IN THE INCOME TAX APPELLATE TRIBUNAL DELHI ‘A’ BENCH BEFORE SHRI I.P. BANSAL, JM & SHRI A.N. PAHUJA, AM
ITA No.2825/Del/2010 Assessment Year:2007-08
D.C.I.T.,Circle 2(1),
New Delhi.
V/s. M/s Bharat Aluminium Company Ltd., Core-6, Scope Complex, Lodi Road, New Delhi [PAN No.: AAACB 1290 N]
(Appellant) (Respondent)
Assessee by Shri Ajay Vohra, AR
Revenue by Mrs. Geetmala Mohnaney, DR
Date of hearing 16-11-2011
Date of pronouncement 09-12-2011 O R D E R
A.N.Pahuja:- This appeal filed on 7th June, 2010 by the Revenue on against an order dated 29.03.2010 of the learned CIT(A)-V, New Delhi, raises the following grounds:-
1. “The learned CIT(A) erred on facts and in law in directing to delete the interest of ``2,24,28,120/- charged u/s 234C of the Income-tax Act on the account of deferred payment of advance tax ignoring the provisions of sub- section 5 of Section 115JB of the Income-tax Act, which clearly implies that in a case where tax is payable under the special provisions of Income-tax Act (here MAT case), all provisions of the Income-tax Act shall apply to the assessee and hence the provisions of section 207 to 211 are applicable in the assessee’s case.
2. That the appellant craves leave for reserving the right to amend, modify or alter add or forego any ground(s) of appeal at any time before or during the hearing of the appeal. “
2. This appeal, earlier disposed vide order dated 29.10.2010 ,was recalled in MA no.121/del./2011 vide order dated 5.8.2011. Adverting now to ground no.1 in the appeal, facts, in brief, as per relevant orders are that return declaring book
profits of ``923,02,07,861/- in terms of provisions of sec. 115JB of the Income- tax Act, 1961 (hereafter referred to as the Act) filed on 27th October, 2007 by the assessee, was processed on 25th February, 2009 u/s 143(1) of the Act, resulting in refund of `3,84,20,761/-. While processing the return, the Assessing Officer (in short A.O.) noticed that the assessee paid following amount of advance tax:
Date Amount [In `]
14.6.2005 3,50,00,000
15.9.2005 11,00,00,000
14.12.2005 31,00,00,000
14.3.2006 63,00,00,000
Total 108,50,00,000
2.1. Since the assessee deferred its advance tax liability and failed to pay various instalments of advance tax at the prescribed percentage in terms of provisions of sec. 211 of the Act, the AO levied interest of ``2,24,28,120/- u/s 234C of the Act while processing the return. Subsequently, on 23.3.2009 ,the assessee filed an application 154 of the Act ,mentioning that interest u/s 234C of the Act was not leviable in view of decision of Hon’ble Supreme Court in the case of CIT Vs. Kwality Biscuits Limited,284 ITR 434(SC).Accordingly, the assessee sought deletion of interest. However, the A.O. rejected the said application on the ground that the interest u/s 234C of the Act in case of book profits determined u/s 115JB of the Act was a question of law on which different opinions exist and thus, the there was no mistake apparent from the record , and consequently, the levy of interest u/s 234C of the Act did not fall within the ambit of provisions of sec. 154 of the Act. Inter alia, the AO observed that the decision of the Hon’ble Apex Court in Kwality Biscuits Limited,(supra) was considered by the Hon’ble High Court in CIT Vs. Geetha Ramakrishna Mills (P) Ltd., 288 ITR 489 (Mad.) and levy of interest u/s 234B & 234C of the Act on tax calculated on the book profits determined u/s 115J of the Act, had been upheld in the said decision. Even SLP against the said decision had been dismissed by the Hon’ble Apex Court. Accordingly, the AO concluded that the issue being amenable to
different interpretations cannot be subject matter of rectification u/s 154 of the Act.
3. On appeal, the learned CIT(A) deleted the interest charged u/s 234C of the Act in the following terms:-
“4. I have considered the submissions of the appellant. There is no dispute after the amendment u/s 143(1) of the Act by the Finance Act, 1999, the processing of return is no more an assessment but it is intimation. There is no dispute about the law that the jurisdiction as available u/s 143(1) to the Assessing Officer is only confined to the prima facie adjustment and not on the issues, which are debatable ones. In the instant case, the Assessing Officer, while passing the order u/s 154 of the Act, has himself admitted the fact that the issue of charging of interest u/s 234B and 234C while processing the return is a debatable issue because various High Courts have given different verdicts.
5. While considering the facts of the case, the final accounts of the assessee is prepared after the accounting year is over and necessary audit of accounts is done in due course. The MAT income cannot be known to a company during the previous year, as he is not aware of where he stands for computation of advance tax on MAT income. Therefore, levy of interest u/s 234B and 234C is not possible in such case where MAT income is deciding factor for chargeability of tax.
6. The debatableness of the issue is also apparent from the judgments of various High Courts as discussed above. The Madras High Court in the case of Geetha Ramakrishna has given the judgment in favour of the Revenue, whereas in the case of Snowcem the Bombay High Court has given the judgment in favour of the assessee. In view of such legal position and keeping into consideration the jurisdiction available u/s 143(1) of the Act, which is akin to the jurisdiction available u/s 154 of the Act, the interest as charged by the Assessing Officer u/s 234C of the Act in processing of return u/s 143(1) is not in accordance with law and is required to be deleted. It is again reminded that the Assessing Officer had not charged 234C interest u/s 143(1) on the same income computed under MAT. The Assessing Officer is directed to delete the interest charged u/s 234C of the Act at ``2,24,28,130/-.”
4. The Revenue is now in appeal before us against the aforesaid findings of learned CIT(A).The ld. DR while supporting the order of the AO, contended that levy of interest being mandatory, the ld. CIT(A) was not justified in deleting such interest. Inter alia, the learned DR relied upon the decisions in Jt. CIT Mumbai Vs. Rolta India Ltd.330 ITR 470 (SC); CIT Vs. Rana Sugars Ltd. (2011) TIOL-573 HC (P&H)and CIT Vs. Steel Steips Leasing Ltd.,338 ITR 455(P&H) .
5. On the other hand, the ld. AR on behalf of the assessee submitted that he issue being debatable was outside the scope of provisions of section 143 (1) of the Act. While referring to decision in CIT Vs. Smt. Premlata Jalani (2003) 264 ITR 744(Raj); DCIT Vs. Surya Roshini Ltd. (2006) 8 SOT 470 and JCIT Vs. Rolta India 330 ITR 470(SC) the ld. AR contended that debate is not obliterated by the subsequent decision of the Apex Court. In this connection, the learned AR relied upon the decision in CIT vs. Max India, 295 ITR 282(SC); CIT Vs. Palani Andavar Cotton & Synthetic Spinners Ltd., 326 ITR 339 (Madras) and Jiyajeerao Cotton Mills Limited. Vs. ITO,130 ITR 710 (Calcutta).
6. We have heard both the parties and gone through the facts of the case as also aforesaid decisions relied upon by both the sides. Before proceeding further, we may have a look at the relevant provisions of sec. 143(1) of the Act, which read as under:
“143. Assessment.
(1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142,--
(i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid, any tax paid on self-assessment and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly; and
(ii) if any refund is due on the basis of such return, it shall be granted to the assessee and an intimation to this effect shall be sent to the assessee:
Provided that except as otherwise provided in this sub-section, the acknowledgment of the return shall be deemed to be intimation under this sub-section where either no sum is payable by the assessee or no refund is due to him:
Provided further that no intimation under this sub-section shall be sent after the expiry of one year from the end of the financial year in which the return is made:
Provided also that where the return made is in respect of the income first assessable in the assessment year commencing on the 1st day of April, 1999, such intimation may be sent at any time up to the 31st day of March, 2002.”
6.1 It may be pointed out that substantial changes have been made to section 143(1) of the Act with effect from June 1, 1999. Up to March 31, 1989, after a return of income was filed the AO could make an assessment under section 143(1) without requiring the presence of the assessee or production by him of any evidence in support of the return. Where the assessee objected to such an assessment or where the officer was of the opinion that the return was incorrect or incomplete or the officer did not complete the assessment under section 143(1), but wanted to make an inquiry, a notice under section 143(2) was required to be issued to the assessee requiring him to produce evidence in support of his return. After considering the material and evidence produced and after making necessary inquiries, the officer had power to make assessment under section 143(3). With effect from April 1, 1989, the provisions underwent substantial and material changes. A new scheme was introduced and in the new substituted section 143(1) prior to the subsequent substitution with effect from June 1, 1999, in clause (a), a provision was made that where a return was filed under section 139 or in response to a notice under section 142(1), and any tax or refund was found due on the basis of such return after adjustment of tax deducted at source, any advance tax or any amount paid otherwise by way of tax or interest, an intimation was to be sent without prejudice to the provisions of
section 143(2) to the assessee specifying the sum so payable and such intimation was deemed to be a notice of demand issued under section 156. The first proviso to section 143(1)(a) allowed the Department to make certain adjustments in the income or loss declared in the return. They were as follows : (i) an arithmetical errors in the return, accounts and documents accompanying it were to be rectified ;
(ii) any loss carried forward, deduction, allowance or relief, which, on the basis of the information available in such return, accounts or documents, was prima facie admissible, but which was not claimed in the return, was to be allowed ;
(iii) any loss carried forward, relief claimed in the return, which, on the basis of the information as available in such return, accounts or documents were prima facie inadmissible, was to be disallowed.
6.2 By making adjustments under the first proviso to section 143(1)(a) of the Act, no addition which is impermissible by the information given in the return could be made by the AO. However, in terms of the newly substituted section 143(1), with effect from June 1, 1999, except as provided in the provision itself, the acknowledgment of the return is deemed to be intimation under section 143(1) where (a) either no sum is payable by the assessee or (b) no refund is due to him. The intimation under section 143(1) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. No adjustments of the nature envisaged in the old provisions ,were stipulated in the substituted provisions nor in the instant case, admittedly, any such adjustments have been made. What the AO has done in the instant case is that he has merely determined the tax and interest due on the basis of return after adjustment of TDS and advance tax. The assessee itself made payment of four instalments of advance tax ,but not at the rates stipulated in provisions of sec. 211 of the Act. Resultantly, the AO while processing the return u/s 143(1) of the Act ,levied interest u/s 234C of the Act on
account of deferment of advance tax Such interest has been calculated on the basis of income returned by the assessee in terms of provisions of sec. 115JB of the Act. The relevant portion of the provisions of sec. 115JB of the Act, read as under:
“(4) Every company to which this section applies, shall furnish a report in the prescribed form from an accountant as defined in the Explanation below sub-section (2) of section 288, certifying that the book profit has been computed in accordance with the provisions of this section along with the return of income filed under sub-section (1) of section 139 or along with the return of income furnished in response to a notice under clause (i) of sub-section (1) of section 142.
(5) Save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company, mentioned in this section. “
As is apparent from the aforesaid provisions, book profits returned by the assessee are on the basis of a report in the prescribed form from an accountant as defined in the Explanation below sub-section (2) of section 288, who certified that the book profits have been computed in accordance with the provisions of this section. The book profits as determined and certified by the accountant alone formed the basis of determination of tax and interest u/s 234C of the Act. It is not the case of the assessee that the AO made any adjustment in the book profits. The AO is statutorily duty bound to compute tax and interest in terms of provisions of sec. 234C read with sec. 115JB(5) of the Act.The relevant circular issued by the CBDT in the context of levy of interest u/s 234B & 234C on the tax on book profits determined in terms of provisions of the sec. 115JB of the Act reads as under:
“Subject: Liability for payment of advance tax under new MAT provisions of section 115JB of the Income-tax Act.
Circular No. 13 of 2001, dated 9th November, 2001.
The Finance Act, 2000, inserted section 115JB of the Income-tax Act, 1961, with effect from 1-4-2001, i,e., from the assessment year 2001-02 providing for levy of
Minimum Alternate Tax on companies. Section 115JB conceptually differs from erstwhile section 115JA, which provided for MAT on companies, so far as it does not deem any part or the whole of book profit as total income. However, the new provision of section 115JB provides that if tax payable on total income is less than 7.5% of book profit, the tax payable under this provision shall be 7.5% of book profit.
2. Instances have come to the notice of the Board that a large number of companies liable to tax under the new MAT provisions of section 115JB, are not making advance tax payments. It may be emphasised that the new provision of section 115JB is a self-contained code. Sub-section (1) lays down the manner in which income-tax payable is to be computed. Sub-section (2) provides for computation of "book profit". Sub-section (5) specifies that save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company mentioned in that section. In other words, except for substitution of tax payable under the provision and the manner of computation of book profits, all the provisions of the tax including the provision relating to charge, definitions, recoveries, payment, assessment, etc., would apply in respect of the provisions of this section.
3. The scheme of the Income-tax Act also needs to be referred to. Section 4 of the Income-tax Act charges to tax the income at any rate or rates which may be prescribed by the Finance Act every year. Section 207 deals with the liability for payment of advance tax, and section 209 deals with its computation based on the rates in force for the financial year, as are contained in the Finance Act. The rates of tax are provided in the Finance Act. The first proviso to section 2(8) of the Finance Act, 2001, reads as under:
"Provided that in cases to which the provisions of Chapter XII or Chapter XII-A or section 115JB or sub-section (1A) of section 161 or section 164A or section 167B of the Income-tax Act apply, 'advance tax' shall be computed with reference to the rates imposed by this sub-section or the rates as specified in that Chapter or section, as the case may be:"
The third proviso to section 2(8) of the Finance Act, 2001, further provides that the tax payable by way of advance tax in respect of income chargeable under section 115JB, shall be increased by a surcharge of 2%. The Finance Act, 2000, also contained similar provisions.
4. It is, thus, abundantly clear that all companies are liable for payment of advance tax having regard to the provisions contained in new section 115JB.
Consequently, the provisions of sections 234B and 234C for interest on defaults in payment of advance tax and deferment of advance tax would also be applicable where facts of the case warrant.
5. This may be brought to the notice of all officers working in your region.
(Sd.)
SupriyoDe ,
Under Secretary to the Government of India.
[F. No. 153/216/2001-TPL] “
6.3 As is apparent from the aforesaid provisions of sec. 115JB(5) of the Act, the legislature while introducing these provisions intended that provisions of advance tax are applicable while determining the liability in terms of provisions of sec 115JB of the Act. The aforesaid circular no. 13 is sufficient reflection of the intent behind provisions of sec. 115JB(5) of the Act. We are of the opinion that in view of the decision of the Hon’ble Supreme Court in the case of CIT v. Anjum M.
H. Ghaswala And Others. 252 ITR 1 (SC), affirmed by Hon'ble Apex Court in the case of CIT v. Hindustan Bulk Carriers [2003] 259 ITR 449(SC) and in the case of CIT v. Sant Ram Mangat Ram Jewellers [2003] 264 ITR 564(SC), levy of interest under section 234C is mandatory even while determining book profits u/s 115JB of the Act and especially in view of specific provisions of section 115JB(5) of the Act .In view of the specific provisions u/s 115JB(5) of the Act and the aforesaid circular and the decisions, the AO did not commit any error, in our view, while levying interest u/s 234C of the Act at the time of processing of return u/s 143(1) of the Act.
7. In the instant case, liability for payment of advance tax has nowhere been denied. Since the AO levied interest u/s 234C of the Act on account of deferment of payment of advance tax, at the time of processing of return on 25.2.2009, the assessee company moved an application u/s 154 of the Act vide letter dated 23.3.2009 which reads as under:
“You have levied an amount of Rs.22,428,119 u/s 234C in respect of assessment u/s 143(1) of the Act. In this connection, we would like to refer to the judgment of the Apex Court in the case of Commissioner of Income Tax vs.
Kwality Biscuits Ltd.(2006) 284 ITR 0434,wherein it was decided that when the assessee’s income is assessed under MAT, interest u/s 234C is not leviable. For your ready reference, we are enclosing a copy of order of the Apex Court which is self explanatory. Since as per order of the Supreme Court, interest u/s 234C is
not leviable, we would request you to amend the said order and refund us an amount of Rs.22,428,119/- wrongly levied by you.
7.1 The AO rejected the aforesaid application on the ground that issue was amenable to different interpretations, which cannot be subject matter of rectification u/s 154 of the Act and referred to decision in Geetha Ramakrishna Mills (P) Ltd.,288 ITR 489(Mad.). On appeal, the ld. CIT(A) allowed the claim of the assessee on the ground that jurisdiction as available u/s 143(1) to the AO is only confined to the prima facie adjustment and not on the issues which are debatable ones. According to the ld. CIT(A), the issue in the instant case was debatable in view of judgments in Assam Bengal Carriers Ltd. Vs. CIT,239 ITR 862(Gau);Itarsi Oil & Flours Pvt. Ltd.vs. CIT,250 ITR 686(MP);CIT vs. Holiday Travel Pvt. Ltd. ,263 ITR 307(Mad.);CIT vs. Kotak Mahindra Finance Ltd.,265 ITR 199(Bom.)&CIT vs. Upper India Steels Mfg.& Engg. Co. Ltd.,279 ITR 123(P&H); Jindal Thermal Power Co. Ltd. Vs. DCIT,286 ITR 182(Kar) and CIT vs. Geetha Ramakrishna Mills P Ltd.,288 ITR 489(Mad.) on the one hand in favour of the Revenue and the decisions in Kwality Biscuits Ltd.(supra) in the context of provisions of sec. 115J of the Act and Snowcem India Ltd. Vs.
DCIT,313 ITR 170(Bom.) in the context of provisions of sec. 115JA of the Act, on the other. As is apparent from the impugned order, the ld. CIT(A) while referring to judgments rendered in the context of levy of interest u/s 234& 234C of the Act on the tax determined on the book profits in terms of provisions of sec.
115J & 115JA of the Act ,has concluded that the issue is debatable and completely ignored the relevant provisions of sec. 115JB(5) of the Act and the aforesaid circular .
8. Here we may analyse as to how the AO or the ld. CIT(A) treated the issue of levy of interest u/s 234C in the context of provisions of sec. 115JB of the Act as debatable. At the time of processing the return on 25.2.2009 and at the time of passing of impugned order by the ld. CIT(A), the decisions in Assam Bengal Carriers Ltd.(supra);Itarsi Oil & Flours Pvt. Ltd.(supra); Holiday Travel Pvt.
Ltd.(supra.); Kotak Mahindra Finance Ltd.,(supra); and Geetha Ramakrishna
Mills P Ltd. ,rendered in the context of levy of interest u/s 234B &/or 234C of the Act on the tax calculated on the book profits u/s 115J of the Act, were in favour of the Revenue while decision of the Hon’ble Apex Court in Kwality Biscuits Ltd.(supra) was in favour of the assessee. These decisions rendered in the context of provisions of sec. 115J of the Act ,cannot ,in our view, be applied in the context of provisions of sec. 115JB of the Act or for holding the issue of levy of interest u/s 234C on tax on book profits u/s 115JB of the Act, as debatable..
As regards levy of interest u/s 234B and 234C in the context of provisions of sec.
115JA of the Act, the decision in Upper India Steels Mfg.& Engg. Co. Ltd. was in favour of Revenue while decision in Snowcem India Ltd.(supra) was in favour of the assessee. In Snowcem India Ltd.(supra), Hon’ble Bombay High Court merely followed the decision of Hon’ble Apex Court in Kwality Biscuits Ltd.(supra) rendered in the context of provisions of sec. 115J of the Act, without even examining the applicability of provisions of sec. 115JA(4) of the Act. However, in the context of provisions of 115JB of the Act, the only decision available was of Hon’ble Karnataka High Court in Jindal Thermal Power Co. Ltd. (supra), where in after considering their own decision in the case of Kwality Biscuits Ltd., Hon'ble High Court held in the context of levy of interest under sections 234B and 234C of the Act on tax calculated on book profits in terms of provisions of section 115JB of the Act that:-
"The Central Board of Direct Taxes Circular No. 13/2001 was issued on 18-11- 2001, regarding the liability for payment of advance tax under the new MAT provisions of section 115JB of the Act and it is abundantly made clear in the said circular that the new provision of the section 115JB as introduced by the Finance Act, 2000 is a self-contained code. Sub-section (1) lays down the manner in which income-tax payable is to be computed. Sub-section (2) provides for computation of "book profit". Sub-section (5) specifies that save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company mentioned in that section. In other words, except for substitution of tax payable under the provision and the manner of computation of book profits, all the provisions of the tax including the provision relating to charge, definitions, recoveries, payment, assessment, etc., would apply in respect of the provisions of this section and in view of the scheme of the Income- tax Act. Section 4 of the Act charges to tax the income at any rate or rates which may be prescribed by the Finance Act every year and section 207 deals with
liability for payment of advance tax and section 209 deals with its computation based on the rates in force for the financial year, as are contained in the Finance Act and the first proviso to section 2(8) of the Finance Act, 2001, provides that the tax payable by way of advance tax in respect of income chargeable under section 115JB as introduced by the Finance Act, 2000, and consequently the provisions of sections 234B and 234C for interest on defaults in payment of advance tax and deferment of advance tax would also be applicable where the facts of the case warrant."
8.1. Thus at the time of processing of return or even at the time of passing of impugned order, in our opinion, there was no dispute in respect of levy of interest u/s 234C of the Act on the tax determined on book profits in terms of provisions of sec. 115JB of the Act, especially in view of aforesaid decision of the Hon’ble Karnataka High Court in Jindal Thermal Power Co. Ltd. (supra), and the following observations of the Hon’ble Madras High Court in Geetha Ramakrishna Mills P Ltd.(supra):
“. That apart, in view of the introduction of sections 115JA and 115JB of the Act with effect from April 1, 1997 by the Finance (No.2) Act, 1996, the question whether a company which is liable to pay tax under either of the provisions should pay advance tax does not assume much importance as specific provisions have been made in the section providing that all provisions of the Act shall apply to the assessee being a company mentioned in the said section and therefore, section 115J of the Act is no more available for the assessee for delaying the payment of advance tax in view of the insertion of sections 115JA and 115JB of the Act.
8.2 The ld. CIT(A) ,in our opinion, has unnecessarily and unjustifiably made the issue debatable while dragging in the decisions rendered in the context of provisions of sec. 115J of the Act, ignoring the specific provisions of sec.
115JB(5) of the Act nor pointed out any contrary decision in the context of relevant provisions of sec. 115JB of the Act.
9. Even otherwise, recently Hon’ble Apex Court in Rolta India Ltd.(supra) vide their decision dated 7.1.2011 upheld the levy of interest u/s 234B on the tax calculated on book profits u/s 115JA of the Act. While referring to the judgments in Kwality Biscuits Ltd.(supra) and Jindal Thermal Power Company Ltd. (supra),Hon’ble Apex Court observed that Circular No. 13/2001 dated
9.11.2001 issued by CBDT reported in 252 ITR(St.)50 clarified that section 115JB is a self-contained code and thus, all companies were liable for payment of advance tax u/s 115JB and consequently provisions of Sections 234B and 234C imposing interest on default in payment of advance tax were also applicable.
10. The ld. AR argued before us that debate cannot be obliterated with the subsequent decision of the Hon’ble Apex Court. But the debate was in respect of issue of levy of interest on tax calculated on book profits u/s 115J of the Act and not in the context of provisions of sec. 115JB of the Act. Hon’ble Apex Court while referring to the aforesaid circular observed that sec. 115JB is self contained code and that is why upheld levy of interest on tax on book profits determined in terms of provisions of sec. 115JB of the Act.
11. Moreover, recently Hon’ble Punjab and Haryana High Court in their decisions in CIT vs. Steel Steips Leasing Ltd.,338 ITR 455,CIT vs. Rana Sugars Ltd.,2011-TIOL-573-HC-P&H-IT and Amtexk Auto Ltd. Vs. CIT,338 ITR 550,following the view taken by the Hon’ble Apex Court in Rolta India Ltd.(supra) upheld the levy of interest u/s 234B of the and 234C of the Act on tax calculated on book profits determined u/s 115JB of the Act even at the time of processing of return u/s 143(1) of the Act.
12. Hon’ble Karnataka High Court in their decision dated 30.6.2010 in CIT vs.
Sankala Polymers P Ltd.,46 DTR(Kar)385 upheld the levy of interest u/s 234B &
234C of the Act on tax calculated on book profits u/s 115JB of the Act in proceedings u/s 154 of the Act in the following terms:
“8. At the outset it is necessary to clarify that the case of the assessee falls under s. 115JB and not under s. 115JA of the Act as submitted by the assessee's counsel. However, in both s. 115JA as well as in s. 115JB of the Act a saving clause has been incorporated which is in the following words :
"Save as otherwise provided in this section,all other provisions of this Act
shall apply to every assessee, being a company, mentioned in this section."
9. The said saving clause is in sub-s. (4) of s. 115JA and sub-s. (5) of s. 115JB of the Act. It is relevant to note thatthe decision of this Court in the case of
Kwality Biscuits (supra) was rendered under s. 115J wherein such a saving clause is not incorporated. This Court, in the case of Kwality Biscuits Ltd. (supra), raised one of the substantial questions of law as follows :
"Having regard to the scheme of s. 115J whether in an assessment year where the assessee's income is computed by invoking the provisions of s.
115J interest under ss. 234B and 234C are leviable ?"
While answering the said question, this Court held that since the entire exercise of computing the income or that of book profit could be only at the end of financial year, the provisions of ss. 207, 208, 209 and 210 cannot be made applicable, unless and until accounts are audited and the balance sheet is prepared, because till then even the assessee may not know whether the provisions of s. 115J would be applicable or not. The liability would be after the book profits are determined in accordance with the Companies Act. The words
"for the purposes of this section" in the Explanation to s. 115J(1A) are relevant and cannot be construed to extend beyond the computation of liability of tax.
Hence, interest cannot be charged under ss. 234B and 234C.
The said reasoning was based on the fact that it is only in respect of the deemed income for which the provision of s. 115J had been incorporated and when a deemed fiction is brought under the statute, it should be carried to the logical conclusion but without creating further deeming fiction so as to include other provisions of the Act which are not specifically made applicable.
However, what is being considered in this case is that the assessee's case falls under s. 115JB. Under s. 115JB of the Act, sub-s. (5) clearly states that other provisions of the Act shall apply to every assessee being a company, save as otherwise provided in the said section. In this context, Circular No. 13 of 2001 has also been issued by the CBDT as per which companies covered by the provisions of s. 115JB are liable to pay advance tax and consequently, ss. 234B and 234C of the Act are applicable. The CIT(A) made a reference to the circular, but erroneously noted that the case of the assessee was under s. 115JA of the Act and by placing reliance on the said circular, dismissed the appeal of the assessee. Learned counsel for the respondent-assessee has categorically stated that the case of the assessee falls under s. 115JB then sub-s. (5) of the said section is applicable and therefore, the provisions regarding interest are applicable to the assessee. In the case of Kwality Biscuits (supra), this Court while considering the said aspect under s. 115J of the Act, noted that it is only a deemed income which is taken into consideration under s. 115J and in the absence of any specific provisions being made applicable the same could not be applied by creating a further deeming fiction and it in that context held that interest under ss. 234B and 234C was not leviable when the case of assessee
falls under s. 115J.However, under s. 115JA as well as under s. 115JB there are specific provisions making applicable other provisions of the Act to an assessee being a company coming under the relevant sections. In view of the specific provision, particularly under s. 115JB under which the case of the present assessee falls, we hold that the ratio of Kwality Biscuits (supra) cannot apply to the case of the assessee herein which is covered under s. 115JB of the Act, wherein sub-s. (5) makes all other provisions of the Act applicable. When a specific provision of the Act has not been applied while passing an order of assessment, which is a mistake apparent from the record, the IT authority has the power to rectify the said mistake by invoking s. 154 of the Act. Therefore, we are of the view that the order passed by the Tribunal cannot be sustained and is liable to be set aside while the orders of the CIT(A) and the AO have to be upheld subject to the clarification that the case of the assessee falls under s.
115JB of the Act and not under s. 115JA.
For the aforesaid reasons, the substantial questions of law have to be answered in favour of the Revenue by allowing this appeal. Accordingly, the order passed by the Tribunal, Bangalore, Bench-A, dt. 7th June, 2005 bearing ITA No.
383/Bang/2005 vide Annex. A is set aside and the order dt. 10th Jan., 2005 passed in ITA No. 084/C-12(1)/CIT(A)-III/2004-05 by the CIT(A)-III, Bangalore, vide Annex. B and the order passed by the AO dt. 1st Dec., 2004 for the asst. yr.
200102, vide Annex. C are all hereby upheld, subject to the clarification that the case of the assessee falls under s. 115JB of the Act. The matter is remitted back to the AO to recompute the interest by considering the case of the assessee under s. 115JB of the Act and pass an order in accordance with law
13. In the instant case before us, the AO applied specific provisions of sec.
115JB(5) of the Act and as pointed out by the Hon’ble Karnataka High Court in their aforesaid decision in view of the specific provisions of s. 115JB(5) ,the ratio of Kwality Biscuits (supra) cannot apply to the case of the assessee herein which is covered under s. 115JB of the Act. For this reason alone, the AO was correct in rejecting the application of the assessee u/s 154 of the Act, seeking rectification of the order in the light of decision of the Hon’ble Apex Court in Kwality Biscuits Ltd.(supra) rendered in the context of provisions of sec. 115J of the Act.
14. Now adverting to the decision relied upon by the ld. AR in Smt. Premlata Jalani(supra). In the said decision, there was no such issue of levy of interest u/s 234C of the Act on tax on book profits determined u/s 115JB of the Act. In the said case, the return of income was filed by the assessee on October 30, 2000,
for the assessment year 2000-2001. An intimation under section 143(1) was sent by the Assessing Officer on November 9, 2000, making variation in the calculation, computing the interest as made by the assessee under sections 234B and 234C of the Act. Aggrieved by the additions made to the admitted liability to pay interest by the assessee while exercising jurisdiction under section 143(1), the assessee preferred a rectification application before the Assessing Officer which was dismissed by him on January 16, 2001. He held that there is no mistake apparent on the face of the record and the Assessing Officer had jurisdiction to make such adjustment in the computation of interest in exercise of his jurisdiction under section 143(1)(a) of the Act. The appeal filed by the assessee before the CIT(Appeals) was dismissed on November 2, 2001. Since the proviso to section 234C excluded the inclusion of capital gains in the computation of total income for the purpose of computing the advance tax to be paid at any time before the capital gains arises, the assessee contended that there was no liability to pay any amount of advance tax, prior to the date capital gains accrues or arises and therefore, no interest was chargeable in respect of shortfall in payment of advance tax relatable to capital gains, prior to the date capital gains accrued or arose and advance tax in respect thereof became payable. In the said decision, the capital gain arose after March 15, 2000, when the date of payment of the last instalment of advance tax had already expired.
The assessee could not have paid advance tax on such capital gains arising out after March 15, 2000. The assessee has not paid the tax payable in respect of such capital gains by March 31, 2000, but has paid the tax in respect thereof in April, 2000.He calculated interest payable in respect of such late payment of tax on such capital gain for one month in his return and deposited the same along with the return. In the light of these facts, Hon’ble High Court upheld the findings of the Tribunal that the interest shall be payable only with effect from the date the liability to pay advance tax in respect thereof has been incurred. There cannot be any interest prior to the date in respect of such liability when there was no liability to pay advance tax under any provisions of the Act. Hon’ble High Court also observed that assessee's plea for rectification in that case was not that the
liability to pay interest under section 234C is disputable, but his contention was that under section 143(1), the Assessing Officer had no authority to make such adjustment to interest statutory provision and on which possibly two opinions can exist. This issue notwithstanding noticed by the Tribunal, had not been decided by it at all, Hon’ble High Court concluded. But such are the facts and circumstances in the instant case nor the ld. AR explained before us as to how this decision is of any help to the assessee, especially when the provisions of sec. 115JB of the Act are self contained in view of specific clause (5) thereof as also decisions of the Hon’ble Karnataka High Court in Jindal Thermal Power Co.
Ltd. (supra) and observations of the Hon’ble Madras High Court in Geetha Ramakrishna Mills P Ltd.(supra) as aforesaid clearly state that interest u/s 234C of the Act is leviable in view of deferment of liability of advance tax paid by the assessee. Even otherwise, the levy of interest was not in the context of tax on book profits determined u/s 115JB of the Act in the cited decision, as already observed by us. Thus, reliance on this decision is totally misplaced.
14.1 The decision in Surya Roshini Ltd. (supra) ,following the aforesaid decision of Rajasthan High Court, was rendered in the context of levy of interest u/s 234C of the Act while processing the return. The ITAT held that such interest on tax determined on book profits u/s 115JA of the Act cannot be levied .It is noticed on perusal of the said decision that the ITAT completely ignored the specific provisions of sec. 115JA(4) of the Act as also the decisions in Anjum M.
H. Ghaswala And Others.(supra); Hindustan Bulk Carriers (supra); and Sant Ram Mangat Ram Jewellers(supra),holding that levy of such interest is mandatory. In the cited case, the ITAT relied upon decision of Hon’ble Karnataka High Court in the case Kwality Biscuits Ltd.(supra) which was rendered in the context of provisions of sec. 115J of the Act and concluded that the AO cannot enter in to interpretative exercise while processing the return. With respect ,reliance by the ITAT on the decision rendered in the context of provisions of sec. 115J of the Act for holding that issue of levy of interest u/s
234C on tax on book profits computed u/s 115JA of the Act,is debatable ,is not correct in our opinion.
14.2 The decision in . Max India(supra), was rendered in its own peculiar facts and circumstances in the context of provisions of sec. 263 of the Act while the ld.
AR did not demonstrate before us as to how this decision helps the assessee.
14.3 In . Palani Andavar Cotton & Synthetic Spinners Ltd.(supra), the issue related to the computation of book profit and the carry forward of loss and the depreciation for purposes of section 115J of the Act in the AYs 1988-89 to 1990- 91. Hon’ble High Court observed that on the date of the proceedings taken under section 143(1)(a) as well as under section 154, admittedly, there was a dispute with reference to the computation of book profit and the carry forward of loss and the depreciation for purposes of section 115J and the law on the question was settled by the Madras High Court and again by the Supreme Court, with the uncertainty existing as on the date when the proceedings under section 143(1)(a) were subjected to section 154, the jurisdiction under section 154 was not available to correct the illegality in an assessment. An impression formed on the scope of the provisions could not be a mistake or an error apparent from the record so as to justify the exercise of jurisdiction under section 154. The invoking of the provisions of section 154 presupposes a mistake or an error which is patent or obvious and does not involve a long drawn process of reasoning on a point which is already a debatable issue. How this decision, rendered on an altogether different issue of carry forward of loss and depreciation while determining book profits u/s 115J of the Act, helps the assessee has not been explained before us by the ld. AR. In the present case issue involved is mandatory levy of interest u/s 234C of the Act in terms of provisions of sec.
115JB(5) of the Act and the assessee sought rectification on the basis of a decision rendered in the context of provisions of sec. 115J of the Act. The creation of a dispute while relying on decisions rendered in the context of an altogether different provision, does not entitle the assessee to have recourse to provisions to sec. 154 of the Act, especially when on the date of processing of
return and even at the time of passing of impugned order, a direct decision of Hon’ble Karnataka High Court was available in favour of Revenue and no contrary decision was pointed out at all by the assessee. Subsequently, Hon’ble Apex Court in Rolta India Ltd.(supra) vide their decision dated 7.1.2011 upheld the levy of interest u/s 234B on the tax calculated on book profits u/s 115JA of the Act
14.4 In Jiyajeerao Cotton Mills Limited. (supra),relied upon by the ld. AR, Hon’ble Calcutta High Court observed that the law laid down by the Supreme Court, cannot be said to have retrospective operation in the sense that although a debate or doubt or a conflict of judicial opinion is resolved and settled by the Supreme Court, yet still that does not obliterate the existence of such debate or doubt or conflict that existed prior to the decision of the Supreme Court setting at rest such debate or doubt or conflict. With due respect to these observations of the Hon’ble High Court, the view taken in the cited decision is quite contrary to the view taken by the Hon’ble Apex Court in ACIT vs. Saurashtra Kutch Stock Exchange Limited, 305 ITR 227 ,wherein it was held that
“ In our judgment, it is also well-settled that a judicial decision acts retrospectively. According to Blackstonian theory, it is not the function of the court to pronounce a "new rule" but to maintain and expound the "old one". In other words, judges do not make law, they only discover or find the correct law.
The law has always been the same. If a subsequent decision alters the earlier one, it (the later decision) does not make new law. It only discovers the correct principle of law which has to be applied retrospectively. To put it differently, even where an earlier decision of the court operated for quite some time, the decision rendered later on would have retrospective effect clarifying the legal position which was earlier not correctly understood.”
14.41 In their aforesaid decision, Hon’ble Apex Court affirmed the view taken by the Hon’ble Gujrat High Court in their decision in Suhrid Geigy Ltd. v.
Commissioner of Surtax [1999] 237 ITR 834,while holding that if the point is covered by a decision of the jurisdictional High court or Supreme Court rendered prior or even subsequent to the order of rectification, it could be said to be a
"mistake apparent from the record" under section 254(2) of the Act and could be corrected by the Tribunal.
15 We may further point out that reliance by the assessee in their application u/s 154 of the Act on the decision in Kwality Biscuits Ltd.(supra), which was rendered in the context of different provisions of sec. 115J of the Act and ignoring specific provisions of sec. 115JB(5) of the Act as also reliance by the ld.
AR on decisions which were rendered in different context and circumstances is not in accordance with law , in view of following observations of the Hon’ble Supreme Court in the case of CIT Vs. Sun Engineering W orks Pvt.
Ltd., 198 ITR 257 :
“It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this court, divorced from the context of the question under consideration and treat it to be the complete " law "
declared by this court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this court. A decision of this court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, the courts must carefully try to ascertain the true principle laid down by the decision of this court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this court, to support their reasonings. In Madhav Rao Jivaji Rao Scindia Bahadur v. Union of India [1971] 3 SCR 9; AIR 1971 SC 530, this court cautioned (at page 578 of AIR 1971 SC).”
15.1 In this context ,Hon’ble Supreme Court cautioned in their decision dated 6.3.2009 in the case of State of AP Vs. M. Radha Krishna Murthy,[Criminal Appeal no. 386 of 2002]
“6. Courts should not place reliance on decisions without discussing as tohow the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of Courts are neither to be read as Euclid's theorems nor as provisions of the statute and that too taken out of their context.
These observations must be read in the context in which they appear to have been stated. Judgments of courts are not to be construed as statutes. To
interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their
words are not to be interpreted as statutes
……….
8. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper.
9. The following words of Lord Denning in the matter of applying precedents have become locus classicus:
"Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive."
*** *** ***
"Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it."
16. In view of the foregoing, especially when neither at the time of processing of return or on the date of application u/s 154 of the Act and even at the time of passing of impugned order, any contrary decision in respect of levy of interest on tax computed on book profits u/s 115JB of the Act was available nor pointed by the assessee before the lower authorities and even before us, we are of the opinion that no such debatable issue as has been made out by the ld. CIT(A) while referring to decisions rendered in the context of altogether different provision of sec. 115J of the Act, existed .In view of specific provisions of sec.
115JB(5) of the Act and in the light of view taken in the aforesaid decisions by the Hon’ble Apex Court in Rolta India Ltd.(supra) ,Saurashtra Kutch Stock Exchange Limited (supra) and by the Hon’ble Karnataka High Court in Jindal Thermal Power Co. Ltd. (supra), and Sankala Polymers P Ltd(supra) as also observations of the Hon’ble Madras High Court in Geetha Ramakrishna Mills P Ltd.(supra), we are of the opinion that the AO is perfectly justified in levying interest u/s 234C on tax determined on book profits calculated u/s 115JB of the
Act and there was no such debatable issue as has been made out by the ld.
CIT(A). In view thereof, we vacate the findings of the ld. CIT(A) and allow ground no.1 in the appeal of the Revenue. :
17. No additional ground having been raised before us in terms of residuary ground no.2 in the appeal, accordingly, this ground is dismissed.
18. No other submission or argument was made before us.
19. In the result, appeal is allowed.
Sd/- Sd/- (I.P. BANSAL) (A.N. Pahuja) (Judicial Member) (Accountant Member) NS
Copy of the Order forwarded to:-
1. D.C.I.T., Circle 2(1), New Delhi.
2 M/s Bharat Aluminium Company Ltd., Core-6, Scope Complex, Lodi Road, New Delhi.
3. CIT(A)-V, New Delhi.
4. CIT concerned.
5. DR, ITAT,’A’ Bench, New Delhi 6. Guard File.
BY ORDER, Deputy/Asstt.Registrar
ITAT, Delhi Order pronounced in Open Court
