DEPUTY COMMISSIONER OF INCOME TAX v. SURYA ROSHNI LTD
[Citation -2006-LL-0113-3]

Citation 2006-LL-0113-3
Appellant Name DEPUTY COMMISSIONER OF INCOME TAX
Respondent Name SURYA ROSHNI LTD.
Court ITAT
Relevant Act Income-tax
Date of Order 13/01/2006
Assessment Year 2000-01
Judgment View Judgment
Keyword Tags instalment of advance tax • regular assessment • bona fide belief • levy of interest • returned income • income returned • payment of tax • capital gain • late payment • nil income
Bot Summary: The only ground raised in the appeal is against the deletion of interest levied under s. 234C of the IT Act, 1961 on book profits determined under s. 115JA of the Act. The assessee filed an application under s. 154 of the Act requesting the AO to delete the interest on the ground that such levy was not permissible when income was determined under s. 115JA of the Act. An intimation under s. 143(1) was sent by the AO making variation in the calculation of interest as made by the assessee under ss. The said liability she discharged in April, 2000, that the rejection of the assessee s claim to the extent of liability of interest in respect of capital gains only for one month and demand for interest for a longer period on the basis of his own reading of s. 234C, while making an intimation to the assessee, was an error apparent on the face of the record which was clearly amenable to rectification proceedings under s. 154 of the Act. If such an exercise be taken, disagreeing with the claim of the assessee about his liability to such levy, recourse had to be taken to s. 143(2) and regular assessment under s. 143(3) of the Act, after calling upon the assessee. In the present case, not only the provisions of s. 115JA came into play but the assessee had a bona fide belief that it was not liable to pay any interest under s. 234C of the Act. While processing the return of the assessee under s. 143(1) of the Act, the AO could not have entered into any interpretative exercise while computing the tax or interest payable on the basis of the information emanating from return submitted by the assessee, under s. 143(1)(a).


Department is in appeal before us against order of learned CIT(A) dt. 20th Nov., 2002 for asst. yr. 2000-01. only ground raised in appeal is against deletion of interest levied under s. 234C of IT Act, 1961 ( Act ) on book profits determined under s. 115JA of Act. assessee-company had filed its return of income showing nil income which was processed under s. 143(1) of Act under MAT on book profit of Rs. 4,81,04,048. As result of this, demand of Rs. 1,93,620 was raised as against claim for refund of Rs. 22,710 made by assessee. demand was created due to levy of interest under s. 234C of Act. assessee filed application under s. 154 of Act requesting AO to delete interest on ground that such levy was not permissible when income was determined under s. 115JA of Act. However, AO was not convinced with argument of assessee and rejected application of assessee. In doing so, AO relied on judgment of Madhya Pradesh High Court in case of Itarsi Oil & Flour Mills Ltd. vs. CIT (2001) 170 CTR (MP) 158: (2001) 250 ITR 686 (MP) and of Gauhati High Court in case of Assam Bengal Carriers Ltd. vs. CIT (2000) 162 CTR (Gau) 170: (1999) 239 ITR 862 (Gau). CIT(A) deleted interest by relying on his own order dt. 24th July, 2002 for asst. yrs. 1998-99 and 1999-2000 in assessee s own case. learned Departmental Representative relied on decision of Delhi Bench of Tribunal in case of Insilco Ltd. vs. Jt. CIT (2004) 85 TTJ (Del) 538. According to learned counsel, said decision was not applicable in view of amendment made in s. 143(1)(a)of Act w.e.f. 1st June, 1999 and matter in that case pertained to asst. yr. 1998-99. learned counsel relied on judgment of Rajasthan High Court in case of CIT vs. Smt. Premlata Jalani (2003) 185 CTR (Raj) 601: (2003) 264 ITR 744 (Raj). We have duly considered rival contentions and material on record. In case before Rajasthan High Court cited supra, assessee filed her return of income for asst. yr. 2000-01. intimation under s. 143(1) was sent by AO making variation in calculation of interest as made by assessee under ss. 234B and 234C of Act. AO was of opinion that since assessee had failed to pay advance tax, in respect of capital gains arising at whatever date during previous year by 31st March, 2000, she was liable to pay interest for entire period to extent there was short fall in payment of advance tax calculated as per income returned by assessee including capital gains from 25th Sept., 1999, when first instalment of advance tax became due and assessee has failed to pay minimum required percentage of advance-tax on basis of 30 per cent of tax on basis of returned income in terms of sub-s. (1) of s. 234C of Act. assessee contended that capital gain arose after 15th March, 2000, when date of payment of last instalment of advance tax had already expired. assessee could not have paid advance tax on such capital gains arising after 15th March, 2000. Since assessee had not paid tax in respect thereof, in April, 2000, she calculated interest payable in respect of such late payment of tax on such capital gains for one month in her return and deposited same along with return. assessee applied for rectification but application was rejected. High Court held, (i) that question of any determination as to liability of interest on tax otherwise than as per claims made by assessee was not within scope of sub-s. (1) of s. 143 of Act as it had come into force w.e.f. 1st April, 2000, and governed assessment proceedings for asst. yr. 2000-01, (ii) that assessee had rightly paid interest under s. 234C along with return, considering her liability to pay interest in respect of advance tax payable on capital gains earned by her arose after 15th March, 2000, for period of one month only as she was to make payment by 31st March, and liability to pay advance tax in respect of such income arose after 15th March. said liability she discharged in April, 2000, (iii) that rejection of assessee s claim to extent of liability of interest in respect of capital gains only for one month and demand for interest for longer period on basis of his own reading of s. 234C, while making intimation to assessee, was error apparent on face of record which was clearly amenable to rectification proceedings under s. 154 of Act. From above and from various observations made by High Court in judgment, it is clear that AO had no jurisdiction to determine liability of interest otherwise than as per claims made by assessee under s. 143(1) of Act. Hon ble Rajasthan High Court was dealing with matter pertaining to asst. yr. 2000-01 and in present appeal also we are concerned with asst. yr. 2000-01. At p. 751 (of ITR 264), Court observed that w.e.f. 1st June, 1999, sub-s. (1) of s. 143 does not contain any provisions for any adjustment in respect of any claims made by assessee in his return. At p. 752 of report, Court observed that question of any determination as to liability of interest on tax otherwise than as per claims made by assessee is not within scope of sub-s. (1) of s. 143 as it has come into force w.e.f. 1st April, 2000 and governs assessment proceedings for asst. yr. 2000-01. At this juncture, it needs to be clarified that issue before Rajasthan High Court was that of capital gains which had been earned by assessee after last date for payment of last of instalments of advance-tax. In this context, High Court observed that AO had indulged in determination of question of law as to what ought to be liability of interest by interpreting s. 234C. It also observed that there is no room for determining any disputed or debatable question or undertaking any interpretative exercise while computing tax or interest payable on basis of information emanating from returns submitted by assessee, under s. 143(1)(a) of Act. If such exercise be taken, disagreeing with claim of assessee about his liability to such levy, recourse had to be taken to s. 143(2) and regular assessment under s. 143(3) of Act, after calling upon assessee. In present case, we are conscious of fact that we are not dealing with levy of interest relatable to tax on capital gains. Here we are concerned with levy of interest relatable to tax on book profits determined under s. 115JA of Act. However, same analogy as is applicable to issue of capital gains, will apply here also with equal force. It is only at end of accounting year, assessee-company will come to know whether it is liable to pay tax on income determined under provisions of Act or that determined under s. 115JA of Act. Therefore, it cannot be expected of assessee to determine advance tax payable on its current income. This is not to suggest that in all company cases there is no liability to pay advance tax at all during particular financial year. If this analogy is to be applied in such sweeping manner, then it will nullify provisions of advance tax qua companies. This cannot be intention of legislature. However, analogy can be applied only on facts of particular case where case is marginal one and there is likelihood of provisions of s. 115JA of Act coming into play. But where it is not marginal case and company is sure to earn profits, it will have to pay advance tax in accordance with provisions of ss. 208 to 210 of Act. In present case, not only provisions of s. 115JA came into play but assessee had bona fide belief that it was not liable to pay any interest under s. 234C of Act. This belief was based on judgment of Karnataka High Court in case of Kwality Biscuits Ltd. vs. CIT (2000) 159 CTR (Kar) 316: (2000) 243 ITR 519 (Kar). Undoubtedly, Punjab & Haryana High Court has dissented from this judgment in case of CIT vs. Upper India Steel Mfg. & Engg. Co. Ltd. (2004) 192 CTR (P&H) 385: (2004) 141 TAXMAN 692 (P&H). Therefore, while processing return of assessee under s. 143(1) of Act, AO could not have entered into any interpretative exercise while computing tax or interest payable on basis of information emanating from return submitted by assessee, under s. 143(1)(a). It was incumbent for AO to have taken recourse to s. 143(2) and regular assessment under s. 143(3) of Act to levy such interest. Accordingly, AO should have entertained application of assessee under s. 154 of Act and should have deleted interest. Not having done so, we cancel levy of interest. In result, appeal of Department is dismissed. *** DEPUTY COMMISSIONER OF INCOME TAX v. SURYA ROSHNI LTD.
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