B.S Dhillon, J.:— The constitutional validity of Expln. 2 to sub-s. (8) of s. 139 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”). is sought to be challenged in this writ petition on the ground that it is violative of art. 14 of the Constitution of India. It may be pointed out that the petitioner is a firm registered under s. 185(1)(b) of the Act. For the assessment year 1974–75, regular assessment was made. In addition, the ITO raised a further demand on account of interest under s. 139(8) of the Act treating the petitioner firm as unregistered for the reason that whereas the return was due to be filed by the petitioner on 30th June, 1974, under s. 139(1) of the Act, it was actually filed on 13th September, 1974. Assessee's application for the waiver of interest was rejected by the ITO. Its revision before the Commissioner of Income-tax was also dismissed. The said orders of the I.T authorities are sought to be impugned in this petition on the sole ground that Expln. 2 to sub-s. (8) of s. 139 of the Act is ultra vires art. 14 of the Constitution.

2. The provisions of sub-s. (8) of s. 139 of the Act are as follows:

“139. (8) (a) Where the return under sub-section (1) or subsection (2) or sub-section (4) for an assessment year is furnished after the specified date, or is not furnished, then [whether or not the Income-tax-Officer has extended the date for furnishing the return under sub-section (1) or sub-section (2)], the assessee shall be liable to pay simple interest at twelve per cent, per annum, reckoned from the day immediately following the specified date to the date of the furnishing of the return or, where no return has been furnished, the date of completion of the assessment under section 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted source:

Provided that the Income-tax Officer may, in such cases and under such circumstances as may be prescribed, reduce or waive the interest payable by any assessee under this sub-section.

Explanation (1).— For the purposes of this sub-section, ‘specified date’, in relation to a return for an assessment year, means,—

(a) in the case of every assessee whose total income, or the total income of any person in respect of which he is assessable under this Act, includes any income from business or profession, the date of the expiry of four 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 before the commencement of the assessment year, or the 30th day of June of the assessment year, whichever is later;

(b) in the case of every other assessee, the 30th day of June of the assessment year.

Explanation (2).— For the purposes of this sub-section, where the assessee is a registered firm or an unregistered firm which has been assessed under clause (b) of section 183, the tax payable on the total income shall be the amount of tax which would have been payable if the firm had been assessed as an unregistered firm.

(b) Where as a result of an order under section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 264, the amount of tax on which interest was payable under this sub-section has been reduced, the interest shall be reduced accordingly, and the excess interest paid, if any, shall be refunded.”

3. Reference at this stage may also be made to the provisions of s. 271(2), which are as follows:

“271. (2) When the person liable to penalty is a registered firm or an unregistered firm which has been assessed under clause (b) of section 183, then, notwithstanding anything contained in the other provisions of this Act, 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.”

4. It has been provided under sub-s. (8) of s. 139 of the Act that where the assessee has furnished the return after the specified date or has not furnished, then the assessee shall be liable to pay simple interest at twelve per cent, per annum reckoned from the day immediately following the specified date to the date of the furnishing of the return or, where no return has been furnished, the date of completion of the assessment under s. 144 on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid and any tax deducted at source. In view of the provisions of Expln. 2 to sub-s, (8) of s. 139 of the Act, for the purposes of this sub-section, where the assessee is a registered firm or an unregistered firm, which has been assessed under cl. (b) of s. 183 the tax payable on the total income shall be the amount of tax which would have been-payable if the firm had been assessed as an unregistered firm. Similarly, the analogous provisions as regards the penalties have been provided for under s. 271 of the Act, and in view of the provisions of sub-s. (2) of s. 271 of the Act, when the person liable to penalties is a registered firm or an unregistered firm which has been assessed under cl. (b) of s. 183, then, notwithstanding anything contained in the other provisions of this Act, the penalty imposable under sub-s. (1) shall be the same amount as would be imposable on that firm if that firm were an unregistered firm. The provisions of sub-s. (2) of s. 271 of the Act were the subject-matter of attack before their Lordships of the Supreme Court in Jain Brothers v. Union of India, [1970] 77 ITR 107, wherein their Lordships held as follows (See headnote):

“It is 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 the imposition of penalty. No question of discrimination under article 14 can arise in such a situation. There is nothing to prevent the legislature from giving the benefit of a reduced rate to a registered firm for the purpose of tax but withholding the same when it committed a default and became liable to imposition of penalty.”

5. These observations, in our view, aptly apply as far as the provisions of Expln. (2) to sub-s. (8) of s. 139 of the Act are concerned. It is open to the legislature to say that once a registered firm committed a default attracting the payment of interest it should be deemed or considered to be an unregistered firm for the purposes of imposition of interest. There is nothing to prevent the legislature from giving the benefit of reduced rate to the registered firm for the purpose of tax but withholding the same when it committed a default and became liable to the payment of interest on the amount, which amount had fallen due but was not actually paid. No question of discrimination under art. 14 of the Constitution, in the said case, can arise. We are unable to agree with the contention of Sri Gupta that Expln. 2 has created any discrimination when it provided that the registered firm be treated as unregistered if the same has attracted the payment of interest on the amount of tax which was due and which was not paid in time. It is no doubt true that the provisions of sub-s. (8) of s. 139 of the Act are compensatory in nature as the said provisions have been enacted on the principle that the revenue, should not suffer the loss for the default of the assessee for not filing the return in time and thereby evading the payment of the tax for the time being and thus the revenue has been held entitled to receive simple interest at the rate of twelve per cent, per annum for the period during which the revenue was deprived of the payment of tax, which had become due and on the amount of tax payable on the total income as determined on regular assessment but that will not make any difference. The scheme of the Act is quite clear. It cannot be disputed, as was also held by their Lordships of the Supreme Court in Jain Brothers' case, [1970] 77 ITR 107, that registered firms have been given certain benefits for the purposes of income-tax as contained in the Act. The Act itself divides the firms into two categories—registered and unregistered. The various provisions of the Act go to show that registered firms have been given certain benefits; while some other benefits have been given by the legislature, yet the benefits as regards the payment of interest with a view to compensate the revenue the loss suffered for non-payment of tax in time and as regards the penalty provisions, the legislature thought not to give any concession to the registered firms and the said firms are treated on the same footing as the unregistered firms are treated for incurring the liability of payment of interest and penalty, if by their own default the said imposition of interest and penalty, becomes leviable.

6. The learned counsel for the petitioner has mainly relied on a Single Bench decision of the Karnataka High Court in M. Nagappa v. ITO, [1975] 99 ITR 32, to contend that the impugned provision is ultra vires. We have very carefully gone through the judgment and we are unable to agree with the view taken therein. It was observed in the said judgment that after 1956–57, an individual whose source of income is the profit made by a firm of which he is a partner, is not in a more advantageous position than an individual who has other sources of income. These observations are clearly against the various provisions of the Act. As is clear, the exemption limit is higher in the case of a registered firm. The tax of a registered firm is also at a lower slab. Their Lordships also observed in Jain Brothers' case, [1970] 77 ITR 107 (SC) that the legislature did give the benefit of reduced rate to the registered firm and thus the conclusions arrived at by the learned judge in M. Nagappa's case, [1975] 99 ITR 32 (Kar) are against the provisions of the statute and the dictum laid down by their Lordships of the Supreme Court.

7. The Gujarat High Court in Chhotalal & Co. v. ITO, [1976] 105 ITR 230 upheld the vires of Expln. 2 to sub-s. (8) of s. 139 of the Act and observed as follows (See headnote):

“The legislature has placed registered firms in a special category for purposes of payment of tax. That special category has been treated favourably to other associations of persons and unregistered firms. But there is nothing wrong if the legislature at the same time imposes a condition that the entity enjoying such a privileged position must conform to the provisions of law and abide by the provisions of law in order to continue enjoying such privileges. Therefore, the same reasoning which justified the creation of such a class amongst the assessees, namely, class of registered firms, also sustains the provisions in clause (iii)(a) of the proviso to section 139(1). Under these circumstances, it cannot be said that in the case of a registered firm penal interest ceases to be an amount of compensation and it cannot be said that there is violation of the object of the Income-tax Act, nor does it result in the payment of penalty. The payment of double penalty is out of question because penal interest is not penalty at all. It is only by way of compensation and since penalty is not being imposed twice over there is no question of double jeopardy. The provisions of clause (iii)(a) of the proviso to section 139(1) are not invalid on the ground of double jeopardy.”

8. Similarly, the vires of these provisions were upheld by the Madras High Court in Mahendrakumar Ishwarlal & Co. v. Union of India, [1973] 91 ITR 101, by the Gauhati High Court in Ganesh Das Sreeram v. ITO, [1974] 93 ITR 19 and by the Madras High Court in Mahendrakumar Iswarlal & Co. v. Union of India, [1974] 94 ITR 65. No other point has been urged before us.

9. For the reasons recorded above, we are of the view that the provisions of Expln. 2 to sub-s. (8) of s. 139 of the Act do not suffer from any vice of unconstitutionality and we, therefore, dismiss this writ petition. However, there will be no order as to costs.