Punjab & Haryana H.C :the interpretation of Section 234B(4) made by the ITAT is sustainable in law as the same being based on misinterpretation of law as well as facts of the case in as much as order passed u/s 147 r.w. 143(3) of the I.T. Act in view of Explanation 2 to Section 234B was a regular assessment as earlier only processing u/s 143(1)(a)

High Court Of Punjab & Haryana

CIT vs. Nahar Spinning Mills Ltd.

Assessment Year : 1989-90

Section : 234B, 147, 263 And 115J

Adarsh Kumar Goel, Actg. CJ. And Ajay Kumar Mittal, J.

IT Appeal No. 8 Of 2004

July 6, 2011

JUDGMENT

Ajay Kumar Mittal, J. – This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 3.6.2003 passed by the Income Tax Appellate Tribunal, Chandigarh, Bench “A”, Chandigarh (hereinafter referred to as “the Tribunal”) in ITA No. 1078/Chandi/97, relating to the assessment year 1989-90. The appeal was admitted on 11.7.2006 to consider the following substantial question of law:-

“Whether, on the facts and in the circumstances of the case, the interpretation of Section 234B(4) made by the ITAT is sustainable in law as the same being based on misinterpretation of law as well as facts of the case in as much as order passed u/s 147 r.w. 143(3) of the I.T. Act in view of Explanation 2 to Section 234B was a regular assessment as earlier only processing u/s 143(1)(a) was made?”

2. Briefly stated, the facts necessary for adjudication as narrated in the appeal are that the assessee filed its return on 1.1.1990 declaring an income of Rs. 43,58,142/- under Section 115J of the Act. The said return was processed under Section 143(1)(a) of the Act on 26.2.1990 which resulted into a refund of Rs. 1,76,518/-. Thereafter, notice under Section 148 of the Act was issued to the assessee for the excess deduction claimed under Section 80HHC and 80-I of the Act on 28.9.1990. Notices under Sections 142(1) and 143(2) of the Act were issued on 4.7.1991. The assessment for the first time was completed on 25.8.1992 under Section 143(3)/147 of the Act at a total income of Rs. 11,62,739/-. The Assessing Officer vide order dated 25.8.1992 computed the total income as per provisions of Section 115J of the Act at Rs. 45,90,182/- and also charged interest under Section 234B of the Act. Feeling aggrieved, the assessee approached the Commissioner of Income Tax (Appeals) [in short “the CIT(A)”] who vide order dated 27.11.1992 partly allowed the appeal on the issue of charging of interest under Section 234B of the Act. Feeling dissatisfied, the department took the matter before the Tribunal and the assessee filed cross-objections. The Tribunal upheld the order of the CIT(A) vide order dated 28.8.2001 by observing that the assessment completed under Section 147 of the Act was not a regular assessment. Further, the assessment made by the Assessing Officer was revised by the department under Section 263 of the Act vide order dated 23.3.1995 and a direction was issued to the Assessing Officer to withdraw relief granted under Section 80-I of the Act on the receipt of duty drawback relating to the goods exported which were manufactured by the assessee in the industrial undertaking. Accordingly, the Assessing Officer made assessment under Section 143(3) of the Act on 31.1.1997 and recomputed the assessed income at Rs. 68,83,294/- after recomputing deduction under Section 80-I of the Act. The interest under Section 234B of the Act was increased by Rs. 9,82,000/- on account of enhancement. Against the said assessment order, the assessee filed an appeal before the CIT(A) who vide order dated 12.8.1997 upheld the quantum addition. On the issue of charging of interest under Section 234B of the Act, the CIT(A) held that the same was not chargeable as the assessment order which had been revised was not a regular assessment. Being dissatisfied, the department approached the Tribunal. The Tribunal vide order dated 3.6.2003 upheld the order of the CIT(A) and dismissed the appeal. Hence, the present appeal by the revenue.

3. We have heard learned counsel for the parties.

4. Learned counsel for the revenue submitted that the assessee having failed to pay the advance tax on the assessed income under the provisions of the Act was liable to pay interest under Section 234B of the Act. Learned counsel with the aid of Explanation 2 to Section 234B of the Act sought to draw support to contend that the assessment which was framed by the Assessing Officer under Section 143(3)/147 on 25.8.1992 was the first assessment as earlier the return which was filed by the assessee was processed under Section 143(1)(a) of the Act on 26.2.1990 which had resulted into a refund of Rs. 1,76,518/-. According to the learned counsel, the order of the CIT(A) dated 27.11.1992 and the Tribunal dated 28.8.2001 deleting the interest levied under Section 234B of the Act was contrary to the decision of the Kerala High Court in CIT v. K. Govindan & Sons[1999] 238 ITR 1005/[2000] 111 Taxman 463 and affirmed by the Supreme Court in K. Govindan & Sons v. CIT[2001] 247 ITR 192/ 114 Taxman 94 (SC) and also Allahabad High Court in Abdul Majid v. CIT[2006] 281 ITR 366 / 153 Taxman 131 (All). He submitted that no appeal had been filed against the said decision in view of tax effect involved being below monetary limit of Rs. 2 lacs fixed for filing appeal under Section 260A of the Act by CBDT’s Instruction No. 1979 dated 27.3.2000 and 1985 dated 29.6.2000 as mentioned in para 4 of the appeal. He urged that the decisions of the Tribunal and the CIT(A) being contrary to the statutory provision contained in Explanation 2 to Section 234B of the Act and the decision of the Apex Court in K. Govindan & Sons’ case (supra) which was binding under Article 141 of the Constitution would render the order ineffective and would not take away the right of the revenue to charge interest under Section 234B(4) of the Act. According to the learned counsel, interest under Section 234B of the Act was correctly charged in the assessment order passed under Section 143(3)/147 and, therefore, it could be subsequently enhanced on completion of set aside assessment.

5. Controverting the aforesaid submissions, learned counsel for the assessee submitted that the CIT(A) vide order dated 27.11.1992 and the Tribunal vide order dated 28.8.2001 had held that sub-section (1) of Section 234B of the Act was not applicable to the present case and no interest was chargeable thereunder as it was not first assessment framed in pursuance to notice issued under Section 147 of the Act. Even application filed under Section 254(2) of the Act for rectification of order dated 28.8.2001 was dismissed on 11.5.2004. Continuing further, learned counsel argued that accordingly sub-section (4) of Section 234B would not apply and the question of levy of interest under Section 234B of the Act was not called for in the present case. He submitted that the Tribunal had rightly decided the issue in favour of the assessee. Reliance was placed by the learned counsel on the judgment of this Court in Darshan Lal Gulati v. CIT [2008] 173 Taxman 268 (Punj. & Har.).

6. In the alternative, it was urged by the learned counsel that the income having been assessed on book profits under Section 115J of the Act, the judgment of the Karnataka High Court in CIT v. Kwality Biscuits Ltd.[2000] 243 ITR 519 / 110 Taxman 47 (Kar) was applicable which stood affirmed by the Apex Court as the civil appeal filed there against was dismissed by the judgment reported in CIT v. Kwality Biscuits Ltd. [2006] 284 ITR 434/155 Taxman 658 (SC) and on that basis, no interest under Section 234B of the Act was exigible.

7. In rejoinder, learned counsel for the revenue reiterated his earlier submissions. Adverting to the alternative plea of the assessee, he relied upon the decision of the Apex Court in Jt. CIT v. Rolta India Ltd.[2011] 330 ITR 470 / 196 Taxman 594 (SC) and the judgments of this Court in ITA No. 589 of 2006 (Amtek Auto Ltd. v. CIT dated on 25.3.2011 and ITA No. 176 of 2003 CIT v. Steel Strips Leasing Ltd. dated on 4.3.2011 to controvert the said contention.

8. After giving our thoughtful consideration to the respective submissions of learned counsel for the parties, we find substantial force in the submissions raised by the learned counsel for the revenue.

9. It is not disputed that the earlier return which was filed by the assessee was processed under Section 143(1)(a) of the Act on 26.2.1990 and a refund of Rs. 1,76,518/- was made. The assessment was framed in pursuance to the notice under Section 148 of the Act on 25.8.1992. The point for consideration would be whether the assessment which was framed on 25.8.1992 under Section 143(3)/147 of the Act was a regular assessment and, therefore, interest under Section 234B of the Act could be charged by virtue of that order. Section 234B of the Act at the relevant time read thus:-

“234B. (1) Subject to the other provisions of this section, where, in any financial year an assessee who is liable to pay advance tax under section 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of section 210 is less than ninety per cent of the assessed tax, the assessee shall be liable to pay simple interest at the rate of two per cent for every month or part of a month comprised in the period from the 1st day of April next following such financial year to the date of determination of total income under sub-section (1) of section 143 or regular assessment, on an amount equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax.

Explanation 1.- In this section, “assessed tax” means,

(a) for the purposes of computing the interest payable under section 140A, the tax on the total income as declared in the return referred to in that section;

(b) in any other case, the tax on the total income determined under sub-section (1) of section 143 or on regular assessment,

as reduced by the amount of tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such local income.

Explanation 2.- Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this section.

Explanation 3. In Explanation 1 and in sub-section (3) “tax on the total income determined under subsection (1) of Section 143” shall not include the additional income-tax, if any, payable under section 143.

(2) Where, before the date of determination of total income under sub-section (1) of section 143 or completion of a regular assessment, tax is paid by the assessee under section 140A or otherwise,-

(i) interest shall be calculated in accordance with the foregoing provisions of this section up to the date on which the tax is so paid, and reduced by the interest, if any, paid under section 140A towards the interest chargeable under this section;

(ii) thereafter, interest shall be calculated at the rate aforesaid on the amount by which the tax so paid together with the advance tax paid falls short of the assessed tax.

(3) Where, as a result of an order of reassessment or recomputation under section 147, the amount on which interest was payable under sub-section (1) is increased, the assessee shall be liable to pay simple interest at the rate of two per cent for every month or part of a month comprised in the period commencing on the day following the date of determination of total income under sub-section (1) of section 143 or regular assessment referred to in sub-section (1) and ending on the date of the reassessment or recomputation under section 147, on the amount by which the tax on the total income determined on the basis of the reassessment or recomputation exceeds the tax on the total income determined under subsection (1) of section 143 or on the basis of the regular assessment aforesaid.

(4) Where, as a result of an order under section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub-section (1) or subsection (3) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and-

(i) in a case where the interest is increased, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly;

(ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded.

(5) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989 and subsequent assessment years.”

10. Explanation 2 to Section 234 of the Act postulates that where an assessment is made for the first time in pursuance to proceedings under Section 147, it shall be regarded as a regular assessment for the purposes of Section 234B of the Act.

11. Kerala High Court in K. Govindan & Sons case (supra) while considering identical Explanation 2 to Section 139(8) of the Act had recorded as under:-

“Considering Explanation 2 to Section 139(8) which is clarificatory in nature and the other case law, we are of the considered view that the assessment made for the first time under section 147(a) read with section 148 is a regular assessment and that being so, the Assessing Officer could legally charge interest under section 139(8).”

12. The Apex Court while affirming the decision of the Kerala High Court in K. Govindan & Sons case (supra) had held as under:-

“The view taken by us that a first or initial assessment under section 147 of the Act is a “regular assessment” within the meaning of section 139(8) of the Act, has been the position of law even before the Explanation in section 139(8) was added by amendment. In that view of the matter the Explanation merely clarified the position taking it beyond the pale of doubt. Parliament thought it necessary to add the Explanation with a view to remove the doubt raised in certain decisions of different High Courts in which a contrary view was taken. Thus, the Explanation is merely a clarificatory provision and has application to the period of assessment in the case, i.e., assessment year 1984- 85.”

13. It would be apposite to refer to the order of the Tribunal dated 28.8.2001 which had affirmed the order of the CIT(A) dated 27.11.1992 deleting the levy of interest under Section 234B of the Act in the order of assessment under Section 143(3)/147 dated 25.8.1992 passed by the Assessing Officer. The relevant observation in the order reads thus:-

“12. In this case the assessee filed its original return declaring income at Rs. 43,58,142/-. The same was processed u/s 143(1)(a) and the AO found that the assessee has claimed excess deduction u/s 80HHC and 80-I which were allowed while processing the return u/s 143(1)(a) on 26.2.1990, was served upon the assessee on 11.10.1990. Thereafter, the assessment u/s 147/143(3) of IT Act was framed on 25.8.1992 and the AO charged interest u/s 234B of IT Act.

13. On going through the provision of Exp. 1 & 2 of section 234B, the CIT(A) came to the conclusion that the interest 234B can only be charged by the AO in the case of regular assessment framed by the AO u/s 143(1)(a) or first time u/s 143(3) of IT Act because the sub-section (3) of section 234B of IT Act gives power to AO to increase the interest u/s 234B if the interest is charged u/s 143(1) or under regular assessment and not otherwise.

The CIT(A), thereafter concluded that as the assessment was made for the first time u/s 147 but has been framed without assessment u/s 143(1) has already been completed so the AO was not justified in invoking the provisions of section 234B for charging interest from the assessee as it was not a regular assessment first time framed by the AO. The CIT(A) thus deleted the interest amount charged u/s 234B of the IT Act by the AO.

14. Keeping in view the provisions of section 234B, we do not find any illegality or infirmity in the well reasoned and well discussed order of CIT(A) because assessment framed u/s 147 being not made for the first time is not a regular assessment and hence the order of CIT(A) in holding that the interest u/s 234B of IT Act can only be charged in a case of regular assessment, does not call for any interference from out side and accordingly the same, in this regard is upheld. In this view of the matter, we find support from the decision of Jurisdictional High Court of Punjab and Haryana in the case of Kamlavati v. CIT, reported in 111 ITR 248 wherein it has been held that the assessment or reassessment made u/s 147 cannot be considered to be a regular assessment. Accordingly, Ground No.3 of revenue’s appeal, having no merits, is rejected.”

14. The legal position enunciated in the order of the Tribunal dated 28.8.2001 being contrary to statutory provision and settled law as held by the Apex Court in K. Govindan & Sons case (supra) decided on December 1, 2000, the order of the Tribunal would not affect the rights of the revenue as the law declared by the Apex Court was binding under Article 141 of the Constitution of India. Further, it may be noticed that as submitted by the learned counsel for the revenue, no appeal under Section 260A of the Act had been filed against the order of the Tribunal dated 28.8.2001 as the tax effect involved was below monetary limit prescribed by the circulars of the CBDT. The order of the Tribunal being contrary to statutory provision and the legal enunciation of the Apex Court would be rendered ineffective in view of law propounded in para 16 in Director of Settlements, A.P. v. M.R. Apparao [2002] 4 SCC 638. The Supreme Court following its earlier decision in Shenoy & Co. v. Commercial Tax Officer [1985] 2 SCC 512 had held that Article 141 of the Constitution of India empowers the Supreme Court to declare the law and statement of court on matter of facts may not have binding force but the ratio of the decision is binding. It was further observed that the judgment of the High Court or the subordinate court which does not follow the decision of the Apex Court on law would be a nullity. Thus, no indefeasible right would accrue on the basis of order of the Tribunal dated 28.8.2001 in favour of the assessee notwithstanding the fact that no appeal had been filed against the said order. In the facts and circumstances of the present case, the order of the Tribunal dated 28.8.2001 would not come in the way of the revenue to invoke Section 234B of the Act. Once that is so, then the assessment order dated 31.1.1997 passed in pursuance of revisional order dated 23.3.1995 enhancing the assessed income would make the assessee liable to interest under Section 234B(4) of the Act. The CIT(A) and the Tribunal were not right in holding otherwise.

15. Suffice it to notice, that the reliance of the learned counsel for the assessee on Darshan Lal Gulati’s case (supra) does not come to the rescue of the assessee as the same was on the individual fact situation involved therein.

16. Now adverting to the alternative submission of the learned counsel for the assessee, reference is made to the judgment of the Karnataka High Court in Kwality Biscuits Ltd’s case (supra). The High Court while disagreeing with the Tribunal had held as under:-

“Under Section 115J, where the total income of the company is less than 30 per cent of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to 30 per cent of such book profit. It is, thus, by way of deeming fiction that this income has been considered to be the deemed income. Profit and loss account has to be prepared in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act. In the Explanation under section 115J(1A) it is provided that for the purposes of this section ‘book profit’ means the net profit as shown in the profit and loss account for the relevant previous year prepared under subsection (1A) as increased by various amounts given in the section. Thus, for the purpose of assessing tax under section 115J, firstly, the profit as computed under the Income-tax Act has to be prepared and thereafter the book profits as contemplated by the provisions of section 115J are to be determined and then the tax is to be levied. The liability of the assessee for payment of tax under section 115J arises if the total income as computed under the provisions of the Act is less than 30 per cent of its book profits. This exercise for determining the total income in accordance with the provisions of the Act and that of book profit can be only after the end of the relevant assessment year. It is only the deemed income for which the provisions of section 115J have been incorporated. When a deeming fiction is brought under the statute, it is to be carried to its logical conclusion but without creating further deeming fiction so as to include other provisions of the Act which have not specifically been made applicable. Since the entire exercise of computing the income or that of book profit could be only at the end of the financial year, the provisions of section 207, 208, 209 or 201 cannot be made applicable until and unless the accounts are audited and the balance sheet is prepared – even the assessee may not know whether the provisions of section 115J would be applicable or not. The liability could be after the book profits are determined in accordance with the Companies Act. The words ‘for the purpose of this section’ in the Explanation to section 115J(A) are relevant and cannot be construed to extend beyond the computation of liability of tax. Accordingly, we are of the view that the Tribunal was not justified in directing to charge interest under sections 234B and 234C. Thus, question No.2 is, therefore, answered in favour of the assessee and against the revenue.”

17. The judgment in Kwality Biscuits Ltd’s case (supra) was affirmed by the Apex Court as the Civil Appeal was dismissed in [2006] 284 ITR 434.

18. Similar issue had also been considered by Gauhati High Court in Assam Bengal Carriers Ltd. v. CIT[1999] 239 ITR 862; Madhya Pradesh High Court in Itarsi Oils & Flour (P) Ltd. v. CIT[2001] 250 ITR 686/ 119 Taxman 112; Madras High Court in CIT v. Holiday Travels (P) Ltd.[2003] 263 ITR 307/ 127 Taxman 250; and Bombay High Court in CIT v. Kotak Mahindra Finance Ltd.[2004] 265 ITR 119 /[2003] 130 Taxman 730 (Bom.), wherein it was held that that there is no mention in Section 234B and 234C of the Act that in cases of determination of income under Section 115J of the Act, the provisions of the same would not be attracted. The Bombay High Court had concurred with the judgment of the Gauhati High Court and Madhya Pradesh High Court.

19. This Court in CIT v. Upper India Steel Mfg & Engg. Co. Ltd.[2005] 279 ITR 123/[2004] 141 Taxman 692 (Punj. & Har.) was considering identical issue of levy of interest under Section 234B and 234C of the Act where there was non-payment or short payment due to computation of income on the basis of book profits under Section 115J of the Act. The view of the High Courts of Gauhati, Madhya Pradesh, Madras and Bombay was followed and that of Karnataka High Court in Kwality Biscuits Ltd’s case (supra) was dissented. It was noted that the provisions of Sections 234A, 234B and 234C of the Act were not penal but compensatory in the following terms:-

“It is, thus, clear that the provisions contained in sections 234A, 234B and 234C of the Act are surely not penal provisions but are compensatory in nature for breach of civil obligation. These provisions have been introduced to obviate the arbitrariness and to eliminate the subjective decisions of the tax authorities ensuring uniform treatment to similarly situated persons. The provisions are mandatory and the levy thereunder is automatic, the moment it is proved that a default has been committed within the comprehension of any one of the provisions in question.”

It was further observed:-

“Section 207 of the Act provides that tax shall be payable in advance during the financial year in accordance with the scheme provided in sections 208 to 219 in respect of the total income of the assessee that would be chargeable to tax for the assessment year immediately following that financial year. Such income has been described as “current income”. Thus, this section contemplates estimation of current income by the end of the financial year and on the basis of such estimation, the assessee is required to pay advance tax. Advance tax is payable on the current income irrespective of whether the same is computed under section 115J or under the other provisions of the Act. In other words, the expression “current income”, on which advance tax is payable under the provisions of section 207, does not exclude the income computed under the provisions of section 115J. We, therefore, find no merit in the contention that the provisions of sections 234B and 234C of the Act would not be attracted in cases where a company is assessed on the income computed under section 115J.”

20. The view of the Karnataka High Court in Kwality Biscuits Ltd’s case (supra) was dissented with the following observations:-

“From the above, it is clear that two factors had weighed with the High Court while granting relief to the assessee. Firstly, that the provisions of section 207 are not applicable to an income determined under section 115J and; secondly, that a hardship is caused to the assessee because the liability to pay tax on the book profits is determined only at the end of the financial year. Both the grounds, according to us, are not tenable. As already observed earlier, the provisions of section 207 do not exclude the income determined under section 115J from the purview of current income on which advance tax is payable. Similarly, there is no scope for considering the hardship of the assessee as the levy is automatic and does not require any opportunity to be given to the assessee. We, therefore, dissent from the judgment of the Karnataka High Court in the case of Kwality Biscuits Ltd. [2000] 243 ITR 519 .”

21. This Court while concurring with the view of the High Courts of Gauhati, Madhya Pradesh, Madras and Bombay had concluded as under:-

“We fully concur with the view expressed in the aforesaid judgments. The Madras High Court has correctly pointed out that for the purpose of payment of advance tax, all assessees including companies, are required to make an estimate of their current income. Even before the introduction of the provisions of section 115J of the Act, companies had been estimating their total income after providing deductions admissible under the Act. In fact, all assessees who maintain books of account have to undertake this exercise for the purpose of payment of advance tax. If a profit and loss account can be drawn up on estimate basis for the purpose of the Income tax Act, it is not understood as to why a similar profit and loss account on estimate basis under the Companies Act cannot be drawn up. If the explanation of the companies that the profits under section 115J of the Act can only be determined after the close of the year were to be accepted, then no assessee who maintains regular books of account would be liable to pay advance tax as in those cases also, income can only be determined after the close of the books of account at the end of the year.”

22. Civil Appeal No. 459 of 2006 had been filed against the judgment of this Court in Upper India Steel Mfg. & Engg. Co. Ltd’s case (supra) which was heard by the Apex Court along with the case of Rolta India Ltd. (supra) and was affirmed as has been noticed therein.

23. The Apex Court in Rolta India Ltd’s case (supra) had recorded as under:-

“7. In our view, Section 115J/115JA are special provisions. Section 207 envisages that tax shall be payable in advance during any financial year on current income in accordance with the scheme provided in Sections 208 to 219 (both inclusive) in respect of the total income of the assessee that would be chargeable to tax for the assessment year immediately following that financial year. Section 215 (5) of the Act defined what is “assessed tax”, i.e., tax determined on the basis of regular assessment so far as such tax relates to income subject to advance tax. The evaluation of the current income and the determination of the assessed income had to be made in terms of the statutory scheme comprising Section 115J/115JA of the Act. Hence, levying of interest was inescapable. The assessee was bound to pay advance tax under the said scheme of the Act. Section 115J/115JA of the Act were special provisions which provided that where in the case of an assessee, the total income as computed under the Act in respect of any previous year relevant to the assessment year is less than 30% of the book profit, the total income of the assessee shall be deemed to be an amount equal to 30% of such book profit. The object is to tax zerotax companies.

8. Section 115J was inserted by Finance Act, 1987 w.e.f. 1.4.1988. This section was in force from 1.4.1988 to 31.3.1991. After 1.4.1991, Section 115JA was inserted by Finance Act of 1996 w.e.f. 1.4.1997. After insertion of Section 115JA, Section 115JB was inserted by Finance Act, 2000 w.e.f. 1.4.2001. It is clear from reading Sections 115JA and 115JB that the question whether a company which is liable to pay tax under either provision does not assume importance because specific provision(s) is made in the section saying that all other provisions of the Act shall apply to the MAT Company (Section 115JA(4) and Section 115JB(5)). Similarly, amendments have been made in the relevant Finance Acts providing for payment of advance tax under Sections 115JA and 115JB. So far as interest leviable under Section 234B is concerned, the section is clear that it applies to all companies. The pre-requisite condition for applicability of Section 234B is that assessee is liable to pay tax under Section 208 and the expression “assessed tax” is defined to mean the tax on the total income determined under Section 143(1) or under Section 143(3) as reduced by the amount of tax deducted or collected at source. Thus, there is no exclusion of Section 115J/115JA in the levy of interest under Section 234B. The expression “assessed tax” is defined to mean the tax assessed on regular assessment which means the tax determined on the application of Section 115J/115JA in the regular assessment.

9. The question which remains to be considered is whether the assessee, which is a MAT Company, was not in a position to estimate its profits of the current year prior to the end of the financial year on 31st March. In this connection the assessee placed reliance on the judgment of the Karnataka High Court in the case of Kwality Biscuits Ltd. v. CIT reported in (2000) 243 ITR 519 and, according to the Karnataka High Court, the profit as computed under the Income Tax Act, 1961 had to be prepared and thereafter the book profit as contemplated under Section 115J of the Act had to be determined and then, the liability of the assessee to pay tax under Section 115J of the Act arose, only if the total income as computed under the provisions of the Act was less than 30% of the book profit. According to the Karnataka High Court, this entire exercise of computing income or the book profits of the company could be done only at the end of the financial year and hence the provisions of Sections 207, 208, 209 and 210 (predecessors of Sections 234B and 234C) were not applicable until and unless the accounts stood audited and the balance sheet stood prepared, because till then even the assessee may not know whether the provisions of Section 115J would be applied or not. The Court, therefore, held that the liability would arise only after the profit is determined in accordance with the provisions of the Companies Act, 1956 and, therefore, interest under Sections 234B and 234C is not leviable in cases where Section 115J applied. This view of the Karnataka High Court in Kwality Biscuits Ltd. case was not shared by the Gauhati High Court in Assam Bengal Carriers Ltd. v. CIT reported in (1999) 239 ITR 862 and Madhya Pradesh High Court in Itarsi Oil and Flours (P.) Limited v. CIT reported in (2001) 250 ITR 686 as also by the Bombay High Court in the case of CIT v. Kotak Mahindra Finance Ltd. reported in (2003) 130 Taxman 730 which decided the issue in favour of the Department and against the assessee. It appears that none of the assesses challenged the decisions of the Gauhati High Court, Madhya Pradesh High Court as well as Bombay High Court in the Supreme Court. However, it may be noted that the judgment of the Karnataka High Court in Kwality Biscuits Ltd. was confined to Section 115J of the Act. The Order of the Supreme Court dismissing the Special Leave Petition in limine filed by the Department against Kwality Biscuits Ltd. is reported in (2006) 284 ITR 434. Thus, the judgment of Karnataka High Court in Kwality Biscuits stood affirmed. However, the Karnataka High Court has thereafter in the case of Jindal Thermal Power Company Ltd. v. Dy. CIT reported in (2006) 154 Taxman 547 distinguished its own decision in case of Kwality Biscuits Ltd. (supra) and held that Section 115JB, with which we are concerned, is a self-contained code pertaining to MAT, which imposed liability for payment of advance tax on MAT companies and, therefore, where such 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 the Act. Thus, it can be concluded that interest under Sections 234B and 234C shall be payable on failure to pay advance tax in respect of tax payable under Section 115JA/115JB. For the aforestated reasons, Circular No. 13/2001 dated 9.11.2001 issued by CBDT reported in 252 ITR(St.)50 has no application. Moreover, in any event, para 2 of that Circular itself indicates that a large number of companies liable to be taxed under MAT provisions of Section 115JB were not making advance tax payments. In the said circular, it has been clarified that Section 115JB is a self-contained code and thus, all companies were liable for payment of advance tax under Section 115JB and consequently provisions of Sections 234B and 234C imposing interest on default in payment of advance tax were also applicable.”

24. In view of the above, the alternative contention of the assessee is also rejected as the order of the Apex Court dismissing civil appeal reported as Kwality Biscuits Ltd’s case (supra) would not come to its rescue in view of the decision of the Bench of three Hon’ble Judges of the Apex Court in Rolta India Ltd’s case (supra).

25. Accordingly, the question of law is answered in favour of the revenue and against the assessee. The appeal stands allowed.

[Citation : 339 ITR 557]

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