Venkataramiah, J.
1. These 28 writ petitions are filed by the firm of M/s. M. Nagappa, building contractors, and the six partners who constitute the said firm. They relate to the assessment years 1965-66, 1966-67, 19 67-68 and 1968-69. In these petitions, the petitioners have challenged the constitutional validity of section 217 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), under the following circumstances :
2. The firm, M/s. Nagappa and its partners, had not been assessed to income-tax at any time prior to the assessment year 1965-66. The orders of assessment in respect of the years 1965-66, 1966-67, 1967-68 and 1968-69 were passed by the Income-tax Officer in the year 1969. While passing the said orders of assessment, the Income-tax Officer levied interest at the prevailing rate under section 217(1) of the Act in respect of the advance tax which they had to pay according to the provisions of the Act. Aggrieved by that part of the order of assessment, the petitioners filed petitions before the Commissioner of Income-tax requesting him to exempt payment of the interest levied under section 217(1) in exercise of his power under rule 40 of the Income-tax Rules (hereinafter referred as 'the Rules') read with section 264 of the Act. The Commissioner of Income-tax found that there was no valid reason for exempting the petitioners from payment of interest in question. Accordingly, he rejected the petitions presented by the petitioners. Aggrieved by the orders passed by the Commissioner of Income-tax, the petitioners have filed these petitions.
3. In these writ petitions, the petitioners have not questioned the correctness of the order passed by the Commissioner. But they have challenged the levy of interest on the ground that section 217 of the Act is unconstitutional as, according to them, it is violative of article 14 of the Constitution.
4. Two contentions are urged by Sri Srinivasan, learned counsel for the petitioners, in support of these writ petitions.
5. The first contention is formulated as follows :
6. The object of levying advance tax under the Act is to see that money payable to the Government is not withheld by the assessee beyond the prescribed time. There are 5 categories of persons who have got to pay advance tax under the Act. They are :
1. Persons against whom an order is passed under section 210 of the Act;
2. Persons against whom an order is passed under section 210 of the Act but who under section 212(1) of the Act have filed their own estimate before the Income-tax Officer stating that their income during the relevant year would be less than the amount mentioned in the order under section 210;
3. Persons who have filed revised estimates under section 212(2) of the Act;
4. Persons who have not been previously assessed either under the Act or under the Indian Income-tax Act of 1922 but who have filed an estimate of their income under section 212(3); and
5. Persons who have not been previously assessed either under the Act or under the Indian Income-tax Act of 1922 and who have not filed any estimate as required by section 212(3) of the Act.
7. The petitioners come under the last category. The argument of Sri Srinivasan is that whereas persons falling under categories Nos. 2,3 and 4 referred to above are made liable to pay interest on account of delayed payment of advance tax under sections 215 and 216 and whereas persons falling under category No. 5 in which the petitioners fall are made liable to pay interest under section 217(1), persons against whom an order is passed under section 210 falling under category No. 1 are not made liable to pay any interest at all. It is argued by Sri Srinivasan that, having regard to the object underlying the levy of interest, there is discrimination between persons falling under category No. 1 and persons falling under category Nos. 2 to 5 and that there can be no valid reason for doing so. It is further urged that all the persons falling under categories Nos. 1 to 5 stand in the same position in so far as the assessment proceedings under the Act are concerned and, therefore, persons falling under categories Nos. 2 to 5 should be treated equally along with persons falling under category No. 1. In that view of the matter, it is contended by the petitioners that section 217(1), with which they are concerned, is liable to be struck down on the ground that it is violative of article 14 of the Constitution.
8. I am concerned in this case only with the case of persons falling under category No. 5. I do not propose to express any opinion in the course of this order with regard to the contentions that may possibly be urged on behalf of persons falling under categories Nos. 2, 3 and 4.
9. The contention of Sri Srinivasan urged on behalf of the petitioners who fall under category No. 5 is no doubt attractive but unsound. It is difficult to agree with the submission that persons falling under category No. 5 stand in the same position in all material respects with persons falling under category No. 1. Although the interest payable under section 217(1) is not in the nature of penalty, it has a purpose to fulfill and that is that persons who have withheld money payable to Government beyond the prescribed period and who have had the benefit of it should suitably compensate the Government. In so far as persons falling under category No. 1 are concerned, it is clear from the provisions of sections 218, 221 and 222 that as soon as those persons become defaulters in payment of advance tax, it is open to the authorities to set in motion the recovery process against them to recover the advance tax which has fallen due and also to levy penalty. But in the case of persons falling under category No. 5, no immediate coercive step can be taken because there is no provision in the Act and the authorities have to wait till the assessment is over to find out that they were liable to pay advance tax in the past. This essential distinction which exists between persons falling under category No. 5, to which the petitioners belong, and persons falling under category No. 1, is sufficient in the eye of law to hold that there is reasonable classification between persons falling under category No. 1 and persons falling under category No. 5. There is also proper correlation between the classification and the objection and the object to be achieved by the levy of interest under section 217. Hence I am of the opinion that the contention that section 217(1) is violative of article 14, on the above ground, is not tenable.
10. I shall now take up the second contention urged by Sri Srinivasan for consideration. He argued that section 217(1) is liable to be struck down in view of the provisions of sub-rule (5) of rule 40 of the Rules. Rule 40 reads as follows :
'Waiver of interest. - The Income-tax Officer may reduce or waive the interest payable under section 215 or section 217 in the cases and under the circumstances mentioned below, namely :-
1. When the relevant assessment is completed more than one year after the submission of the return, the delay in assessment not being attributable to the assessee.
2. Where a person is under section 163 treated as an agent of another person and is assessed upon the later's income.
3. Where the assessee has income from an unregistered firm assessed under the provisions of clause (b) of section 183.
4. Where the previous year is the financial year or any year ending about the close of the financial year and large profits are made after the 1st March (or the 15th March in cases where the proviso to section 211 applies) in circumstances which could not be foreseen.
5. Any case in which the Inspecting Assistant Commissioner considers that the circumstances are such that a reduction or waiver of the interest payable under section 215 or section 217 is justified.'
11. The argument constructed by Sri Srinivasan on the basis of sub-rule (5) of rule 40 is that the rule-making authority having conferred unguided and uncontrolled power on the Inspecting Assistant Commissioner to reduce or waive the payment of interest payable under section 217 has virtually made section 217 unconstitutional. In other words, his contention is that as sub-rule (5) does not provided any guidance to the concerned officer to decide the question whether in a given case the interest levied can either be reduced or waived and because rule 40 is an interest part of the statute, section 217 under which the interest is levied is liable to be struck down. It should be stated that Sri. Srinivasan does not challenge sub-rule (5). His contention is untenable for two reasons : 1. granting for purpose of argument that sub-rule (5) is violative of articles 14 of the Constitution, it cannot be said that the provision in a statute enacted by parliament would become unconstitutional. Sri Srinivasan has not been able to cite any authority in support of such a legal position; 2. secondly, in sub-rules (1) to (4) of rule 40, the circumstances under which the Income-tax Officer can either reduce or waive the interest are set out. It is no doubt true that in sub-rule (5), the circumstances in which such power can be exercised are not set out with any particularity. The object of enacting rule 40 as can be seen from sub-rule (1) to (4) is that, in certain circumstances which are referred to therein, the assessee should be shown concession with regard to the interest payable by him under law. Sub-rule (5) confers the discretion on the Inspecting Assistant Commissioner to give relief under other circumstances in which reduction or waiver of interest is justified. The said power is conferred on an officer of the income-tax department who, by the time he is called upon to exercise the said powers, would have acquired sufficient experience regarding the administration of the provisions of the Act. The fact that sub-rule (5) authorises him to allow reduction or waiver only in justifiable cases requires that he has got to record reasons in support of the order. Those reasons are liable to be scrutinised by the higher authorities under the Act. Under these circumstances it cannot be said that the power conferred under sub rule (5) of rule 40 is unguided power.
12. Rule 40 which is promulgated by the Central Board of Revenue in exercise of power conferred by the Act is enacted to meet certain unforeseen contingencies which Parliament when it enacted the Act could not foresee. The power conferred on an executive authority to exempt the operation of law in certain cases can be justified on the ground that it is necessary to confer such power in order to see that the provisions of law are properly administered and implemented.
13. In State of Bombay v. F. N. Balsara, the question whether sections 52, 53 and 139(c) of the Bombay Prohibition Act by which the State Government was given power to grant licences in cases not other than those specifically provided under any of the provisions of that Act, to vary or substitute any of the conditions of the statute laid down in that Act and to exempt any person to any class of persona from the observance of allow any of the provisions of the Act, were constitutional came up for consideration before the Supreme Court. Those provisions had been struck down by the High Court on the ground that the re was excessive delegation of legislative power. The Supreme Court reversed the said decision of the High Court of Bombay observing that a legislature has to confer such power on an executive authority out of necessity as the legislature would not be able to foresee and provided for all the further contingencies. I do not, therefore, agree with the second contention of Sri Srinivasan.
14. No other contention is urged. There writ petitions fail and they are dismissed. In the circumstances, will be no order as to costs.