1. This appeal is. directed against the order of the Commissioner (Appeals) passed in Appeal No. 182 (Mad.) of 1983-84/Co. Cir. dated 23-1-1984. The assessment year involved is 1980-81.
2, The assessee is a nationalised bank. For the assessment year 1980-81, the accounting year ended on 31-12-1979.
3 to 16. [These paras are not reproduced here as they involve minor issues.] 17. The next ground relates to levy of interest under Section 139(8) of the Income-tax Act, 1961 ('the Act'). The assessee contends that the Commissioner (Appeals) should not have upheld the levy of interest under Section 139(8). This contention is based on the argument that the return of income was filed on 31-7-1980 whereas it was due on 30-6-1980 and, hence, there was no complete month of default. Attention was invited to the provisions of Rule 119A of the Income-tax Rules, 1962 ('the Rules'), which provided that while calculating interest under any provision of the Act, periods of delay which are of a fraction of a month should be ignored. Since the return was filed on 31-7-1980, it was submitted that there was no complete month of default which would have occurred only had the return been filed on 1-8-1980 and, therefore, the interest levied under Section 139(8) should be cancelled.
18. The learned departmental representative opposed this plea. He submitted that under the provisions of Section 139(8)(a) interest was payable from the day immediately following the specific date to the date of furnishing the return, i.e., interest in this case, according to the learned departmental representative, was payable from 1-7-1980 to 31-7-1980. He, accordingly, pleaded for the levy being upheld.19. We have considered the rival submissions. The provision of Section 139(8)(a) specifies that the assessee shall be liable to pay simple interest at 12 per cent reckoned from the date immediately following the specific date to the date of furnishing of the return. There is a provision for waiver under the prescribed circumstances. Specified date is the 30th June, according to Explanation 1(a), as applicable to the present case. The provisions of the section would contemplate calculation of interest on a daily basis. There is, however, Rule 119A, which reads as under : In calculating the interest payable by the assessee or the interest payable by the Central Government to the assessee under any provision of the Act,-- (a) the period for which such interest is to be calculated shall be rounded off to a whole month or months and for this purpose any fraction of a month shall be ignored ; and the period so rounded off shall be deemed to be the period in respect of which the interest is to be calculated ; (b) the amount of tax, penalty or other sum in respect of which such interest is to be calculated shall be rounded off to the nearest multiple of one hundred rupees and for this purpose any fraction of one hundred rupees shall be ignored ; and the amount so rounded off shall be deemed to be the amount in respect of which the interest is to be calculated.
At the first sight there is a conflict between the rule and the provisions of the section. But the rule provides a concession, viz., that the period of default shall be rounded off to whole months and for this purpose a fraction of a month is to be ignored. Since the rule has provided for a concession, the assessee can claim that this concession should be extended to the assessee if applicable. For this purpose, we have to determine that when the specified date is 30-6-1980, by filing the return on 31-7-1980 whether there is one complete month of default or not. In the case of CIT v. Kadri Mills (Coimbatore) Ltd. [1977] 106 ITR 846, while dealing with levy of penalty under Section 271(1)0) of the Act, the Madras High Court held that the word 'month' has to be reckoned according to the British calendar and that where the assessee was granted time for filing the return for the assessment year 1961-62, fill 15-1-1962, but actually filed the return on 15-2-1962, it had filed its return on the last day of the default and, hence, the default had not lasted for a month for the purpose of levying penalty. In that judgment, the Madras High Court had dissented from the judgment of the Allahabad High Court in the case of CIT v. Laxmi Rattan Cotton Mills Co. Ltd. [1974] 97 ITR 285 wherein the view taken was that the word 'month' must be taken to mean a period of thirty days. Under the provisions of Section 139(8) the period for reckoning interest is to commence from the date immediately following the specified date. The specified date in the present case is 30th June. Therefore, reckoning of interest is to start from the immediately following date, i.e., 1st July. Though levy of interest is to start from 1st July, the question is whether when the return has been filed on 31st July, one month is over. Looking to the ratio of the judgment of the Madras High Court, which is binding on us, the return, when it is filed on the 31st July, cannot be said to have been filed after a delay of a whole month.
Therefore, the delay is technically only of a fraction of a month and, hence, under the provisions of Rule 119A, it has to be ignored and no interest would be leviable. The learned departmental representative, we may state, had referred to the note of the Ministry of Law, which reads as under : In this connection reference might be made to Ramanath Aiyar's Law Lexicon, wherein it has been observed : The term month where employed in modern statutes or contracts, and not appearing to have been used in a different sense, denotes a period terminating with the day of the succeeding month numerically corresponding to the day of its beginning, less one. If there be no corresponding day of the succeeding month, it terminates with the last day thereof.
These observations have also judicially been approved by the Orissa High Court in Marakanda Sahu v. Lal Sadananda AIR 1952 Ori. 279.
It is this construction which should be adopted in calculating the period of a month. This is more in accordance with the authorities and would also result in avoiding injustice.
On the facts of the present case, there is nothing in the aforesaid opinion which is in conflict with the conclusion that we have arrived at.
20. The learned departmental representative also invited our attention to the letter of the Board, F. No. 236/335/73-A & P AC II, dated 11-12-1974 wherein it was stated that 'in the matter of levying interest under Section 139(8) the actual date of filing the return should also be included in computing the total period for which interest is chargeable under Section 139(8)'. In the present case, we have to apply the terms of Rule 119A, which is a statutory rule and which uses the expression 'month' and with reference to the actual dates, on the basis of the judgment of the Madras High Court, we have to come to the conclusion that there is no default of one whole month.
Therefore, the interest levied under Section 139(8) has to be cancelled.
21 and 22. [These paras are not reproduced here as they involve minor issues.]