CIT Vs. PRANOY ROY

JUDGEMENT

(1.) THIS appeal has been preferred against the order of the High Court of Delhi in Civil Writ Petn. No. 1745 of 1999 passed on 21 -12 -2001 (Dr. Prannoy Roy and Anr. v. CIT and Anr. : (2002) 254 ITR 755 (Del) - -Ed.).

(2.) THE respondent -assessees earned substantial capital gains for the assessment year 1995 -96 for which income -tax return was due to be filed on 31 -10 -1995. The return was filed on 29 -9 -1996, i.e., after a delay of about 11 months. However, taxes due were paid on 25 -9 -1995, i.e., before the due date of filing of the return. Though the returned income was accepted on 29 -1 -1998, yet interest was charged under the provisions of Section 234A of the Income Tax Act, 1961 (for short the Act) on the ground that tax paid on 25 -9 -1995 could not be reduced from the tax due on assessment.

(3.) THE assessees, being further aggrieved, filed writ petition in the High Court of Delhi which has been disposed of by the impugned under. The High Court, while accepting the writ petition and setting aside the interest charged under Section 234A of the Act, has come to the conclusion that interest is not a penalty and that the interest is levied by way of compensation to compensate the revenue in order to avoid it from being deprived of the payment of tax on the due date. The High Court also held that interest would be payable in a case, where tax has not been deposited prior to the due date of filing of the income -tax return.