Commissioner of Income-tax, Vadodara-2 v. National Dairy Development Board
[Citation -2017-LL-0614-8]

Citation 2017-LL-0614-8
Appellant Name Commissioner of Income-tax, Vadodara-2
Respondent Name National Dairy Development Board
Court HIGH COURT OF GUJARAT AT AHMEDABAD
Relevant Act Income-tax
Date of Order 14/06/2017
Assessment Year 2008-09
Judgment View Judgment
Keyword Tags default in making payment of tax • retrospective amendment • actual cost of asset • advance payment • short payment • book profits • service tax • advance tax • oral order • person
Bot Summary: The tribunal relied on a decision of the Kolkata High Court in the case of Emami Ltd. v. Commissioner of Income Tax reported in 337 ITR 470 and of Uttaranchal High Court in the case of Commissioner of Income Tax and Another vs. SEDCO FOREX INTERNATIONAL DRILLING CO. LTD. reported in 264 ITR 320. Subsection 1 of Section 207 provides that tax shall be payable in advance during any financial year in accordance to the provision of Sections 208 to 219 in respect of total income of the assessee, which would be chargeable to tax for the assessment year immediately following the financial year and such income would be referred to as current income. Section Page 3 of 7 HC-NIC Page 3 of 7 Created On Fri Sep 01 11:42:00 IST 2017 O/TAXAP/361/2017 ORDER 208 of the act provides for condition for liability to pay advance tax and requires an assessee to pay such tax if tax liability exceeds Rs.10,000/ Section 209 of the Act provides for computation of advance tax. 5 In terms of Section 207 of the Act, thus, advance tax is payable in respect of total income of the assessee, which would be chargeable to tax in the assessment year immediately following the financial year in question. v. CCE reported in 2006 280ITR321(SC), strongly relied upon by Mr.Bajoria, where the apex court in the context of imposition of service tax by the Finance Act, 2002 with retrospective effect held that the liability to pay interest would arise only on Page 5 of 7 HC-NIC Page 5 of 7 Created On Fri Sep 01 11:42:00 IST 2017 O/TAXAP/361/2017 ORDER default and is really in the nature of quasi punishment and thus, although the liability to pay tax arose due to retrospective effect of law, the same should not entail the punishment of payment of interest. In our opinion, the said decision is not relevant for considering the second and the third questions as to whether an assessee can be said to be a defaulter in payment of advance tax if he had no liability to make payment of such tax on the last date of a financial year preceding the relevant assessment year as such the question did not arise in the said case before the Supreme Court. The various decisions of the other High Courts and the Tribunals relied upon by the Tribunal did not effectively consider the question whether even in a case like the present one where on the last date of the financial year preceding the relevant assessment year, the assessee had no Page 6 of 7 HC-NIC Page 6 of 7 Created On Fri Sep 01 11:42:00 IST 2017 O/TAXAP/361/2017 ORDER liability to pay advance tax, he would be nevertheless asked to pay interest in terms of section 234B and section 234C of theAct for default in making payment of tax in advance which was physically impossible.


O/TAXAP/361/2017 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 361 of 2017 COMMISSIONER OF INCOME TAX VADODARA-2 Appellant(s) Versus NATIONAL DAIRY DEVELOPMENT BOARD Opponent(s) Appearance: MR KM PARIKH, ADVOCATE for Appellant(s) No. 1 CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE BIREN VAISHNAV Date : 14/06/2017 ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1 Tax Appeal is admitted for consideration of following substantial questions of law: 1 Whether on facts and circumstances of case and in law, ITAT was justified in restricting disallowance made u/s.14A r.w.r 8D of I.T.Act to Rs.10,00,000/ without appreciating that provisions of Rule 8D(2)(iii) are applicable to assessee? We notice that Revenue has proposed another question, which reads as under: 2 Whether on facts and circumstances of case and in law, ITAT was justified in deleting interest u/s. 234B and 234C of I.T.Act by holding that same would not have been charged on assessee on account of increase Page 1 of 7 HC-NIC Page 1 of 7 Created On Fri Sep 01 11:42:00 IST 2017 O/TAXAP/361/2017 ORDER in total income resulting from retrospective amendment to section 43(6) of Act without appreciating that charging of interest u/s. 234B and 234C of I.T Act is mandatory? 2 This question relates to liability of assessee to pay interest on short fall of payment of advance tax. It is undisputed that such short fall occurred due to liability, which arose on account of retrospective amendment. Explanation 6 to Section 43(6) of Income Tax Act, 1961, was inserted by Finance Act 2008 with retrospective effect from 01.04.2003. This explanation essentially provided for computing actual cost of asset, depreciation allowed on such asset etc., in case of assessee who was not required to compute total income for purpose of act for any previous year or years. It is not necessary to go into nitigrity of explanation of this provision. Suffice it to record that for assessment year 2008 09 which is under consideration, assessee had paid advance tax, which was later on found to be short of statutory computation on account of above noted retrospective statutory amendment. In this context, Page 2 of 7 HC-NIC Page 2 of 7 Created On Fri Sep 01 11:42:00 IST 2017 O/TAXAP/361/2017 ORDER question arose whether assessee was liable to pay interest on such short fall of advance tax. 3 issue when ultimately reached Tribunal, Tribunal by impugned judgement held that interest cannot be levied under Section 234B and 234C of Act. tribunal relied on decision of Kolkata High Court in case of Emami Ltd. v. Commissioner of Income Tax reported in 337 ITR 470 and of Uttaranchal High Court in case of Commissioner of Income Tax and Another vs. SEDCO FOREX INTERNATIONAL DRILLING CO. LTD. reported in 264 ITR 320. 4 Para C of chapter XVII of Act pertains to advance payment of tax. Section 207 contained in said chapter pertains to liability for payment of advance tax. Subsection 1 of Section 207 provides that tax shall be payable in advance during any financial year in accordance to provision of Sections 208 to 219 in respect of total income of assessee, which would be chargeable to tax for assessment year immediately following financial year and such income would be referred to as current income. Section Page 3 of 7 HC-NIC Page 3 of 7 Created On Fri Sep 01 11:42:00 IST 2017 O/TAXAP/361/2017 ORDER 208 of act provides for condition for liability to pay advance tax and requires assessee to pay such tax if tax liability exceeds Rs.10,000/ Section 209 of Act provides for computation of advance tax. 5 In terms of Section 207 of Act, thus, advance tax is payable in respect of total income of assessee, which would be chargeable to tax in assessment year immediately following financial year in question. Thus, computation of advance tax would be made in advance and deposited with Government Revenue as per provisions contained in said chapter. In absence of amendment in Section 43(6) of Act, at relevant time no liability to pay tax in case of assessee existed. Such liability arose by virtue of subsequent amendment brought into statute with retrospective effect. Therefore, at relevant time when liability to pay advance tax arose, there was no short fall as per statutory provisions prevailing. No interest can be charged on ground that by virtue of subsequent amendment with retrospective effect tax liability arose, law does not expect person to perform Page 4 of 7 HC-NIC Page 4 of 7 Created On Fri Sep 01 11:42:00 IST 2017 O/TAXAP/361/2017 ORDER impossible. 6 This is precisely what Division Bench of Kolkata High Court in case of Emami Ltd. v. Commissioner of Income Tax (supra) had held. It was case in which certain tax liability arose by virtue of retrospective amendment under Section 115 JB of Act. Revenue demanded interest on short payment of advance tax calculated on basis of such retrospective amendment. Kolkata High Court held and observed as under: 13 In our opinion, amended provision of section 115JB having come into force with effect from April 1, 2001, appellant cannot be held defaulter of payment of advance tax. As pointed out earlier, on last date of financial year preceding relevant assessment year, as book profit of appellant in accordance with then provision of law was nil, we cannot conceive of any advance tax which in essence is payable within last day of financial year preceding relevant assessment year as provided in sections 207 and 208 or within dates indicated in section 211 of Act which inevitably falls within last date of financial year preceding relevant assessment year. Consequently, assessee cannot be branded as defaulter in payment of advance tax as mentioned above. 14 At this stage, we may profitably rely upon observations of Supreme Court in case of Star India P.Ltd. v. CCE reported in [2006] 280ITR321(SC), strongly relied upon by Mr.Bajoria, where apex court in context of imposition of service tax by Finance Act, 2002 with retrospective effect held that liability to pay interest would arise only on Page 5 of 7 HC-NIC Page 5 of 7 Created On Fri Sep 01 11:42:00 IST 2017 O/TAXAP/361/2017 ORDER default and is really in nature of quasi punishment and thus, although liability to pay tax arose due to retrospective effect of law, same should not entail punishment of payment of interest. 15 Although Mr Nizamuddin, learned counsel appearing on behalf of revenue, in this connection, strongly relied upon decision of Supreme Court in case of Joint CIT v. Rolta India Ltd. Reported in [2011] 330 ITR 470(SC), we find that in that case question was whether interest under Section 234B of Act could be charged on tax calculated on book profit under Section 115JA and in other words, whether advance tax was at all payable on book profits under Section 115JA of Act. Supreme Court answered said question in affirmative and further held that provisions of interest on default as provided in Sections 234B and 234C would also apply. We have already pointed out that Mr. Bajoria, at very outset, conceded that said decision should be applied for answering first question formulated in this appeal against his client. In our opinion, said decision is not relevant for considering second and third questions as to whether assessee can be said to be defaulter in payment of advance tax if he had no liability to make payment of such tax on last date of financial year preceding relevant assessment year as such question did not arise in said case before Supreme Court. 16 It appears that learned Tribunal has not at all considered aforesaid aspect as to liability of assessee to make payment of advance tax on last day of financial year, i.e.,March 31,2001, when its book profit was nil according to then law of land. various decisions of other High Courts and Tribunals relied upon by Tribunal did not effectively consider question whether even in case like present one where on last date of financial year preceding relevant assessment year, assessee had no Page 6 of 7 HC-NIC Page 6 of 7 Created On Fri Sep 01 11:42:00 IST 2017 O/TAXAP/361/2017 ORDER liability to pay advance tax, he would be nevertheless asked to pay interest in terms of section 234B and section 234C of theAct for default in making payment of tax in advance which was physically impossible. 7 In result, second question is not entertained and tax appeal is confined only to first question. (AKIL KURESHI, J.) (BIREN VAISHNAV, J.) Bimal Page 7 of 7 HC-NIC Page 7 of 7 Created On Fri Sep 01 11:42:00 IST 2017 Commissioner of Income-tax, Vadodara-2 v. National Dairy Development Board
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