Priya Soparkar 1 5 and 5-1 itxa 875-17 and 1237-17- order IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL (IT) NO.875 OF 2017 AND INCOME TAX APPEAL (IT) NO.1237 OF 2017 Pr. Commissioner of Income Tax, Mangaluru Appellant V/s. Mangalore Refinery & Petrochemicals Ltd. Respondent Mr.Ashok Kotangle with P.A.Narayanan, Mr.Prabhakar Ranshur and Ms.Sakshi Aundhekar, Advocates for Appellant. Mr.S.E.Dastur, Sr. Counsel with Mr.Niraj Sheth and Rajesh Poojary i/by M/s Mulla & Mulla Craige Blunt & Caroe, Advocates for Respondent. --- CORAM : UJJAL BHUYAN & MILIND N. JADHAV, JJ. DATE : MARCH 17, 2020 P.C.:- 1. Heard Mr.Ashok Kotangle, learned standing counsel, Revenue for appellant; and Mr.S.E.Dastur, learned senior counsel assisted by Mr.Niraj Sheth, learned counsel for respondent/assessee. 2. This order will dispose of above two appeals. While Income Tax Appeal No.875 of 2017 arises out of Income Tax Appeal No.6835/Mum/ 2008 for assessment year 2004- 05, Income Tax Appeal No.1237 of 2017 arises out of Income Tax Appeal No.7341/Mum/ 2008 for assessment year 2005-06. ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 2 5 and 5-1 itxa 875-17 and 1237-17- order 3. Issues raised in two appeals being identical and parties being same though appeals pertain to two different assessment years, those have been heard together and are being disposed of by present common order. 4. For convenience, Income Tax Appeal No.875 of 2017 is taken up as lead case. 5. This appeal has been preferred under Section 260A of Income Tax Act, 1961 (briefly Act hereinafter) assailing order dated 23rd November, 2016 passed by Income Tax Appellate Tribunal, Mumbai Bench F , Mumbai ( Tribunal for short) in Income Tax Appeal No.6835/Mum/ 2008 for assessment year 2004-05. 6. appeal has been preferred proposing following two questions as substantial questions of law:- 1. Whether on facts and in circumstances of case and in law, Tribunal was justified in upholding decision of Commissioner of Income Tax (Appeals) holding that surplus arising on prepayment of deferred sales tax loan at net present value (NPV) is capital receipt which cannot be termed as remission on cessation of trading liability under section 41(1) of Act? 2. Whether on facts and in circumstances of case and in law, Tribunal was justified in confirming decision of Commissioner of Income Tax (Appeals) holding that interest under section 234B and section 234C of Act was not chargeable with respect to tax liability determined under minimum alternate tax (MAT)? ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 3 5 and 5-1 itxa 875-17 and 1237-17- order 7. Respondent is assessee under Act. Status of assessee is that of resident company. Assessment year under consideration is 2004-05. Assessee carries on business of refining of crude oil, selling of petroleum products and captive generation and distribution of electric power. 8. Assessee filed return of income declaring loss of Rs.60,29,17,798.00. Assessee however paid tax on book profit of Rs.31,61,94,360.00 computed in terms of section 115JB of Act. Assessment was made under Section 143(3) of Act. 9. In course of assessment proceedings issue of considerable importance arose relating to amount of Rs.255.685 crores shown by assessee under head other income and not in nature of income liable to income tax. 10. Assessing Officer noted that there was scheme of Karnataka Government on basis of which while assessee was allowed to collect sales tax on its sales, sales tax so collected was considered as sales tax deferment loan . loan so outstanding was to be paid by assessee to State Government within periods specified in scheme. In terms of incentives granted to assessee by Government of Karnataka, assessee could repay loan within period of 11 years in respect of phase-I of refinery and within period of 14 years in ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 4 5 and 5-1 itxa 875-17 and 1237-17- order respect of phase-II of refinery. Such loan outstanding as on 29th April, 2004 amounted to Rs.517.130 crores. At this point of time Karnataka Government came up with scheme vide notification dated 31st March, 2004. As per scheme Government of Karnataka allowed prepayment of sales tax deferment loan outstanding as on 29 th February at net present value (NPV) before expiry of deferred periods of 11 years and 14 years for phase-I and phase-II respectively. Availing this opportunity assessee made payment of deferred sales tax loan at net present value (NPV) of Rs.261.445 crores as against total outstanding loan amount of Rs.517.130 crores. Assessee contended that this difference of Rs.255.685 crores (Rs.517.130 crores less Rs.261.445 crores) was capital receipt credited to profit and loss account under head other income which accrued on account of prepayment of sales tax deferment loan and therefore this amount was not covered by section 41(1) of Act. 11. Assessing Officer referred to section 41(1) of Act and held that as and when any allowance or deduction is made in assessment year in respect of any expenditure or trading liability incurred by assessee and subsequently in any previous year assessee obtains any benefit in respect of such liability by remission or cessation thereof that is required to be brought to tax. Sales tax collected is trading receipt. Conversion of sales tax collected into loan and using expression sales tax deferment loan did not change real character of receipt as trading receipt. ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 5 5 and 5-1 itxa 875-17 and 1237-17- order Nomenclature was not decisive; real character of receipt was required to be considered. Accordingly, contention of assessee was rejected. Thus, amount of Rs.255.685 crores was brought to tax, same being added to income of assessee vide assessment order dated 30th October, 2006. By said assessment order Assessing Officer computed book profit under section 115JB of Act at Rs.2,44,63,94,360.00 and charged interest thereon under sections 234B and 234C of Act. 12. Aggrieved by said order of assessment, assessee preferred appeal before Commissioner of Income Tax (Appeals)-3, Mumbai, ( CIT(Appeals) for short) or first appellate authority, raising various grounds of appeal. Assessee challenged decision of Assessing Officer treating discount received by it on settlement of sales tax deferment loan as taxable income of assessee. issue was of taxability of amount of discount. Following decision of CIT (Appeals) dated 30.04.2008 in case of Associated Capsules Private Limited for assessment year 2004-2005, first appellate authority by appellate order dated 16th September, 2008 allowed said ground of appeal of assessee and directed Assessing Officer to exclude amount of Rs.255.685 crores added to income of assessee. On issue regarding charging of interest under sections 234B and 234C of Act on book profit computed under section 115JB of Act, first appellate authority followed decision of Karnataka High Court in case of Kwality Biscuits ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 6 5 and 5-1 itxa 875-17 and 1237-17- order Limited Vs. Commissioner of Income Tax, 243 ITR 519 and held that when income is taxable under section 115JB of Act, interest under sections 234B and 234C could not be charged. 13. Aggrieved by decision of first appellate authority, Revenue preferred appeal before Tribunal which was registered as Income Tax Appeal No.6835/Mum/2008. Assessee also preferred cross objection being CO No.105/Mum/ 2009. Both appeal and cross-objection were heard together. While appeal by Revenue was dismissed, cross-objection of assessee was allowed vide order dated 23rd November, 2016. However, in this appeal we are only concerned with decision of Tribunal in rejecting appeal of Revenue. 14. On issue relating to addition of Rs.255.685 crores made by Assessing Officer by invoking provisions of section 41(1) of Act was concerned, Tribunal took view that issue was squarely covered by decision of Bombay High Court in case of CIT vs. Sulzer India Limited, 369 ITR 71 and held that first appellate authority made no mistake in holding that surplus arising on prepayment of deferred sales tax loan at NPV is capital receipt which cannot be termed as remission or cessation of trading liability so as to attract section 41(1) of Act. Thus, order of first appellate authority was affirmed by Tribunal. ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 7 5 and 5-1 itxa 875-17 and 1237-17- order 15. On question of charging of interest under sections 234B and 234C on income taxable under section 115JB of Act is concerned, Tribunal held that at relevant time i.e., at time of making assessment decision of Karnataka High Court in Kwality Biscuits Limited (supra) was holding field as per which interest under sections 234B and 234C of Act was not chargeable with respect to tax liability determined under MAT. Tribunal also noted that in Joint Commissioner of Income Tax Vs. Rolta India Limited, 330 ITR 470, Supreme Court held that where MAT companies defaulted in payment of advance tax in respect of tax payable under section 115JB, it was liable to pay interest under sections 234B and 234C of Act. However, according to Tribunal, judgment of Supreme Court in Rolta India Limited (supra) was delivered subsequently which would not discredit bona fide reason entertained by assessee in not depositing advance tax on MAT in view of prevailing judgment of Karnataka High Court in Kwality Biscuits Limited (supra) which was then holding field. In such circumstances, Tribunal held that there was no reason to interfere with finding of first appellate authority, albeit on different ground. 16. Aggrieved, Revenue is before us in appeal under section 260A of Act raising above two questions for consideration. ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 8 5 and 5-1 itxa 875-17 and 1237-17- order 17. Mr.Kotangale, learned standing counsel, Revenue has assailed findings of Tribunal on both issues and submits that findings being contrary to law are liable to be appropriately interfered with. In so far first issue is concerned, it is fit case where provision of section 41(1) of Act is attracted and amount received on sales tax deferment loan as rebate was liable to be treated as income being trading receipt. In so far levy of interest under sections 234B and 234C of Act in event of failure of assessee in depositing advance tax on MAT, position has been clarified by Supreme Court in case of Rolta India Limited (supra). decision of Supreme Court in Rolta India Limited (supra) being law of land, Tribunal was not justified in taking contrary view. In addition to decision in Rolta India limited (supra), Mr.Kotangale has relied upon decisions of Supreme Court in Commissioner of Income Tax Vs. T.V. Sundaram Iyengar and Sons Ltd., 222 ITR 344 and in case of Commissioner of Income Tax Vs. Anjum M.H.Ghaswala, 201 ITR 252. 18. Per contra, Mr.Dastur, learned senior counsel for respondent/assessee has supported order of Tribunal on both counts. He submits that in so far first question is concerned, premature payment of sales tax already collected termed as sales tax deferment loan as per scheme of Government of Karnataka does not attract section 41(1) of Act and refers to decision of Bombay High Court in Sulzer India Limited (supra) which decision has been ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 9 5 and 5-1 itxa 875-17 and 1237-17- order affirmed by Supreme Court in CIT Vs. Balkrishna Industries Limited, (2018) 15 SCC 608. In so far second question is concerned, Mr.Dastur has referred to sections 234B and 234C of Act and submits that Karnataka High Court in Kwality Biscuits Limited (supra) had held that for not paying advance tax in respect of tax leviable on book profits determined under section 115JB of Act, interest could be charged under sections 234B and 234C of Act. That was law applicable at time of making of assessment. Infact, this decision of Karnataka High Court was not disturbed, rather affirmed by Supreme Court in CIT Vs. Kwality Biscuits Limited, 284 ITR 434. This position was clarified by Bombay High Court in Prime Securities Limited Vs. ACIT, 333 ITR 464 and again in CIT Vs. JSW Energy Limited, 379 ITR 36(Bom). 19. Submissions made by learned counsel for parties have been considered. Also perused relevant materials on record as well as considered decisions cited at Bar. 20. In so far first question is concerned as already noticed above, it relates to addition of Rs.255.685 crores made by Assessing Officer by invoking provisions of section 41(1) of Act. We have already noticed that assessee was granted incentives by Karnataka Government whereby it availed sales tax deferment for period of 11 years for phase-I of refinery and 14 years for phase-II of refinery. scheme was called sales tax deferment loan scheme. sale tax so collected was ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 10 5 and 5-1 itxa 875-17 and 1237-17- order converted into loan to be repaid by assessee to State Government within two periods specified as per phase-I and phase-II. Such loan amount outstanding as on 29 th February, 2004 was to extent of Rs.517.130 crores. Government of Karnataka issued two notifications, both dated 31st March, 2004, allowing prepayment of sales tax deferment loan at net present value (NPV) before expiry of deferred periods of 11 years or 14 years as per phase-I and phase-II respectively. As per said notifications assessee pre-paid deferred sales tax loan at NPV of Rs.261.445 crores against outstanding amount of Rs.517.130 crores resulting in surplus of Rs.255.685 crores which was credited to profit and loss account as other income . In assessment proceedings assessee treated said other income as capital receipt, not liable to be taxed. However, Assessing Officer did not accept said contention of assessee by taking view that sales tax deferred loan amount was nothing but sales tax collected which was trading liability and remission or cessation of part of same was taxable under section 41(1) of Act. Thus, according to him surplus of Rs. 255.685 crores arising on account of prepayment of deferred sales tax loan was remission or cessation of trading liability, liable for assessment under section 41(1) of Act. 21. When this was appealed against, first appellate authority took view that amount of Rs.255.685 crores accrued to assessee due to preponement of payment of converted loan at discounted rate. ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 11 5 and 5-1 itxa 875-17 and 1237-17- order first appellate authority found that this issue was already decided at stage of first appeal in case of Associated Capsules (P) Limited for assessment year 2004-05 wherein it was held that on such surplus provisions of section 41(1) of Act were inapplicable and, therefore, directed Assessing Officer to delete aforesaid amount which was added to income of assessee. 22. Before Tribunal assessee contended that case of Associated Capsules (P) Limited was adjudicated by jurisdictional High Court i.e. Bombay High Court alongwith bunch of cases in Sulzer India Limited (supra) where High Court considered identical scheme of Government of Maharashtra with respect to premature repayment of deferred sales tax loan. High Court had upheld contention that surplus arising on such repayment was not amount falling for consideration in terms of section 41(1) of Act. On other hand, it was contended on behalf of Revenue that sales tax collected formed part of trading receipt as held by Supreme Court in Chowringhee Sales Bureau P. Ltd. Vs. CIT, 87 ITR 42 and therefore, any cessation or remission in payment of such liability would attract provisions of section 41(1)of Act. 23. Tribunal considered rival submissions and held as follows:- 9. We have carefully considered rival submissions and find that conclusion drawn by CIT (A) on this aspect is fully covered by judgment of Hon ble Bombay High Court in case of Sulzer India Ltd. (supra). point ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 12 5 and 5-1 itxa 875-17 and 1237-17- order argued by ld. DR, based on judgment of Hon ble Supreme Court in case of Chowringhee Sales Bureau P. Ltd. (supra), is untenable in as much as same has already been considered by Hon ble Bombay High Court in its judgment. There is also no dispute to assertions made by learned representative for assessee that sales tax deferred scheme under Package Scheme of 1983 and Package Scheme of Incentive, 1985 notified by Government of Maharashtra, which was considered by Hon ble Bombay High Court in case of Sulzer India Ltd. & Others (supra) is pari materia to scheme availed by assessee herein, as notified by Government of Karnataka. Having regard to aforesaid, we find that judgment of Hon ble Bombay High Court in case of Sulzer India Ltd. (supra), squarely covers controversy before us, and CIT (A) made no mistake in holding that surplus arising on prepayment of deferred sales tax loan at NPV is capital receipt, which cannot be termed as remission or cessation of trading liability so as to invite section 41(1) of Act. order of CIT (A) is hereby affirmed and Revenue fails in its Ground of appeal no.1. 24. Thus, Tribunal held that decision of Bombay High Court in Sulzer India Limited (supra) squarely covered issue and that first appellate authority made no mistake in holding that surplus arising on prepayment of deferred sales tax loan at NPV was capital receipt which could not be termed as remission or cessation of trading liability so as to invite section 41(1) of Act. Accordingly, order of first appellate authority was affirmed. ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 13 5 and 5-1 itxa 875-17 and 1237-17- order 25. Before examining decision of this court in Sulzer India limited (supra) brief reference to section 41(1) of Act is considered necessary. Section 41 comes under chapter IV of Act which deals with computation of total income and under heading (D) deals with profits and gains of business or profession. Section 41 deals with profits chargeable to tax. Section 41(1) reads as under :- S. 41(1) Where allowance or deduction has been made in assessment for any year in respect of loss, expenditure or trading liability incurred by assessee (hereinafter referred to as first mentioned person) and subsequently during any previous year - (a) first mentioned person has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, amount obtained by such person or value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income tax as income of that previous year, whether business or profession in respect of which allowance or deduction has been made is in existence in that year or not; or (b) successor in business has obtained, whether in cash or in any other manner whatsoever, any amount in respect of which loss or expenditure was incurred by first mentioned person or some benefit in respect of trading liability referred to in clause (a) by way of remission or cessation thereof, amount obtained by successor in business or value of benefit accruing to successor in business shall be deemed to be profits and gains of business or profession, and accordingly chargeable to income tax as income of that previous year. ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 14 5 and 5-1 itxa 875-17 and 1237-17- order Explanation 1 - For purposes of this sub section, expression "loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof" shall include remission or cessation of any liability by unilateral act by first mentioned person under clause (a) or successor in business under clause (b) of that sub section by way of writing off such liability in his accounts. Explanation 2 - For purposes of this sub section, "successor in business" means - (i) where there has been amalgamation of company with another company, amalgamated company; (ii) where first mentioned person is succeeded by any other person in that business or profession, other person; (iii) where firm carrying on business or profession is succeeded by another firm, other firm; (iv) where there has been demerger, resulting company. 26. In Sulzer India Limited (supra) above section was analyzed by this court and thereafter, it was held as follows:- 22) perusal thereof indicates that wherein allowance or deduction has been made in assessment for any year in respect of loss, expenditure or trading liability incurred by assessee (referred to as first mentioned person) and subsequently during any previous year, this first mentioned person has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, amount obtained by such person or value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 15 5 and 5-1 itxa 875-17 and 1237-17- order to income tax as income of that previous year. That irrespective whether business or profession in respect of which allowance or deduction has been made is in existence in that year or not. That is what is stipulated in clause (a) of sub-section (1) of section 41 of I.T. Act and for purposes of sub-section, Explanation (1) defines term loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof to include remission or cessation of any liability by unilateral act by first mentioned person or his successor by way of writing of such liability in his accounts. 27. In facts and circumstances of case this court in Sulzer India Limited (supra) held as follows:- 40) It is not possible to agree with Mr.Gupta. Because premature payment of sales tax already collected but its remittance to Government, as Mr. Gupta envisages, is not covered by this provision else sub-sections and particularly section 43B(1) would have been worded accordingly. Therefore, section 43B has no application. In so far as applicability of section 41(1)(a), there also applicability is to be considered in light of liability. It is loss, expenditure or trading liability. In this case, scheme under which sales tax liability was deferred enables assessee to remit sales tax collected from customers or consumers to Government not immediately but as agreed after 7 to 12 years. If amount is not to be immediately paid to Government upon collection but can be remitted later on in terms of scheme, then we are of opinion that exercise undertaken by Government of Maharashtra in terms of amendment made to Bombay Sales Tax Act and noted above, may relieve assessee of his obligation, but that is not by way of obtaining remission. worth of amount which has to be remitted after 7 to 12 ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 16 5 and 5-1 itxa 875-17 and 1237-17- order years has been determined prematurely. That has been done by finding out its net present value. If that is value of money that State Government would be entitled to receive after end of 7 to 12 years, then we do not see how ingredients of sub-section (1) of section 41 can be said to be fulfilled. obligation to remit to Government sales tax amount already recovered and collected from customers is in no way wiped out or diluted. obligation remains. All that has happened is option is given to assessee to approach SICOM and request it to consider application of assessee of premature payment and discharge of liability by finding out its net present value. If that was permissible exercise and in terms of settled law, then, we do not see how assessee can be said to have been benefited and as claimed by Revenue. argument of Mr.Gupta is not that assessee having paid Rs.3.37 crores has obtained for himself anything in terms of section 41(1) but assessee is deemed to have received sum of Rs.4.14 crores, which is difference between original amount to be remitted with payment made. Mr.Gupta terms this as deemed payment and by State to assessee. We are unable to agree with him. Tribunal has found that first requirement of section 41(1) is that allowance or deduction is made in respect of loss, expenditure or trading liability incurred by assessee and other requirement is assessee has subsequently obtained any amount in respect of such loss and expenditure or obtained benefit in respect of such trading liability by way of remission or cessation thereof. As rightly noted by Tribunal, sales tax collected by assessee during relevant year amounting to Rs.7,52,01,378/- was treated by State Government as loan liability payable after 12 years in 6 annual/equal instalments. Subsequently and pursuant to amendment made to 4th proviso to section 38 of Bombay Sales Tax Act, 1959, assessee accepted offer of SICOM, ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 17 5 and 5-1 itxa 875-17 and 1237-17- order implementing agency of State Government, paid amount of Rs.3,37,13,393/- to SICOM, which, according to assessee, represented net present value of future sum as determined and prescribed by SICOM. In other words, what assessee was required to pay after 12 years in 6 equal installments was paid by assessee prematurely in terms of net present value of same. That State may have received higher sum after period of 12 years and in instalments. However, statutory arrangement and vide section 38, 4 th proviso does not amount to remission or cessation of assessee's liability assuming same to be trading one. Rather that obtains payment to State prematurely and in terms of correct value of debt due to it. There is no evidence to show that there has been any remission or cessation of liability by State Government. We agree with Tribunal that one of requirement of section 41(1)(a) has not been fulfilled in facts of present case. 28. As was pointed out before Tribunal, in decision in Sulzer India Limited (supra) this court had also considered and adjudicated appeal in case of Associated Capsules(P) Limited. Therefore, decision in Sulzer India Limited (supra) was decision in Associated Capsules (P) Limited (supra) as well. 29. question as to whether differential amount arising on account of premature payment of deferred sales tax liability at net present value (NPV) should be treated as capital or revenue/trading receipt and applicability of section 41(1) of Act thereto came up for consideration before Supreme Court in Balkrishna Industries Limited (supra) in which decision of this Court in Sulzer India Limited (supra) was also considered. Supreme Court noted that main judgment ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 18 5 and 5-1 itxa 875-17 and 1237-17- order out of which appeals arose and were considered in said case was rendered in Sulzer India Limited (supra). Supreme Court referred to decision of this Court in Sulzer India Limited (supra), more particularly to paragraph 40 thereof which has been extracted above, and held that aforesaid approach of High Court was without any blemish. Accordingly, appeals were dismissed. 30. It may also be mentioned that while deciding Sulzer India Limited (supra) this court had examined decision relied upon by Mr.Kotangale i.e. T.V. Sundaram Iyengar and Sons Ltd. (supra) and found same to be distinguishable. 31. On due consideration, we do not find any error or infirmity in view taken by Tribunal. This issue is squarely covered by decisions in Sulzer India Limited (supra) and Balkrishna Industries Ltd. (supra) and Tribunal rightly followed same. Consequently, we see no reason to interfere with same. Question No.1 so framed is accordingly answered against Revenue and in favour of assessee. 32. This brings us to second question which deals with charging of interest under sections 234B and 234C when income is taxable under section 115JB of Act. 33. We have already noticed that Assessing Officer computed book profit of Rs.2,44,63,94,360.00 in terms of ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 19 5 and 5-1 itxa 875-17 and 1237-17- order section 115JB of Act while passing assessment order and charged interest thereon amongst others under sections 234B and 234C of Act. 34. CIT (Appeals) relied upon decision of Karnataka High Court in Kwality Biscuits Limited (supra) in holding that interest under sections 234B and 234C of Act is not chargeable where tax liability has been determined in terms of book profit calculated under section 115JB of Act. 35. Before Tribunal it was contended on behalf of Revenue that charging of interest under sections 234B and 234C of Act is mandatory in nature by placing reliance on decision of Supreme Court in case of Rolta India Limited (supra) as per which interest under sections 234B and 234C of Act is chargeable even where tax liability is determined in terms of section 115JB of Act. On other hand, assessee defended decision of first appellate authority on ground that during relevant period judgment of Karnataka High Court in Kwality Biscuits Limited (supra) was holding field and in such circumstances assessee was not expected to pay advance tax in respect of tax leviable on book profit determined under section 115JB of Act. contention was that since at relevant point of time Karnataka High Court had held that assessee was not required to pay advance tax in respect of minimum alternate tax (MAT), non-payment of advance tax with respect to liability under MAT would not ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 20 5 and 5-1 itxa 875-17 and 1237-17- order attract levy of interest under sections 234B and 234C of Act. 36. Considering rival submissions, Tribunal held as under :- 24. We have carefully considered rival submissions. Before we proceed to test efficacy of stand of Revenue for charging interest u/s 234B & 234C of Act in instant case, brief relevant facts are to be appreciated which are as follows. In instant case, in return of income filed, tax liability was determined on book profits in terms of Section 115JB of Act. Even in assessment finalized u/s 143(3) of Act, final tax liability was determined by Assessing Officer based on book profits determined u/s 115JB of Act. During previous year relevant to assessment year under consideration, relevant dates for payment of advance tax were - 15.6.2003, 15.9.2003, 15.12.2003 and 15.3.2004. In assessment order passed u/s 143(3) dated 30.10.2006, Assessing Officer charged interest u/s 234B & 234C of Act with respect to tax liability u/s 115JB of Act. At time of relevant dates for payment of advance tax, judgment of Hon ble Karnataka High Court dated 30.11.1999 in case of Kwality Biscuits Ltd. (supra) was prevailing, according to which interest u/s 234B & 234C of Act was not chargeable with respect to tax liability determined under MAT. Under these circumstances, it is quite clear that at relevant point of time assessee had justifiable and plausible reason to believe that no advance tax was payable by it, being corporate entity, with respect to liability u/s 115JB of Act. No doubt, judgment of Hon ble Supreme Court in case of Rolta India Ltd. (supra) prescribes that interest u/s 234B & 234C of Act is leviable even with respect to liability determined on MAT, so however, ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 21 5 and 5-1 itxa 875-17 and 1237-17- order said decision is of later date, i.e. 7.11.2011. judgment of Hon ble Supreme Court in case of Rolta India Ltd. (supra) being subsequent decision would not discredit bonafide reason entertained by assessee in not depositing advance tax on MAT in view of then prevailing judgment of Hon ble Karnataka High Court. Therefore, under these circumstances, we find no reason to uphold plea of Revenue for levy of interest u/s 234B & 234C of Act in present case. During relevant assessment under consideration, available legal position, manifested by judgment of Hon ble Karnataka High Court in case of Kwality Biscuits Ltd.(supra), reflected that no advance tax was payable with respect to MAT liability. plea of Revenue before us that charging of interest u/s 234B & 234C of Act is mandatory, in our view, is not germane to decide impugned controversy in as much as levy can be said to be mandatory only if its payment is attracted per se as per prevailing legal position. As we have seen in present case, during relevant assessment year under consideration, position regarding payment of MAT in advance was governed by judgment in case of Kwality Biscuits Ltd. (supra) which ruled non-payment of MAT in advance and, thus interest for such default was not chargeable. Under these circumstances, we hereby affirm ultimate decision of CIT (A) in deleting levy of interest u/s 234B & 234C of Act, albeit on different ground. Thus on this aspect also, Revenue fails. 37. Before we analyse finding of Tribunal as extracted above, it would be apposite to deal with provisions contained in sections 234B and 234C of Act. Section 234B deals with interest for default in payment of advance tax. As per sub-section (1) where in any financial year assessee who is liable to pay advance tax under ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 22 5 and 5-1 itxa 875-17 and 1237-17- order section 208 of Act has failed to pay such tax or where advance tax paid under section 210 is less than 90% of assessed tax, assessee shall be liable to pay simple interest at percentage determined for every month or part of month comprised in period from first day of April next following such financial year to date of determination of total income under section 143(1) and where regular assessment is made, to date of such regular assessment on amount equal to assessed tax or as case may be, on amount by which advance tax paid as aforesaid falls short of assessed tax. 38. Thus, interest under section 234B would be charged when assessee who is liable to pay advance tax has failed to pay such tax or where advance tax paid is less than 90% of assessed tax. 39. Section 234C on other hand deals with interest for deferment of advance tax. Like section 234B, this is also very longish provision but sum and substance of section is that where in any financial year assessee who is liable to pay advance tax has failed to pay such tax or advance tax paid on or before 15 th day of June is less than 15% of tax due on returned income or amount of advance tax paid on or before 15 th day of September is less than 45% of tax due on returned income or amount of such advance tax paid on or before 15 th day of December is less than 75% of tax due on returned ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 23 5 and 5-1 itxa 875-17 and 1237-17- order income, then assessee shall be liable to pay simple interest at rate prescribed per month for period of three months on amount of shortfall from 15% or 45% or 75%, as case may be, of tax due on returned income. That apart, if advance tax paid by assessee on current income on or before 15 th day of March is less than tax due on returned income, then assessee shall be liable to pay simple interest at rate of 1% on amount of shortfall from tax due on returned income. 40. Adverting to order of Tribunal, we find that at time of relevant dates for payment of advance tax by assessee, judgment of Karnataka High Court in case of Kwality Biscuits Limited (supra) delivered on 30th November, 1999 was holding field. As per said judgment interest under sections 234B and 234C of Act was not liable to be paid with respect to tax liability determined under minimum alternate tax (MAT). In such circumstances, Tribunal took view that at relevant point of time assessee had justifiable and plausible reason to believe that no advance tax was required to be paid by it. Being corporate entity with respect to liability under section 115JB of Act, Tribunal further noted that Supreme Court in subsequent decision in case of Rolta India Limited (supra) held that interest under sections 234B and 234C of Act is leviable even with respect of liability determined on minimum alternative tax (MAT) but this decision was delivered at later point of time i.e. on 7 th ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 24 5 and 5-1 itxa 875-17 and 1237-17- order January, 2011. Therefore, Tribunal held that later decision of Supreme Court in Rolta India Limited (supra) being subsequent decision would not discredit bonafide reason entertained by assessee in not depositing advance tax on MAT in view of decision in Kwality Biscuits Limited (supra). In this context, Tribunal held that contention of Revenue that charging of interest under sections 234B and 234C is mandatory would not be germane in deciding controversy in as much as levy can be said to be mandatory only if its payment is attracted per se as per prevailing legal position. Therefore, Tribunal affirmed decision of CIT (Appeals). 41. In Kwality Biscuits Limited (supra) one of questions for consideration before Karnataka High Court was whether in assessment year where assessee s income is computed by invoking provisions of section 115J of Act interest under sections 234B and 234C were leviable? Karnataka High Court referred to requirements of sections 234B and 234C and also scheme of section 115J whereafter it was held that since entire exercise of computing income or book profit could be done only at end of financial year, provisions of sections 207, 208, 209 or 210 (dealing with liability to pay advance tax) cannot be made applicable. Until and unless accounts are audited and balance-sheet is prepared, even assessee would not know whether provisions of section 115J would be applicable or not. liability would arise only after book profits are determined. Accordingly, it was held that interest ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 25 5 and 5-1 itxa 875-17 and 1237-17- order could not be charged under sections 234B and 234C of Act while computing book profit. It may be mentioned that Revenue preferred appeal against aforesaid decision of Karnataka High Court before Supreme Court in CIT Vs. Kwality Biscuits Limited, 284 ITR 434. decision of Karnataka High Court was affirmed by Supreme Court and appeal was dismissed. 42. Supreme Court in Star India Private Limited Vs. Commissioner of Central Excise, 280 ITR 321 (SC), considered question of payment of interest in default of payment of tax in context of service tax. It was held that liability to pay interest would only arise on default and is really in nature of quasi punishment. 43. Question before Supreme Court in Anjum M.H. Ghaswala (supra) relied upon Mr. Kotangale was whether Settlement Commission constituted under section 245B of Act had jurisdiction to reduce or waive interest chargeable under sections 234A, 234B and 234C of Act while passing orders of settlement under section 245D(4) of Act. Supreme Court held that Settlement Commission acting under section 245D(4) and (6) does not have power to reduce or waive interest statutorily payable under sections 234A , 234B and 234C of Act. 44. decision of Supreme court in Anjum M.H. Ghaswala (supra) was examined by this court in Prime ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 26 5 and 5-1 itxa 875-17 and 1237-17- order Securities Limited (supra). This court observed that in case of Anjum M.H. Ghaswala (supra) Supreme Court was concerned with powers of Settlement Commission and explained that what Supreme Court had said was that once assessee is found liable to pay interest then recovery of interest is mandatory. Such recovery of interest cannot be waived for any reasons but for charging interest under those sections i.e. sections 234A, 234B and 234C, it has first to be established that assessee had committed default in payment of advance tax. 45. In case of JSW Energy limited (supra) this court again referred to decision of Supreme Court in Star India Private Limited (supra) and held that liability to pay interest would only arise on default and is really in nature of quasi punishment. liability to pay tax although created retrospectively could not entail punishment of payment of interest with retrospective effect. It was held that though Explanation to section 234B was introduced by Finance Act, 2008 with retrospective effect, assessee could not be termed as defaulter for non-payment of advance tax because such provision did not exist at relevant time mandating payment of advance tax. 46. As noticed, in Rolta India Limited (supra) Supreme Court again examined provisions of sections 234B and 234C and held that section 115JB is self contained code pertaining to MAT and all companies were liable for payment of advance tax under section 115JB. Consequently, ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 27 5 and 5-1 itxa 875-17 and 1237-17- order provisions of sections 234B and 234C imposing interest on default in payment of advance tax were also applicable. Therefore, decision of Karnataka High Court in Kwality Biscuits limited (supra) was overruled. 47. Though in Rolta India Limited (supra) Supreme Court held that interest under sections 234B and 234C is payable on failure to pay advance tax in respect of tax liability under section 115JB of Act, fact remains that at time of payment of advance tax by assessee decision of Karnataka High Court in Kwality Biscuits Limited (supra) was holding field as per which assessee was not required to pay advance tax since entire exercise of computing book profit could only be made at end of financial year and therefore, following law applicable at that point of time, assessee did not pay advance tax on book profit which was subsequently computed. Therefore, there was no deliberate or intentional failure to pay advance tax on book profit by assessee. In circumstances, Tribunal was justified in affirming view taken by first appellate authority that charge of interest under sections 234B and 234C on book profit was not justified. 48. Consequently, second question so framed is also answered in favour of assessee and against Revenue. 49. In view of discussions and conclusions reached above, we do not find any merit in appeal. ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Priya Soparkar 28 5 and 5-1 itxa 875-17 and 1237-17- order 50. Appeal is accordingly dismissed. However, there shall be no order as to costs. (MILIND N. JADHAV, J.) (UJJAL BHUYAN, J.) ::: Uploaded on - 23/06/2020 ::: Downloaded on - 24/06/2020 17:29:24 ::: Pr. Commissioner of Income-tax, Mangaluru v. Mangalore Refinery & Petrochemicals Ltd