IN HIGH COURT OF JUDICATURE AT BOMBAY O.O.C.J. WRIT PETITION NO.544 OF 2019 Ultratech Cement Ltd. Petitioner (As successor of Samruddhi Ltd.) Vs Chief Commissioner of Income-tax 1 Respondents & anr. Mr.J.D. Mistri, Senior Advocate with Mr.M.Agarwal i/b Mr.Atul Jasani for Petitioner Mr.Suresh Kumar with Sumandevi Yadav, Priyanka Tiwari for Respondents CORAM: AKIL KURESHI & S.J. KATHAWALLA, JJ. DATED: AUGUST 5, 2019 P.C.: 1. Heard learned Counsel for parties for final disposal of petition. petition is filed by one Ultratech Cement Limited, company registered under Companies Act challenging order dated 30.11.2018 passed by Respondent No.1 Chief Commissioner of Income Tax rejecting petitioner s application for waiver of interest u/s 234C of Income Tax Act ( Act , for short). 2. Brief facts are as under: petitioner company is successor of one M/s.Samruddhi Cement Limited, company registered under Page 1 of 13 wp.544.2019_11.doc Companies Act, which was incorporated on 4.9.2009 as subsidiary company of Grasim Industries Ltd. Grasim Industries Ltd. desired to demerge its cement unit which would be taken over by Samruddhi Cement Ltd. scheme for such purpose, therefore, was framed. appointed date provided in scheme was 1.10.2009. scheme provided that (i) Grasim Industries Ltd. will carry on cement business from appointed date to effective date in trust on behalf of Samruddhi Cement Ltd. (ii) advance tax payment made by Grasim Industries Ltd. in respect of profits of cement business from appointed date and onwards shall be deemed to be paid by Samruddhi Cement Ltd. It is not in dispute that pursuant to such clause, Grasim Industries Ltd. paid advance tax of Rs.184 crores on its profits of cement business for period from 1.10.2009 and 31.3.2010 in following manner: Advance tax payment made by Grasim in respect of profits of Cement Business on profits pertaining to profits from appointed date and onwards shall be deemed to be paid by Company. Date of Payment Rs. 15.12.09 124,00,00,000 15.03.10 60,00,00,000 Total 184,00,00,000 Page 2 of 13 ::: Uploaded on - 08/08/2019 ::: Downloaded on - 09/08/2019 14:15:27 ::: wp.544.2019_11.doc 3. scheme of demerger was presented before Madhya Pradesh High Court as well as Gujarat High Court for approval. Madhya Pradesh High Court approved scheme by order dated 31.3.2010 whereas Gujarat High Court granted approval by order dated 6.5.2010. scheme was subsequently duly notified and became effective from 18.5.2010. 4. Samruddhi Cement Ltd. filed its return of income for AY 2010-2011 declaring income of Rs.428.83 crores, which under section 115JB of Act was assessed at Rs.931.70 crores. Assessment order was passed on 26.3.2013. This order took into account advance tax of Rs.184 crores paid by Grasim Industries Ltd. for period between 1.10.2009 till 31.3.2010. This was adjusted against Grasim s tax liability giving rise to refund of Rs.25.66 crores (rounded off). 5. Samruddhi Cement Ltd. had not paid advance tax installments falling due on 15.6.2009 and 15.9.2009. question of charging interest on non-payment of advance tax of two installments, therefore, would arise. It is not even case of Samruddhi Cement Ltd. that interest u/s 234C of Act, ordinarily would not be leviable. Samruddhi Cement Ltd., however, contends that such advance tax was not deposited on account of Page 3 of 13 ::: Uploaded on - 08/08/2019 ::: Downloaded on - 09/08/2019 14:15:27 ::: wp.544.2019_11.doc impossibility. Citing Circular of CBDT dated 26.6.2006, Samruddhi Cement Ltd., therefore, filed application dated 11.5.2012 to Chief Commissioner of Income Tax seeking waiver of interest. In such application, Samruddhi Cement Ltd. pointed out that scheme of demerger envisaged appointed date of 1.10.2009. From such date, Samruddhi Cement Ltd. would continue to operate its cement business in trust for and on behalf of Samruddhi Cement Ltd. and advance tax pertaining to profit from such date and onwards, would be deemed to have been paid by Samruddhi Cement Ltd. In that application, it was also pointed out that accordingly Samruddhi Cement Ltd. had paid advance tax of Rs.184 crores in two installments falling due on 15.9.2012 and 15.3.2012. It was pointed out that scheme was approved by Madhya Pradesh High Court and Gujarat High Court on 31.3.2010 and 6.5.2010 respectively. It was also pointed out that Grasim has not claimed benefit of such advance tax of Rs.184 crores. It was contended that company was incorporated only on 4.9.2009 and company was not in existence on 15.6.2009. By time second installment fell due on 15.9.2009, there was no proposal to acquire cement business from Grasim. Samruddhi Cement Ltd. was in infant stage. No business activity was carried on. It was further pointed out that income was received Page 4 of 13 ::: Uploaded on - 08/08/2019 ::: Downloaded on - 09/08/2019 14:15:27 ::: wp.544.2019_11.doc after due date for payment of first and second installments of advance tax. Such income was neither anticipated nor in contemplation on such dates. request was, therefore, made to waive interest in terms of CBDT Circular dated 26.6.2006 since case of company fell squarely within parameters of said Circular. 6. Principal Commissioner passed impugned order dated 30.11.2018 and rejected application of petitioner. His principal ground was that in view of clear provisions contained in scheme of demerger, it cannot be stated that income was neither anticipated nor contemplated. Necessary conditions for waiver of interest provided in CBDT Circular dated 26.6.2006 were, therefore, not fulfilled. He also pressed in service yet another ground, namely, that company ought to have paid all its installments which requirement in present case according to him was not fulfilled. relevant portion of his order reads as under: 5. I have carefully considered facts of case request of assessee. Para 2(b) of Board s instructions dated 26.6.2006, relied upon by assessee company, reads as under: (b) Any income chargeable to income-tax under any head of income, other than Capital gains is received or accrued after due date of payment of first or subsequent Page 5 of 13 ::: Uploaded on - 08/08/2019 ::: Downloaded on - 09/08/2019 14:15:27 ::: wp.544.2019_11.doc installments of advance tax which was neither anticipated or was in contemplation of assessee, and advance tax on such income is paid in remaining installment or installments and Chief Commissioner/Director-General is satisfied on facts and circumstances of case that this is fit case for reduction or waiver of interest chargeable under section 234C of Income-tax Act. Thus, as per Board s guidelines income should be received after due date of payment of first or subsequent installment of advance tax, which was neither anticipated nor was in contemplation of assessee. In instant case, cement business of Grasim Industries was contemplated to be transferred to assessee w.e.f. 01.10.2009 under well thought out and deliberate plan by Scheme of arrangement. assessee company being 100% subsidiary of GIL was integral part of Grasim Industries who was carrying on cement business. Therefore, it cannot be said that income was not anticipated or not under contemplation. benefit of this clause for waiver of interest is available only in case where income was not anticipated at all. When assessee has executed well thought out and deliberate plan to acquire cement business it cannot be said that income from cement business was not anticipated or not under contemplation. Thus, this condition of unexpected income which was not anticipated is not found fulfilled in this case. 6. second condition as per this guideline is that assessee should have made payment of advance tax on such income in remaining installments. In this case no payment of advance tax was made by assessee at all in any of installments. advance tax paid by GIL was in respect of its composite business including cement unit as there is no provision to pay advance tax unit-wise. It is also found that third and fourth installment of advance tax was paid by Gil on its own PAN and no payment was made on PAN of assessee company. Boards guideline for waiver of interest is applicable only in case where assessee itself has paid advance tax and there was shortfall in payments made in earlier installments. Thus, basic ingredient of payment of advance tax by Page 6 of 13 ::: Uploaded on - 08/08/2019 ::: Downloaded on - 09/08/2019 14:15:27 ::: wp.544.2019_11.doc assessee, as contemplated in Board s instructions is missing in this case. assessee has only taken credit for 3rd and 4th installment of advance tax paid by Grasim Industries Limited. However, fact remains that no advance tax was paid by assessee though its separate PAN was available. Therefore, assessee is not eligible for any wavier of interest in accordance with Board s instructions as no payment of advance tax was made by assessee company at all during year. 7. Appearing for petitioner, learned Counsel Mr.Mistri submitted that impugned order suffers from gross illegality. Samruddhi Cement Ltd., was not in existence when first installment of 15.6.2009 had fallen due. By time of second installment of 15.9.2009, company had just come into existence. proposal for acquiring cement business from Grasim had not yet been finalised. In any case, scheme of demerger was subject to approval by two High Courts. Till such approvals were granted, scheme would not come into existence. Various provisions made in scheme would not be effective. It was, therefore, not correct to hold that profit in question could have been anticipated or could have been under contemplation. He further pointed out that advance tax of Rs.184 crores paid by Grasim was not claimed by said company but by Samruddhi Cement Ltd. and Assessing Officer duly recognised same while passing order of assessment. Page 7 of 13 ::: Uploaded on - 08/08/2019 ::: Downloaded on - 09/08/2019 14:15:27 ::: wp.544.2019_11.doc Commissioner was, therefore, not correct in recording that all installments were not paid by Samruddhi Cement Ltd. 8. On other hand, learned Counsel Mr.Suresh Kumar opposed petition. He supported impugned order. He argued that crucial requirement of applicability of Circular was that income in question should neither be anticipated nor in contemplation. In present case, both conditions were not satisfied. scheme of demerger was already framed which envisaged transfer of cement business of Grasim to Samruddhi. Commissioner, therefore, had correctly come to conclusion that petitioner was not entitled to benefit of Circular. 9. In exercise of powers under section 119(2) of Act, CBDT has issued order/circular dated 26.6.2006 regarding waiver of interest under section 234A, 234B and 234C of Act. Relevant portion of this Circular reads as under: Sub: Order under section 119(2)(a) of Income-tax Act, 1961 regarding waiver of interest under sections 234A, 234B & 234C of Income-tax Act, 1961. SECTION 234A, 234B, 234C, In exercise of powers conferred under clause (a) of sub-section (2) of section 19 of Income-tax Act 1961, Central Board of Direct Taxes, hereby directs that Chief Commissioner of Income-tax and Director General Page 8 of 13 ::: Uploaded on - 08/08/2019 ::: Downloaded on - 09/08/2019 14:15:27 ::: wp.544.2019_11.doc of Income-tax may reduce or waive interest charged under section 234A, or section 234B or section 234C of Act in classes of cases or classes of income specified in paragraph 2 of this Order for period and to extent Chief Commissioner of Income-tax / Director-General of Income-tax may deem fit. However, no reduction or waiver of such interest shall be ordered unless assessee has filed return of income for relevant assessment year and paid entire Income-tax (principal component of demand due on income as assessed. Chief Commissioner of Income-tax or Director-General of Income-tax may also impose any other conditions as deemed fit for said reduction or waiver of interest. class of incomes or class of cases in which reduction or waiver of interest under section 234Aof section 234B or, as case may be section 234C can be considered, are as follows: (a) . (b) Any income chargeable to income-tax under any head of income, other than Capital gains is received or accrued after due date of payment of first or subsequent instalments of advance tax which was neither anticipated nor was in contemplation of assessee, and he advance tax on such income is paid in remaining instalment or instalments, and Chief Commissioner/Director-General is satisfied on fact and circumstances of case that this is fit case for reduction or waiver of interest chargeable under section 234C of Income-tax Act. . 4. Earlier Orders under section 119(2)(a) dt. 23 rd May, 1996 and 30th January, 1997 on subject stand superceded by this Order. If any petition in past has been rejected because Board had not issued this direction earlier, such petition may be reconsidered and decided in accordance with this Order. If any petition in past was allowed in accordance with Orders under section 119(2)(a) dt. 23 rd May, 1996 and 30th Page 9 of 13 ::: Uploaded on - 08/08/2019 ::: Downloaded on - 09/08/2019 14:15:27 ::: wp.544.2019_11.doc January, 1997, such Orders allowing waiver should not be reopened/revised as per guidelines contained in this Order. 10. It can thus be seen that to obviate difficulty arising out of strict compliance of interest provision, CBDT has issued said Circular for waiver of interest in certain circumstances. Para 4 of Circular provides that these guidelines would be applied even in cases, applications for waiver of interest have been rejected in past. 11. facts of case are not seriously in dispute. Samruddhi Cement Ltd. was incorporated on 4.9.2009 as subsidiary of Grasim Industries. scheme of demerger of Grasim s business was framed which envisaged 1.10.2009 as appointed date. scheme was approved by Madhya Pradesh and Gujarat High Courts on 31.3.2010 and 6.5.2010, and effective date being 18.5.2010. Till these orders were passed, scheme would not be effective. demerger as envisaged in scheme, would not come into existence. It was, therefore, that scheme itself provided that post 1.10.2009, Grasim Industries would continue to operate its cement business in trust for and on behalf of Samruddhi Cement Ltd. scheme also provided that all taxes paid by Grasim Industries on profit of its cement Page 10 of 13 ::: Uploaded on - 08/08/2019 ::: Downloaded on - 09/08/2019 14:15:27 ::: wp.544.2019_11.doc business arising on and after 1.10.2010 would be deemed to have been paid by Samruddhi Cement Ltd. That is how two companies and even assessing officer proceeded. 12. As per law, any scheme of amalgamation, merger or demerger of companies would have to be approved by jurisdictional High Court. effective date may be one provided by High Court in its order. appointed date may be one envisaged in scheme or if any specification made in order, that may be provided by High Court. Necessarily, therefore, any such scheme would be approved having retrospective effect. Till approval comes from High Court, nevertheless, scheme remains at stage of proposal. Under circumstances, at best, it can be stated that Grasim Industries Ltd. and for that matter, Samruddhi Cement Ltd. could have anticipated demerger of cement unit and that such demerger was also in contemplation. However, accruing of income to Samruddhi Cement Ltd. cannot be stated to be either anticipated or under contemplation. One must draw distinction between anticipation or contemplation of demerger of business from anticipation or contemplation of income. Obviously, since it was Grasim Industries and Samruddhi Cement Ltd. who had applied to Page 11 of 13 ::: Uploaded on - 08/08/2019 ::: Downloaded on - 09/08/2019 14:15:27 ::: wp.544.2019_11.doc High Court for approval of demerger scheme, scheme was under contemplation and, therefore, approval anticipated. This does not mean that approval by High Court was certainty. Till approval was granted, Samruddhi Cement Ltd. could not have anticipated or contemplated flowing of income in its coffers. Any other view would act extremely harshly in situation as present one and defeat very purpose for which Circular has been issued by CBDT. We can think of reverse situation. Let us assume Samruddhi Cement Ltd. had paid advance tax. Grasim Industries obviously, therefore, would not. Or scheme of demerger was not approved by High Court or not approved till completion of financial year. Samruddhi Cement Ltd. may be able to claim refund, surely Grasim Industries would be charged interest for not depositing advance tax. 13. We may recall, Grasim Industries continued to discharge tax liability on profit of cement business even after 1.10.2009. Consequently, Grasim had paid advance tax of Rs.184 crores. On account of demerger, Grasim never claimed benefit of such advance tax, instead, Samruddhi Cement Ltd. in return of income, claimed credit thereof, which was also recognised by Assessing Officer. Second ground pressed in service by Page 12 of 13 ::: Uploaded on - 08/08/2019 ::: Downloaded on - 09/08/2019 14:15:27 ::: wp.544.2019_11.doc Commissioner is wholly untenable. We may recall, he was of opinion that Grasim Industries had not even paid all its installments and therefore also, waiver of interest could not be granted. This conclusion is based on fallacious consideration that installments were paid by Grasim Industries and not Samruddhi Cement Ltd. relevant parties, namely, Grasim Industries and Samruddhi Cement Ltd. as well as Assessing Officer treated advance tax installments paid by Grasim Industries as deemed to have been paid by Samruddhi Cement Ltd. Commissioner, therefore, was in error in pressing in service this clause of Circular. 14. Under circumstances, we find that Commissioner committed serious error in rejecting application for waiver of interest. impugned order dated 30.11.2018 is, therefore, quashed. It is directed that respondents shall waive interest payable u/s 234C of Act in terms of CBDT Circular dated 26.6.2006 for period in question. Consequently, if such interest is already recovered, same would become refundable. 15. petition is allowed and disposed of accordingly. (S.J. KATHAWALLA, J.) (AKIL KURESHI, J.) Page 13 of 13 Ultratech Cement Ltd. (As successor of Samruddhi Ltd.) v. Chief Commissioner of Income-tax1 & anr