Allahabad H.C : The levy of interest under Sections 234B and 234C of the Income Tax Act, 1961 (hereinafter referred to as the Act) on the income of the appellant assessed and liable to tax as per the provisions of Section 115-J

High Court Of Allahabad

J.K. Synthetics Ltd. Vs. CIT, Kanpur

Section 115J, 234B and 234C

Assessment year 1989-90

Pankaj Mithal And Vinod Kumar Misra, JJ.

IT Appeal No. 46 Of 2012

May  1, 2017

ORDER

1. Heard Sri R.S. Agrawal, learned counsel for the appellant and Sri Krishna Agrawal learned counsel for the respondent.

2. This appeal is directed against the order of the Income Tax Appellate Tribunal dated 31st March, 2006 in respect of the assessment year 1989-90.

3. The following substantial question of law has been raised herein in this appeal.

“Whether on the facts and circumstances of the case the Income Tax Appellate Tribunal was justified in upholding the levy of interest under Sections 234B and 234C of the Income Tax Act, 1961 (hereinafter referred to as the Act) on the income of the appellant assessed and liable to tax as per the provisions of Section 115-J of the Act?”

4. The Tribunal has confirmed the levy of the interest under the aforesaid provisions on the income assessable to tax under Section 115J of the Act on the basis of the decisions of the Madras High Court in the case of CIT v. Holiday Travels (P.) Ltd. [2003] 263 ITR 307/127 Taxman 250, Madhya Pradesh High Court in the case of Itarsi Oil & Flours (P.) Ltd. v. CIT [2001] 250 ITR 686/119 Taxman 112 and the Gauhati High Court in the case of Assam Bengal Carriers Ltd. v. CIT [1999] 239 ITR 862.

5. All the above decisions hold that interest under Sections 234B and 234C of the Act is leviable even if the income of the assessee is assessable and liable to tax as per the provisions of Section 115J of the Act.

6. Sri R.S. Agrawal, on the contrary has placed reliance upon a decision of the Gujarat High Court in the case of CIT v. Cornerstone Brands Ltd. [2016] 387 ITR 455/[2017] 79 taxmann.com 48 wherein it has been held that the determination of tax under Section 115J of the Act upon a company is only after the end of relevant year and interest cannot be levied in such a case under Section 234B and 234C of the Act.

7. In the aforesaid case apart from other questions one of the substantial of law referred to the High Court was to the following effect:-

8. Whether having regard to the scheme of Section 115J, where the assessee’s income is computed by invoking the above provisions interest under Section 234B and 234C of the Act is leviable?

9. The High Court was of the view that the taxable income under Section 115J of the Act is only computable only at the end of the relevant year. Accordingly, the Income Tax Appellate Tribunal was not justified in directing to charge interest under Section 234B and 234C of the Act on such income.

10. It may be pertinent to mention here that liability to pay interest under Section 234B and 234C of the Act arises for the default in payment of advance tax liable to be paid under Section 208 of the Act and therefore, it was held that as taxable income under Section 125J of the Act is computable at the end of the year there is no question of payment of advance tax or interest thereon for non-payment.

11. The decision of the Kwality Biscuits Ltd. v. CIT [2000] 243 ITR 519/110 Taxman 47 (Kar.) was upheld by the Supreme Court vide CIT v. Kwality Biscuits Ltd. [2006] 284 ITR 434 inasmuch as the appeal against the said decision was dismissed by the Supreme Court.

12. In addition to the above decision of Gujarat High Court and the Supreme Court decision several other decisions of various High Courts have been placed reiterating the same view.

13. In Deputy Commissioner of Tax (Assistant) v. Madhusudan Industries Ltd. [2009] 208 Taxation 442 (Guj.) relying upon the decision of the Karnataka High Court in Kwality Biscuits Ltd. (supra). it was reiterated that on the income tax computable under Section 115J of the Act no interest under Section 234B of the Act is chargeable.

14. A similar view was expressed by the Bombay High Court in Snowcem India Ltd. v. Dy. CIT [2009] 313 ITR 170/178 Taxman 478.

15. The Bombay High Court considering all the previous decisions on the point held that in view of the dismissal of appeal by the Supreme Court in Kwality Biscuits Ltd. (supra), the judgment of the Karnataka High Court stands merged and upheld by the Supreme Court to the effect that interest under Sections 234B and 234C would not be chargeable on taxable income computed under Section 115J of the Act.

16. The Madhya Pradesh High Court in Dy. CIT (Asstt.) v. Bhopal Motors Ltd. [2010] 323 ITR 684 (M.P.) held that no interest is leviable under Sections 234B and 234C where the determination of Income Tax is under Section 115J of the Act again relying upon the decision of Supreme Court in Kwality Biscuits Ltd. (supra) affirming the decision of the Karnataka High Court.

17. The Calcutta High Court in Binani Industries Ltd. v. CIT [2010] 329 ITR 323 Calcutta again held that no interest is leviable for default in payment of advance tax computed under Section 115J of the Act. It was held that the decision of the Supreme Court in Kwality Biscuits Ltd. (supra) though may not be a speaking order but as it dismisses the appeal after it was admitted, it affirms the view taken by the Karnataka High Court.

18. In contrast to the above decision Sri Krishna Agrawal, learned counsel appearing for the department has cited a decision of three Judges Bench of the Supreme Court in the case of Jt. CIT v. Rolta India Ltd. [2011] 330 ITR 470/196 Taxman 594/9 taxmann.com 36.

19. In the aforesaid decision the Supreme Court was ceased with the similar controversy with regard to charging of interest on payment of advance tax computed under Section 115JA of the Act. It relying upon the entire gamut of decision on the above point including that of Kwality Biscuits Ltd. (supra) held that interest under Sections 234B and 234C of the Act shall be payable on failure to pay advance tax in respect of the tax payable under Section 115JA/115JB of the Act.

20. The aforesaid decision of the Supreme Court is specifically in respect of payment of interest on failure to pay advance tax in computed under Section 115JA/115JB of the Act and not in respect non-payment of tax computed under Section 115J of the Act.

21. The observation therein that there is no exclusion of Section 115J in the levy of interest under Section 234B is not material so as to affect the right of the assessee herein.

22. The provisions of Section 115J of the Act were inserted with effect from April, 1988 and it remained in force upto 31st March, 1991. At that time there was neither Section 115JA nor Section 115JB of the Act.

23. The aforesaid two provisions were enforced by the Finance Act of 1996 w.e.f. 1st April, 1997 and by the Finance Act, 2000 w.e.f. 1st April 2001 respectively thereupon Sub-Section 4 and Sub-Section 5 were added to Section 115 JA and Section 115 JB of the Act. On the basis of the above additions it was observed that no distinction can be made between the computation made under either of the above provisions so far as the interest leviable under Section 243B of the Act.

24. In the instant case we are seized with the matter of the assessment for the year 1989-90 when neither of the two Sections 115JA and 115JB of the Act were in-existence what to say about Sub-Section 4 and Section 5 to the aforesaid provisions. Therefore, we are of the view that the decision of the Supreme Court in Rolta India Ltd. (supra) would not be applicable to the present case and that the question regarding the levy of interest under Section 234B and 234C of the Act on the tax computed under Section 115J would stand covered by the decision of the Karnataka High Court in Kwality Biscuits Ltd. (supra)which has been approved by the Supreme Court.

25. In view of above, the question hereinabove is answered in favour of assessee and against the department and it is held income computed under Section 115J for the period prior to enforcement of Section 115JA and Section 115JB would not attract interest under Section 234B and 234C of the Act.

26. The appeal is allowed.

[Citation : 395 ITR 647]

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