025-NLR-NLR-V-77-M.-Y.-M.-MAKEEN-Petitoner-and-E.-M.-G.-TILLEKERATNE-Deputy-Commissioner-of-In.pdf
H. 3ST. G. FEBNANDO, C.J.—Makeen v. Tillekeralne
145
1971 Present: H. N. G. Fernando, C.J., and Thamotheram, J.
M. Y. M. MAKEEN, Petitioner, and E. M. G. TILLEKERATNE(Deputy Commissioner of Inland Revenue) and another,
Respondents
S. C. 862/69—Application for a Mandate in the nature of a Writof Certiorari and a Writ of Mandamus
Finance Act No. 11 of 1963—Business turnover tax—Penalty payableunder ss. 119 (5), 122 (3), 144.
Where any business turnover tax is in default, and the defaulterbecomes liable to pay, in addition to such tax, a penalty in terms ofsection 122 (3) of the Finance Act, No. 11 of 1963, no deductioncan be claimed against such penalty if the amount of the businessturnover tax is subsequently reduced by reason of the relief providedin section 119 (5) and a refund of the excess amount already paidas tax is given.
_/PPLICATION for a Writ of Certiorari and a Writ ofMandamus.
M. Tiruchelvam, Q.C., with K. Shanmugam and K. Kanag-Iswaran, for the petitioner.
Shiva Pasupati, Senior Crown Counsel, for the respondents.
Cur. adv. vult.
July 10, 1971. H. N. G. Fernando, C.J.—
It is common ground in this case that the petitioner becameliable, in terms of Section 122 of the Finance Act No. 11 of 1963to pay a sum of Rs. 21,971 as turnover tax for the period ending31st March 1968, and that there had been default in the paymentof this amount. On account of that delay, sub-section (3) of s. 122rendered the petitioner liable to pay in addition a penalty ofRs. 6,383.
A Certificate under s. 144 of the Act was issued by the Commis-sioner of Inland Revenue to the Magistrate’s Court for therecovery of these two amounts, but in pursuance of the provisoto sub-section (6) of s. 144 the Court adjourned the matter toenable the petitioner to submit to the Commissioner his objec-tion to the tax. Thereafter the Commissioner issued a secondCertificate stating that the tax recoverable had been reduced toRs. 3,260 and certified that the total amount to be recovered fromthe petitioner was Rs. 3,260 as tax in default, and Rs. 7,040 aspenalty (payable under s. 122 (3)).
LXXVH—7
1*—A 07909—2,808_ (74(08)
146
H. N. G. FERNANDO, C.J.—Makeen v. Tillekeratne
Counsel for the petitioner has argued that since the amount ofthe tax in default was reduced from Rs. 21,971 to Rs. 3,260, thereshould also have been a proportionate reduction of the penaltypayable under s. 122 (3).
It appears however from the affidavit of the Assessor filed inthis Court that the reduction of the amount due from thepetitioner as tax was not made on the ground that the amount oftax due from the petitioner in terms of s. 122 (1) for the relevantperiod was less than the amount originally certified Le. Rs. 21,971.This reduction was allowed on a different ground to which I shallnow refer. Sub-section (5) of s. 119 of the Act provides that themaximum amount of the business turnover tax charged from anyperson for any year in respect of any business, shall in no caseexceed 80 per centum of the proceeds or income from that busi-ness, and the sub-section further provides that in such a case,the taxpayer shall be entitled to a refund of tax paid in excessof the maximum amount. In the present case, the reduction ofthe amount of tax in the second certificate to Rs. 3,260 was madeon account of the fact that the petitioner would be entitled to therelief provided in sub-section (5) of s. 119.
An examination of the relevant sections establishes that theturnover tax due from any person in respect of any quarter, mustbe paid within 15 days after the expiry of that quarter, and thatthe tax is in default if not duly paid. As soon as tax is thus indefault the liability to pay the penalty under sub-section (3) ofs. 122 immediately arises ; and if the tax in default and thepenalty are not paid, the Commissioner is entitled to recover thefull amount of both items by the procedure set out in s. 144.
Thus the relief allowed by sub-section (5) of s. 119 does notrelease a person from the liability to pay in full the tax and anypenalty accruing under sub-section (3) of s. 122. The reliefallowed is only that if the amount of the tax paid (not includingthe amount of any penalty) exceeds the maximum amountreferred to in sub-section (5) of s. 119, then there will be a sub-sequent refund of the excess amount paid as tax. In the presentcase the Commissioner in issuing the second Certificate for areduced amount of tax has really given the petitioner greaterrelief than that for which sub-section (5) of s. 119 provides. Butit is clear that no relief could legally have been claimed orallowed against the penalty which sub-section (3) of s. 122imposed for the petitioner’s delay in paying Rs. 21,971 admittedlydue from him as tax for the relevant period.
Commissioner of Inland Revenue v. Life Insurance Corporation of India 147
(I understand from learned Crown Counsel that some sub-sequent amendment of the Act may have altered the legalposition as set out above.)
I hold accordingly that the petitioner was not entitled to claimany deduction against the penalty which accrued on account ofhis default.
The application is refused with costs fixed at Rs. 210.Thamothebam, J.—I agree.
Application refused.