G.P. Singh, C.J.
1. The petitioner is a partnership firm registered under the Partnership Act. By this petition under art. 226 of the Constitution, the petitioner challenges the assessment orders passed by the ITO in respect of assessment years 1968-69 to 1971-72, in so far as the petitioner is made liable for payment of interest under Clause (iii)(a) of the proviso to Section 139(1) of the I.T. Act, 1961.
2. The sole contention raised by the learned counsel for the petitioner before us is that the aforesaid provision in so far as it requires a registered firm to pay interest on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm, is discriminatory and offends art. 14 of the Constitution. Learned counsel, in support of this submission, relies upon the case of M. Nagappa v. ITO : [1975]99ITR32(KAR) . This case no doubt supports the contention of the learned counsel for the petitioner, but with respect we are unable to accept the view taken in it.
3. Section 139, in so far as is relevant, reads as follows :
'139. Return of income.--(1) Every person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall furnish a return of his income or the income of such other person during the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed-
(a) in the case of every person whose total income, or the total income of any other person in respect of which he is assessable under this Act, includes any income from business or profession, before the expiry of six months from the end of the previous year or where there is more than one previous year, from the end of the previous year which expired last beforethe commencement of the assessment year, or before the 30th day of June of the assessment year, whichever is later ;
(b) in the case of every other person, before the 30th day of June of the assessment year:
Provided that, on an application made in the prescribed manner, the Income-tax Officer may, in his discretion, extend the date for furnishing the return-
(i) in the case of any person whose total income includes any income from business or profession the previous year in respect of which expired on or before the 31st day of December of the year immediately preceding the assessment year, and in the case of any person referred to in Clause (b), up to a period not extending beyond the 30th day of September of the assessment year without charging any interest;
(ii) in the case of any person whose total income includes any income from business or profession the previous year in respect of which expired after the 31st day of December of the year immediately preceding the assessment year, up to the 31st day of December of the assessment year without charging any interest; and
(iii) up to any period falling beyond the dates mentioned in Clauses (i) and (ii), in which case, interest at six per cent. per annum shall be payable from the 1st day of October, or the 1st day of January, as the case may be, of the assessment year to the date of the furnishing of the return-
(a) in the case of a registered firm or an unregistered firm which has been assessed under Clause (b) of Section 183, on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm; and
(b) in any other case, on the amount of tax payable on the total income, reduced by the advance tax, if any, paid or by any tax deducted at source, as the case may be.'
4. The section fixes the time within which the returns are to be filed. The ITO may extend the date for furnishing the return under Clauses (i) and (ii) of the proviso without any liability on the assessees to pay interest. When time is extended beyond the period mentioned in Clauses (i) and (ii), the assessee has to pay interest under Clause (iii). The impugned provision, i.e., Sub-clause (a) of Clause (iii) of the proviso, enacts that in the case of a registered firm or an unregistered firm which has been assessed under Clause (b) of Section 183 as if it were a registered firm, interest shall be payable on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm. In any other case, Sub-clause (b) of Clause (iii) directs that interest shall be paid on the amount of tax payable on the total income.reduced by the advance tax, if any, paid or by any tax deducted at source, as the case may be.
5. The argument of the learned counsel for the petitioner is that a registered firm is a separate legal entity for assessment purposes, and that it should be treated like any other assessee. It is also argued that there was absolutely no justification for making the impugned provision, for payment of interest in the case of a registered firm on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm, and in the case of other assessees on the amount of tax payable by them.
6. Under the I.T. Act, if the firm is unregistered, the tax payable by the firm itself is determined as in the case of any other distinct entity and the levy is made on the firm itself. But where the firm is registered, each partner's share in the firm's income is added in the partner's income and the tax is payable by each partner on the basis of his total income (including his share in the firm's income) and the levy is made on the partners individually. After the year 1956, a registered firm also pays tax on the total income at a reduced rate. The Act confers a special privilege on a registered firm in that the total income of the firm is assessed in the hands of the partners and the firm only pays tax at the reduced rate or what is commonly known as 'the registered firm tax'. While granting certain privileges to a registered firm it is open to the Legislature to say that the privileges would be granted in certain respects but not in others. It is this kind of provision which is made in Sub-clause (a) of Clause (iii) of the proviso. The Legislature here says that in case an extension of time is granted for filing the return after the dates mentioned in Clauses (i) and (ii) of the proviso, a registered firm will have to pay interest on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm. There is, in our opinion, no question of discrimination here. While repelling a challenge to Section 271(2) of the Act, the Supreme Court in Jain Brothers v. Union of India : [1970]77ITR107(SC) observed as follows (p. 118);
' According to that provision when the person liable to penalty is a registered firm then notwithstanding anything contained in the other provisions of the Act of 1961, the penalty imposable under Sub-section (1) shall be the same amount as would be imposable on that firm if that firm were an unregistered firm. It is pointed out that in the case of assessees other than registered firms the maximum penalty imposable under Section 271(lXi) cannot exceed in aggregate 50% of the tax payable by the assessee; whereas in the case of a registered firm the maximum penalty is not made to depend upon the tax assessed on or payable by such firm. On the contrary, the registered firm will have to pay the same penalty as an unregistered firm which may far exceed the maximum limit of 50% 'prescribed by the above provision. This, according to the appellants, constitutes discrimina-tion under article 14 of the Constitution. Now a firm when registered is treated as a separate entity liable to tax After 1956, it has to pay tax at a special reduced rate. If a firm got itself registered the partners were entitled to certain benefits and advantages. It was, however, open to the Legislature to say that once a registered firm committed a default attracting penalty, it should be deemed or considered to be an unregistered firm for the purpose of its imposition. No question of discrimination under article 14 can arise in such a situation. We fully share the view of the High Court that there was nothing to prevent the Legislature from giving the benefit of a reduced rate to a registered firm for the purpose of tax but withhold the same when it committed a default and became liable to imposition of penalty.'
7. The reasoning contained in the above passage of the Supreme Court judgment upholding the validity of Section 271(2) of the Act fully applies for supporting the validity of Sub-clause (a) of Clause (iii) of the proviso to Section 139(1). It was submitted by the learned counsel for the petitioner that the Supreme Court in Jain Brothers' case : [1970]77ITR107(SC) was dealing with a provision for penalty, whereas the interest payable under Clause (iii) of the proviso to Section 139(1) is in the nature of compensation and, therefore, the decision of the Supreme Court is not applicable. We are unable to agree with this argument. As earlier stated by us, the reasoning of the Supreme Court is that a registered firm is granted certain privileges under the Act. To what extent those privileges would be granted is a matter of policy for the Legislature. If in certain matters the privileges are not allowed, no case of complaining of the violation of art. 14 arises. This reasoning applies also to the impugned provision before us. The case of M. Nagappa v. ITO : [1975]99ITR32(KAR) which proceeds upon the distinction that the interest payable under Sub-clause (a) of Clause (iii) of the proviso to Section 139(1) is compensatory in nature and, therefore, Jain Brothers' case : [1970]77ITR107(SC) is not applicable, does not appeal to us. The validity of the impugned provision was upheld by the Gauhati High Court in Ganesh Das Sreeram v. 1TO , the Madras High Court in Mahendrakumar Iswarlal & Co. v. Union of India : [1974]94ITR65(Mad) and the Gujarat High Court in Chhotalal & Co. v. ITO : [1976]105ITR230(Guj) . These cases, except the Gujarat case, were noticed and distinguished by the Karnataka High Court in M. Nagappas' case : [1975]99ITR32(KAR) on the ground that they proceed on the basis that interest payable under Clause (iii) of the proviso to Section 139(1) was quasi-penal. As earlier pointed out by us above, this distinction does not make any difference in the applicability of the reasoning of the Supreme Court in Jain Brothers' case : [1970]77ITR107(SC) . As rightly pointed out by the Gujarat High Court in Chhotalal & Co.'s case : [1976]105ITR230(Guj) 'all that the Legislature has done in Clause (iii)(a) of the provisoto Section 139(1) is to withhold privilege which is otherwise extended to a registered firm '. The Gujarat High Court held the provision valid and, in our opinion, rightly, even though it held that the interest payable under the impugned provision is by way of compensation and not a penalty. We respectfully agree with the view taken by the Gujarat High Court. The impugned provision does not suffer from the vice of discrimination.
8. The petition fails and is dismissed, but without any order as to costs. The security amount be refunded to the petitioner.