TaxTMI 
TaxTMI 
2006 (4) TMI 97
X X X X Extracts X X X X
X X X X Extracts X X X X
....of admitting appeal: "Whether, on the facts and circumstances, the Tribunal was justified in not allowing the interest of Rs. 3,76,654 which has become due on delayed payment of sales tax payable by the assessee as deduction by considering it as 'tax' within the meaning of section 43B of the Income-tax Act, 1961?" 3. Learned counsel for the assessee contended that the tax, interest and penalty under any fiscal statute are distinct and have different connnotation. For creating demand of either of them, separate charging provision is needed and no liability is created independent of statutory provision. Levy and collection of tax has to be authorised by law and refund and collection of interest on delayed payment of tax is also required to be authorised by law. 4. Section 43B(a) in its plain and unambiguous terms puts a condition only in respect of tax, duty, fee or cess that the same is paid in terms of section 43B on or before the statutory time. Failure to make payment of tax, duty, cess or fee which is otherwise deductible in terms of section 43B within the statutory period would forfeit the claim of deduction on such accrued liability on account of levy of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "43B. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of- (a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, or (c) any sum referred to in clause (ii) of sub-section (1) of section 36, or (d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution or a State Financial Corporation or a State Industrial Investment Corporation, in accordance with the terms and conditions of the agreement governing such loan or borrowing, or (e) any sum payable by the assessee as interest on any loan or advances from a scheduled bank in accordance with the terms and conditions of the agreement governing such loan or advances; or (f) any sum payable by the assessee as an employer in lieu of any leave at the credit of his employee; Shall be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Sales Tax Act is also not absolute in terms but the definitions have to be read in the context in which they appear at various places in the given statute. Section 2 of the Income-tax Act as well as the definition clause under the Rajasthan Sales Tax Act start with the expression "in this Act, unless the context otherwise requires". Therefore, the definition given under the Act has to be read in the context of the provisions. 15. It is not in all the circumstances that tax has to be considered different from interest or penalty nor that in all circumstances, they are to be considered to be one. This principle is so well established as not to need any clarification on this aspect of the matter. The parties have also not joined any issue. Therefore, the crucial question that begs answer is whether the expression "tax, duty, cess or fee" used in clause (a) of section 43B has to be construed in a wider sense to include other charges leviable on any assessee as incidental or ancillary charges to effectually levy and collect tax than the tax proper leviable under the charging provision of the taxing statute. Apart from this, it is also essential to consider in the context of sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....verbalism and words lose their thrust when read in vacuo, we must search for a reliable scientific method of discovery rather than the speculative quest for the spirit of the statute and the cross-thoughts from legislators' lips or Law Commissioner's pens. They edify but are not edictal." 24. In coming to this conclusion the following passage from Hutton v. Philips [1949] 45 Del 156; 70 A 2d 15), was quoted with approval: "...Interpretation involves far more than picking out dictionary definition of words or expressions used. Consideration of the context and the setting is indispensable property to ascertain a meaning. In saying that a verbal expression is plain or unambiguous, we mean little more than that we are convinced that virtually anyone competent to understand it and desiring fairly and impartially to ascertain its signification, would attribute to the expression in its context a meaning such as the one we derive, rather than any other; and would consider any different meaning, by comparison, strained or far fetched, or unusual or unlikely. ...Implicit in the finding of a plain, clear meaning of an expression in its context, is a finding that s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s allowed. In this context, would the term "tax" include within its meaning tax simpliciter or would it also include disallowance of interest chargeable on it for non-payment or delayed payment which though has become due, has not been paid before the specified date? 28. In this connection, it would be apposite to refer to another decision of the hon'ble Supreme Court in the case of Harshad Shantilal Mehta v. Custodian reported in [1998] 231 ITR 871, on which reliance was also placed by learned counsel for the appellant. It was a case arising in connection with section 11(2) of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992. The question that had arisen before the court was whether the expression "tax" under section 11(2)(a) of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992, would include interest or penalty as well for the purpose of claiming priority in regard to its payment or other liabilities to be distributed by the Special Court in regarding to certain transactions. Significantly, while answering the question, for the purpose of section 11(2)(a), the court excluded the interest accrued on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ax liability of the notified person arising out of transactions in securities during the "statutory period" of April 1, 1991, to June 6, 1992. If for example, any income-tax is required to be paid in connection with the income accruing to a notified person in respect of transactions in securities during the "statutory period", that liability will have to be paid before the funds are made available to the banks and financial institutions. Similarly in respect of any property which is attached, if any rates or taxes are payable for the "statutory period" those rates or taxes will have to be paid before the proceeds of the property are distributed to banks and financial institutions. In the same manner, the liabilities to banks and financial institutions in section 11(2)(b) are also liabilities pertaining to the statutory period. The court further concluded that every kind of tax liability of the notified person for any other period is not covered by section 11 (2)(a), although the liability may continue to be the liability of the notified person. Such tax liability may be discharged either under the directions of the Special Court, under section 11(2)(c) or the taxing authority may r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iminal prosecution. 32. Thus, the hon'ble Supreme Court in this case held that interest accrued on delayed payment of cess was held to be allowable deduction as part of the cess payable by the assessee and because of delayed payment of cess, liability to cess became enlarged by inclusion of interest in it. Apparently, for the purpose of deduction under section 10(2) of the Indian Income-tax Act, 1922, or for that matter under section 37 of the Act of 1961, liability to pay interest on the delayed payment of tax becomes part and parcel of the tax for the purpose of allowing deduction. 33. The conclusion is irresistible that if the entire liability claimed as deduction on account of cess and interest accrued thereon is considered as part and parcel of tax liability for the purpose of its allowability, for the purpose of section 43B, which is an ancillary provision laying down a condition for allowing deduction on account of tax liability, a different construction cannot be placed on the term "tax, duty, fee or cess" all various species of tax. 34. We are fortified in our view by the decision of this court in the case of Mewar Motors v. CIT reported in [2003] 260 ITR 218.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be carried to its logical end to effectuate the object with which it has been enacted, viz., to remedy the mischief of gaining other advantages by defaulters in payment of tax, in the matter of using it as a vehicle for reducing tax liability on the one hand, but on the other hand not paying such taxes due to the public exchequer. There is a public element in it. 38. Learned counsel for the appellant has relied on the decision of the Calcutta High Court in the case of Russel Properties P. Ltd. v. CIT [1982] 137 ITR 358. 39. This judgment in our opinion is of little help to the appellant inasmuch as it was the judgment before the insertion of section 43B of the Act of 1961 and the expression "allowance of deduction on account of liability arising for tax, duty, cess or fee" was not there. Therefore, this judgment is of a little value in considering the provisions of section 43B of the Act. 40. Learned counsel for the appellant has also placed reliance on a series of decisions of the Calcutta High Court in the case of CIT v. Padmavati Raje Cotton Mills Ltd. reported in [1999] 239 ITR 355, CIT v. Orient Beverages Ltd. reported in [2001] 247 ITR 230 and CIT v. E.L. Properties....