Workable construction of interest liability under advance tax provisions sustains charge even when no tax was paid.

Interest under section 18A(8) of the Indian Income-tax Act, 1922 was treated as part of the machinery for assessment and collection, and not as a charging provision to be read narrowly. The Supreme Court held that the provision clearly created liability to interest where an assessee liable to estimate and pay advance tax failed to submit an estimate or pay any tax. To make the computation workable, the Court read the starting point for interest as the date on which the tax ought to have been paid. On that construction, liability to interest remained enforceable even in cases of total default.

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Issues: Whether interest under section 18A(8) of the Indian Income-tax Act, 1922 was chargeable where the assessee, liable to make an estimate and pay advance tax under section 18A(3), neither submitted an estimate nor paid any tax, and whether section 18A(6) could be construed so as to make the charging provision workable.

Analysis: The provision imposing interest was treated as part of the machinery for assessment and collection, not as a charging provision to be narrowly confined by the strict rule applicable to taxing clauses. The Court held that section 18A(8) clearly created liability to interest by providing that interest calculated in the manner laid down in section 18A(6) shall be added to the tax. The difficulty arose only in applying the formula in section 18A(6) to a case where no tax had in fact been paid. To avoid defeating the clear intention of section 18A(8), the Court read the words governing the starting point for interest as referring to the date on which the tax ought to have been paid. On that construction, a defaulting assessee who paid nothing could be placed substantially in the same position as one who paid less than the prescribed amount.

Conclusion: Interest under section 18A(8) was chargeable against the assessee notwithstanding that no advance tax had been paid, and the appeal failed.

Ratio Decidendi: A machinery provision in a taxing statute must receive a workable construction so as to give effect to the clear legislative intention, and where liability to interest is expressly created, the computational formula may be read purposively to sustain that liability even in a case of total default.

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