Y. VENUGOPALA REDDY vs COMMISSIONER OF INCOME TAX

By this writ petition, the order of the Commissioner dated 19-1-1999 passed under the Kar Vivad Samadhan Scheme, has been challenged. The prayer made for revision of calculation to the Commissioner was rejected on 19-1-1999. The petitioner moved the CBDT on 1-1-999 stating that the amount along with the returns should be appropriated towards tax but not towards interest. In pursuance of the representation, the petitioner was informed that the Scheme of 1999 is different from section 140A of the Income Tax Act, 1961 (''the Act'').

The learned counsel for the petitioner submitted that the Finance Minister in his budget speech, while explaining the objectives of the Kar Vivad Samadhan Scheme, observed:

"... I, therefore, proposed to introduce a new scheme called as Kar Vivad Samadhan Scheme. The scheme will apply to both Direct or Indirect taxes and offer waiver of interest, penalty, and immunity from prosecution on payment of arrears of direct taxes at current rates."

It is submitted that., due regard has to be given to the budget speech, as was observed by the Calcutta High Court in Commissioner of Income Tax Vs. Birla Education Trust, , relying upon the decision of the Apex Court in K.P. Varghese Vs. Income Tax Officer, Ernakulam and Another, , wherein it was observed:

". . . Now, it is true that the speeches made by the Members of the Legislature on the floor of the house when a bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the mover of the bill explaining the reason for the introduction of the bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the Legislation and the object and purpose for which the legislation was enacted. This is in accord with the recent trend in juristic thought not only in western countries but also in India, that interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible....'' (p. 608)

It is also submitted that, the Scheme of l9Q8 is a special provision and reliance is placed on the judgment given in Commissioner of Income Tax Vs. Indian Molasses Co. (P.) Ltd., , wherein the Calcutta High Court observed that when there is a general enactment as well as a special enactment in respect of the same head in a statute, the particular or special enactment would override the general enactment. Reliance is also placed on the judgment in Commissioner of Income Tax, Amritsar Vs. Straw Board Manufacturing Co. Ltd., , wherein it was observed that, when a provision is made in the context of a law providing for concessional rates of tax for the purpose of encouraging an industrial activity, a liberal construction should be put upon the language of the statute. It is also stated that the interpretation has to be taken in favour of the assessee if there is any ambiguity. It is stated that in the clarifications issued by the CBDT dated 3-9-1998, a question was raised to the effect that:

"Where the tax arrear comprises tax and interest, how will the part payment be first appropriated towards tax or interest ?"

The answer to the question was given that the part payments are appropriated first towards tax and then towards interest. It is also submitted that power has been given u/s 96 of the Kar Vivad Samadhan Scheme, 1998 to the Central Government to issue instructions which are binding on the respondents and since a clarification has already been given by the Government, the Commissioner should have accepted it, in view of the provisions of section 96(2) of the Scheme, 1998.

I have considered over the matter.

The assessment in this case was made by the Deputy Commissioner on 21-3-1997 for the assessment year 1994-95. The assessee has paid the tax between April and January, 1997 to the extent of Rs. 4,90,000. A sum of Rs. 3,00,000 was paid u/s 140A of the Act on 18-7-1995 and after adjusting these two amounts, out of the total liability of tax and interest of Rs. 38,47,856, demand was created for Rs. 35,47,156. Under the Explanation to section 140A(1), if the amount paid falls short of the aggregate of the tax and interest, the amount so paid shall be first adjusted towards interest payable and the balance is to be adjusted towards tax.

Under the Scheme of the Act, the payment, therefore, has to be adjusted towards liability of interest. Provisions of Kar Vivad Samadhan Scheme, 1998, provide that, notwithstanding anything contained in any direct tax enactment or indirect tax enactment or any other provision of any law for the time being in force, the amount payable under this Scheme by the declarant shall be determined at the rates specified hereunder:

"(a) Where the tax arrear is payable under the Income Tax Act, 1961(4ol 1961):-

(i) in the case of declarant, being a company or a firm, at the rate of thirty-five per cent of the disputed income;

(ii) in the case of a declarant, being a person other than a company or a firm, at the rate of thirty per cent of the disputed income;

(iii) in the case where tax arrear includes Income Tax, interest payable or penalty levied, at the rate of thirty-five percent of the disputed income for the persons referred to in clause (i) or thirty per cent of the disputed income for the persons referred to in clause (ii);

(iv) in the case where tax arrear comprises only interest payable or penalty levied, at the rate of fifty per cent of the tax arrear;

(v) where the tax arrear includes the tax, interest or penalty determined in any assessment on the basis of search and seizure proceedings u/s 132 or section 132A of the Income Tax Act, 1961 (43 of 1961),-

(A) in the case of a declarant, being a company or a firm, at the rate of forty-five per cent of the disputed income;

(B) in the case of a declarant, being a person other than a company or a firm, at the rate of forty per cent of the disputed income;"

Whenever a non obstante clause is used in any provision by using the word ''notwithstanding'', then it can only mean that the provisions of the latter would supersede the earlier. If the contention of the learned counsel for the petitioner is considered in this respect, it would be evident that the amount payable under the Scheme will hold the field than what is payable under the Income Tax law. This supersession has been made u/s 88 to the amount payable under the Scheme. A definite percentage and calculations have been given on the basis of which the amount has to be calculated under the Scheme, 1998, irrespective of the provisions of the Act. Nowhere under the Scheme, 1998, it is stated that the assessments which have already been made and where the amount paid u/s 140A has been adjusted, then readjustment has to be done. Provisions of section 140A and its Explanation would have no force, had there been any specific provision under the Kar Vivad Samadhan Scheme, 1998. Since the KVS Scheme does not contemplate adjustment of the amount paid u/s 140A towards tax, the arguments raised by the learned counsel for the petitioner cannot be accepted. Question No. 4 of the clarification dated 3-9-1998 also does not help the petitioner''s case, because, it refers to the payments which are made after the tax arrears are computed and thereafter any part-payment is made. The clarification given by the Government dated 18-1-1999 has only used the words "The Scheme is different from section 140A.'' This also does not help the petitioner, for, it is nowhere stated in this clarification that the amount paid u/s 140A has to be adjusted towards tax. The amount has been paid admittedly u/s 140A and the Explanation to section 140A is clear in requiring adjustment of the payment first towards interest liability. Even in the budget speech, the contention raised by the petitioner has not been elaborated, explained or stated. It is pointed out that, if the payment made u/s 140A is adjusted towards interest, then such adjustment would be disadvantageous in comparison to an assessee who has not paid the tax at all. There may be anomalies or the Scheme may be more beneficial to the greater defaulter than to the honest taxpayer or the taxpayer who has complied with the provisions but the Scheme has to be read as it is. In these circumstances, I do not consider that any case for interference is made out. The contention that the payment u/s 140A should be treated towards the tax liability has no force.

The writ petition is, accordingly, dismissed.