1977 (3) TMI 42 - HC - Income Tax

Appeal Upheld on Penal Interest & Dividend Relief under Income Tax Act

The court held that an appeal against the levy of penal interest under section 18A is competent if the assessee denies liability to pay advance tax. ... Advance Tax, Appellate Assistant Commissioner, Penal Interest Issues Involved:1. Competency of an appeal to the Appellate Assistant Commissioner of Income-tax against the levy of penal interest.2. Entitlement to relief under section 15C of the Indian Income-tax Act, 1922, in respect of dividend received from Telco.Detailed Analysis:Issue 1: Competency of an Appeal Against Levy of Penal InterestFacts and Background:The first question concerns the assessment year 1958-59. The assessee, a non-resident company, was assessed by the Income-tax Officer who charged penal interest under section 18A(8) of the Indian Income-tax Act, 1922. The assessee appealed to the Appellate Assistant Commissioner, who refused to entertain the appeal on the ground that no appeal was provided in the Act against the levy of penal interest. The Tribunal, however, held that such an appeal was competent, relying on the decision in Mathuradas B. Mohta v. Commissioner of Income-tax.Conflicting Views:Two Division Benches of the High Court had expressed conflicting views:1. Keshardeo Shrinivas Morarka v. Commissioner of Income-tax: Held that no appeal lies against the levy of penal interest because the legislature did not specifically provide for such an appeal in section 30 of the Act.2. Mathuradas B. Mohta v. Commissioner of Income-tax: Held that the levy of interest under section 18A amounted to a tax, and thus, an appeal was competent under section 30 of the Act.Court's Analysis:- Section 18A Provisions: The court analyzed section 18A, which deals with the machinery for advance tax assessment. Sub-section (6) and (8) deal with the imposition of penal interest.- Section 30 Interpretation: The court focused on the phrase 'denying his liability to be assessed under this Act' in section 30(1) and concluded that it includes the denial of liability to pay advance tax and, consequently, penal interest.Decisions Considered:1. Commissioner of Income-tax v. Jagdish Prasad Ramnath: Held that an appeal against the regular assessment could include a challenge to the levy of penal interest if it involved denying liability to advance tax.2. Purshottamdas Thakurdas v. Commissioner of Income-tax: Confirmed that section 18A does not apply to dividend income, thus no interest under section 18A(6) could be charged for failure to include dividend income in the estimate.Conclusion:The court concluded that an appeal against the levy of penal interest is competent if the assessee denies liability to pay advance tax. Thus, the first question was answered in the affirmative, in favor of the assessee.Issue 2: Entitlement to Relief Under Section 15CFacts and Background:The second question pertains to whether the assessee was entitled to relief under section 15C of the Act in respect of dividends received from Telco. The Income-tax Officer had granted exemption on 24% of the dividend, while the assessee claimed 27% as declared in the dividend warrant.Court's Analysis:- Precedent: The court noted that this issue was already concluded by the decision in Commissioner of Income-tax v. Tata Engineering & Locomotive Co. Ltd., where it was held that the assessee was entitled to the relief on the basis of the percentage declared in the dividend warrant.- Concession by Revenue: Mr. Joshi, appearing for the revenue, conceded that the assessee was entitled to the relief on the basis of 27% as declared in the dividend warrant.Conclusion:The court answered the second question in favor of the assessee, holding that relief under section 15C would be available on the basis that 27% of the dividend was exempt as declared in the dividend warrant.Summary:The court held that an appeal against the levy of penal interest under section 18A is competent if the assessee denies liability to pay advance tax. Additionally, the assessee was entitled to relief under section 15C of the Act in respect of dividends received from Telco, based on the percentage declared in the dividend warrant. The judgments were delivered in favor of the assessee on both issues.