Compensatory interest on assessed tax liability upheld where the statute does not limit levy to tax shown in the return.

Interest under section 18(3A) of the Karnataka Agricultural Income-tax Act, 1957 was treated as compensatory, meant to recompense the Revenue for delay in filing the return and delay in paying tax. Because the State provision did not contain a limiting explanation confining interest to the tax shown in the return, the levy could be computed on the tax liability finally determined on regular assessment rather than only on the returned figure. The challenge to the interest levy failed, and the provision was regarded as permitting interest on assessed tax liability.

---

---

Issues: Whether interest under section 18(3A) of the Karnataka Agricultural Income-tax Act, 1957 could be levied with reference to the tax liability determined on regular assessment, and whether the levy was invalid because the return had disclosed a lower tax liability.

Analysis: The provision was held to be compensatory in nature, intended to recompense the Revenue for loss caused by delayed filing of the return and delayed payment of tax. The Court distinguished section 234A of the Income-tax Act, 1961 on the ground that the Supreme Court decision cited by the petitioners turned on Explanation 4 then attached to that provision. Since no such limiting explanation existed in the State enactment, the interest under section 18(3A) was held to be properly referable to the tax liability as determined in assessment and not merely to the tax shown in the return. The levy was therefore treated as reasonable and justified in the facts of the cases.

Conclusion: The challenge to the levy of interest failed, and the provision was held to permit computation of interest on the assessed tax liability. The answer is against the petitioners and in favour of the Revenue.

Ratio Decidendi: Where a fiscal provision imposes compensatory interest for delayed filing or delayed payment, and the statute does not confine the levy to the tax disclosed in the return, the interest may be computed on the tax liability as finally determined on assessment.

---