1976 (8) TMI 50 - HC - Income Tax

Court interprets 'month' as calendar month for tax penalty, assessee wins case

The High Court ruled in favor of the assessee, interpreting the word 'month' in section 271(1)(a) of the Income-tax Act as a calendar month per the ... Penalty under section 271(1)(a) of the Income-tax Act - meaning of the word 'month' - calendar month - section 3(35) of the General Clauses Act, 1897 - reckoning period of default for imposition of penaltyMeaning of the word 'month' - calendar month - section 3(35) of the General Clauses Act, 1897 - penalty under section 271(1)(a) of the Income-tax Act - Whether the word 'month' in section 271(1)(a) of the Income-tax Act is to be reckoned as a calendar month under section 3(35) of the General Clauses Act, 1897, and whether penalty was therefore payable for the default in filing the return for AY 1961-62. - HELD THAT: - The Tribunal found that the Income-tax Officer had allowed the assessee time to file the return until January 15, 1962, and the return was filed on February 15, 1962; the department did not challenge that factual finding. Section 271(1)(a) levies penalty at a rate 'for every month during which the default continued', but the Income-tax Act does not define 'month'. Section 3(35) of the General Clauses Act, 1897, defines 'month' as one 'reckoned according to the British calendar'; in the absence of anything repugnant in the context, that definition applies. Authorities and standard texts recognise varying senses of 'month' (calendar month, lunar month, period of 28 days or 30 days), but where a statute by its terms is subject to the General Clauses Act definition, 'month' must be read as a calendar month. The Court rejected the departmental contention that 'month' should mean a 30-day period for section 271(1)(a) so as to avoid perceived escapes from penalty, observing that adopting the General Clauses Act definition does not frustrate the provision and that calendar months may be 28-31 days depending on the months involved. Applying the calendar-month reckoning here, the default commenced on January 16, 1962, and one calendar month would expire on February 15, 1962; since the return was filed on February 15, 1962, a full month of default had not elapsed and no penal month arose for the purpose of section 271(1)(a).The word 'month' in section 271(1)(a) is to be reckoned as a calendar month under section 3(35) of the General Clauses Act, 1897, and on the Tribunal's finding the assessee did not incur a month's default; accordingly no penalty was imposable for AY 1961-62.Final Conclusion: The reference is answered in the affirmative for the assessee: 'month' in section 271(1)(a) is to be reckoned as a calendar month under section 3(35) of the General Clauses Act, 1897, and on the Tribunal's finding the return filed on February 15, 1962 did not complete a calendar month's default, so no penalty was leviable for Assessment Year 1961-62; assessee entitled to costs. Issues Involved:1. Interpretation of the word 'month' in the context of penalty u/s 271(1)(a) of the Income-tax Act, 1961.Summary:Issue 1: Interpretation of the word 'month' in the context of penalty u/s 271(1)(a) of the Income-tax Act, 1961The Income-tax Appellate Tribunal, Madras Bench, referred the question of whether the Tribunal was right in law in holding that no penalty was imposable u/s 271(1)(a) based on the interpretation of the word 'month.' The controversy arose from the imposition of a penalty for the assessment year 1961-62. The assessee-company was given time to file the return of income till January 15, 1962, but filed it on February 15, 1962. The Tribunal held that the penalty u/s 271(1)(a) is calculated as 'a sum equal to two percent of the tax for every month during which the default continued,' and interpreted 'month' as a calendar month per section 3(35) of the General Clauses Act, 1897.The High Court examined whether the word 'month' in section 271(1)(a) should be understood as a calendar month or a period of 30 days. The court noted that the Income-tax Act, 1961, does not define 'month,' but section 3(35) of the General Clauses Act, 1897, defines it as a calendar month. The court referenced various judicial decisions and legal dictionaries to support this interpretation. It concluded that the default commenced on January 16, 1962, and the return was filed on February 15, 1962, within a calendar month, thus no penalty was leviable.The court disagreed with the Allahabad High Court's view in Commissioner of Income-tax v. Laxmi Rattan Cotton Mills Co. Ltd., which interpreted 'month' as a period of 30 days to avoid defaulters escaping penalty. The High Court emphasized that the definition in the General Clauses Act should apply unless explicitly excluded by the context of the statute. The court found no such exclusion in section 271(1)(a) and held that 'month' should be reckoned according to the British calendar.Conclusion:The High Court answered the question in the affirmative, in favor of the assessee, stating that the word 'month' in section 271(1)(a) of the Income-tax Act should be interpreted as a calendar month per section 3(35) of the General Clauses Act, 1897. Consequently, no penalty was imposable as the return was filed within a calendar month from the due date. The assessee was entitled to costs, with counsel's fee set at Rs. 500.