin~ interest nnder 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. ISA. 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 caBes to an Income.tax Officer to make an order directing person to make an advance payment of tax of an amount equal to the amount of the tax payable for the latest pre-vious year in respect of which he has been assessed. Sub-section (2) gives an assessee on whom an orders under sub-seo. ( 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·seotion (3) deals with the case of person who has not been asses-sed 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 asses-see 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 I5 in each financial year or on such of these dates as may not have expired in the OMes contemplated by sub-secs. (2) and (3), and that the income on which tax is payable in ad-vance 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. lSA 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

3 S.C.R.

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 determind 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 shall be payable by the assessee upon the amount by which the tax so paid fails short of the said eighty per cent".

It is de11igned to apply to oases ;where tax bas been paid by the assessee according to hie 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 deter-mined on the basis of the regular assessement.

The assessee does not dispute that sub-secs ( 3)of s. l8A 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 person to whom sub-sec. (8)applies· His contention is that in

Guraahai Yaigal ,,. Cammi,,ioner of lncam1·Tax, Punja"ll Sarkar J.

Gurs•h•i Sai:al v. Comrni11ion1r of Incow11-i ax, Ptit1j1b

hie 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 case where no payment of tax has been made ~nd, therefore, there is no first day of January of financial ye&r in which tax was paid, from which day the calculation of interest h11.s to commence. Neither, the asaessee contend~, can any question of shortfall between eighty per cent of the tax pay-able on regular assessment and the amount paid arise where nothing had been paid. The assessee really says that as the language of sub·seo. (6) stands, it can have no operation in his case and therefore he has been wrongly charged with inter-est. To clear the ground we may state before proceeding further that the assessee has no other objection to the orders under sub·sec. (8) m&king him laible for interest.

The question thus raised is one of construction

of sub· secs. (6)and (8). The assessee relies on rule of construction applicable to taxing statutes which has been variously stated. Rowlatt J.put it in these words in Cape· Brandy Syndicate v.lnland Revenue Commissiones, (').

"In taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about tax. There is no presumption as to 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 prevant taxing

statute being construed "according to its intent, though not according to its words": In re Bethlem Hospital ('). This Court has accepted this rule. (I) (I92I) I K.B. 64, 7I. (2) (1875) L.R. 19 Eq. 475, +sg.

3 S.C.R .. SUPREME COURT REPORTS

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 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 want-

ing in clllrity that no meaning is responsibly clear, the courts will be unable to regard it as of any effect.'' : see lnland Revenue Commissioners v. Balil-noch Distillery Oo. Ltd. ([2]) The assessee therefore contends that on the plain words of sub-ss. (8) and (6) he cannot be charged any interest and in fact in case like his, sub-section (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 taxing provision and has no application to all provisions in a. taxing statue. It does not, for example, apply to provision not creating charge for the tax but laying down the machinery for its calculation or proceedure for its collection. The provisions in 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 legis~ lature which is to make charge levied effective. Reference may be made to few cases laying down this distinction. In Commissioner of Income-tax v. Mahaliram Ramjidas ([1]) it was said,

"The Section, although it is part of

taxing Act, imposes no charge on the subject, and deals merely with the machinery of (I) (1957) S.C.R. 83 7, 847. (21 (1948) I All. E. R, 6'6, 625. (3) A.l .R. (1940) P.C. 124. 126-127.

Gunahai Saigal v.

Oommissi mer of

lneome-Ta:r, Puni••

SqrkarJ.

Guraaliai Saigal v. C1mmissioner •f /ttcome-Tax, Punjab

assessment. In interpreting provisions of this kind the rule is that 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 charging section, but machinery sec-tion. And machinery section should be so construed as to effectuate the charging sec-tions."

We may now profitably read what Lord Dunedin said in Whitney v. Commissioners(') of Inland Reve-nue:

"My Lords, I shall now permit myself genral observation. Once that it is fixed that there is liablity, it is antecedently highly improbable that the statute should not go on to make that liability effective. statute is designed to be work!j.ble and the interpreta-tion thereof by Court should be to secure that object, 'tmless crucial omission or clear direction makes that end unattainable. Now there are three stages in the imposition of 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, Lia.bi· lity does not depend on assessment. That, ex hypothesi, has already been fixed. But assessment particularises the exact sum which person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay." (I) (1955) I s.c.R. BIO, 816. (2) (!925) IO T.C. 88, no.

3S.C.R. SUPREME COURT REPORTS

There is one other case to which we think it useful

to refer and that is Allen v. Trehearne wheres. 45(5) of the English Finance Act, 1927 which laid down that "Where in any year of assessment person ceases to hold an office or employment ...... charge· able 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 constmction. It was contended that sum of£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 secti0n as it could not te 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 bub-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 sub-section the learned Lord Justice said,

"It is quite true that strictly speaking the emolunent in question never became his in the sense that the quantitative amount of £10,000 became his property. It never became payable to him, because he died. But that it was his emolument under the agreement with the Company in broad sense seems to me to be obvious, and in order to prevent the Revenue's failure to get the tax which was intended by Rule 1 of .Schedule E, it appears to me to be legitimate to treat the words in {I) (1938) 22 T.C. 25, 26 27.

Gursahai Saigal v. Commissioner of Income· Tax, Punjab Sar/car J.

1962 GrwJahai l!aigal v. Commi•sioa~r of lncome-Tax1 Pun.JU Sarkar J.

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 provision which lays down the machinery for the assessment of interest. That sub-section (8) intended to and did in the clearest term impose charge for interest seems to us to be beyond dispute. It says that interest calculated in certain manner "shall be added to the tax." We do not here have to resort to any equita hie rule of constructin or to alter the meaning of the language usd or to add to or vary it in order to arrive at the conclnsion that the provision intended to impose liability to pay interest. That is the plain affect of the language used. But the Sub-section also provides that the interest for which liability was ereated, has to be calculated in .certain manner. It is this provision which has given rise to the difficulty. But obviously this provision only lays down the machinery for as~essing the amount of interest for which liability was clearly created; it in substance says that in cslculating the amount of interest the machinery of calculation laid down in sub.sec. (6) shall be applied. The proper way to deal wi.th such 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, therefere, think that we should read suh·sec.(6), according to the provision of which in-terest has to be calculated as provided in sub-sec.(8) in manner which makes it workable and thereby prevent the elear intention of sub-sec.(8) being defeated. Now, how is that best done? As we have (1) A.J.R. (1940) P.C. 124, 126-127.

3 S.C.R. SUPREME COURT EPORTS

ealier said sub-sec.(6) deals with case in which tax has been pa.i 1 and therefore it says that interest would be calculated "from the 1st day of January in the financial year in which the tax was paid". This obviously cannot literarily be applied to case where no tax has been paid. If however the por· tion of sub-sec. ( 6) which we have quoted above is read as, "from the 1st day of January in the finan· cial yea~ in which the tax ought to have been paid", the provision becomes workable. It would not be doing too much viol~nce 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 smaller amount and those who did not pay tax at all would than be put in the same position substantially which is obuiously fair and was clear· ly intended. Which is tb.e precise financial year in any case would depend on its facts and this, would make no difference in the construction of the provi-sion.

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 assess-ment and the amount of tax paid in case where no tax was paid, it setms 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'B oaBe(l)

It remains now to refer to sub-s.(9) of s. l8A. That sub·section provides for payment of penalty in tenms of s. 28 upon submission of estimates under sub·secs. (2) and (3) known or reasonably believed to be untrue or upon failure without (I) (1P8i 22 T.C. l.S. 16, 17. ' '

GurJahai Sa ·gal •• Commi'1ioner of Income· Tax, Punj•• SJrkor J,

1961 Gursahai Saital •. Cur salrai Saigal lneome•Tax, Punjab Sarkar J.

SUPREME COtJRT REPORTS [1963]

reasonable cause to comply with the provisions of sub-sec.(3). We are unable to see that this provi-sion 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 oase, The penalty under sub-sec.(9) is in addition to the liability under sub-seo. (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 aud 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.

Appeals dismissed.

1982 August 31.

SHAM KARTIK SINGH

MATH ORA

(P. B. GA.JENDRAGADKAR, K.C.DAs GUPTA and RAGHUBER DAYAL, JJ.)

Te,,ancy Law-Sir la.nds-Suit for ejeclment oflenanta-Decree-Appeal-Pending appeal provision made for filing particulars in suits for ejectment-Statute providing penal~y .of di•missal of suit for failure to file particulars-Retrospeciivity -If substantial compliance sufficient - U .P .Tenancy Act. 1939 (U.P. 27 of 1939), ss. 6.16,19-U, P. Tenancy(Amen~ment)Act 1941(U.P. [I) o/ 19"7),s.31.

The appellants filed suit under the U.P Tenancy Act, 1939 for the ejectment of the respondents who were tenants of si;. The appellants filed the necessary extracts of pap~rs in support of their case. The trial court decreed the suits