M/S.KANAKADURGA AGRO OIL PRDTS. VJY V. COMMR.OF I.T. VJY

RC/177/1996

AI Insights

The case revolves around the question of whether interest under Sections 234B and 234C of the Income Tax Act is applicable when the income of the assessee is computed under Section 115J. The assessee, after filing a revised return admitting a higher income, challenged the levy of interest on the grounds that advance tax was not required under Section 207 when income was assessed under Section 115J. The Income Tax Appellate Tribunal upheld the interest levy, leading to the reference of the question to the High Court. The court examined precedents, including the Supreme Court's decision in Rolta India, which supported the Revenue's stance that advance tax is payable and interest is chargeable.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 735988 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 23-11-2011
• Assessment Year: misc
• Other Referred Cases: Kwality Biscuits Limited v CIT, Joint Commissioner, Income Tax v Rolta India Limited, Deputy Commissioner of Income-tax (Asstt.) v Bhopal Motors Limited, Jindal Thermal Power v Deputy CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Respondent
• Court: HIGH COURT
• Keywords: Advance tax; Assessment Year; Book profit; Income Tax; Interest Levy
• Section: 143(3); 208; 234B; 207; 234C; 256(1); 115J; 215(5)

Judgement Text

"THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.177 OF 1996 ORDER: (Per Hon’ble Sri Justice V.V.S.Rao) The reference under Section 256(1) of the Income Tax Act, 1961 (the Act, for brevity) was made by the Income Tax Appellate Tribunal, Hyderabad Bench-B, at the instance of the assessee. The following question has been pleaded for the decision of this Court. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is justified in holding that interests under Sections 234B and 234C of the Income Tax Act are leviable, particularly when the income assessable comprises of the income computed under Section 115J of the Income Tax Act? The fact of the matter is not in dispute. The assessee filed return of income for assessment year 1989-90 admitting Rs.9,19,430/- for the previous year covering period of 21 months from 01.07.1987 to 31.03.1989. Subsequently, revised return was filed admitting an income of Rs.14,05,080/-. The amount of Rs.74,09,334/- was shown as book profit in Profit and Loss Account after setting off unabsorbed depreciation of Rs.24,01,120/-. This was done for the purpose of assessment of profit arrivable under Section 115J of the Act. Assessment under Section 143(3) was completed on 31.12.1990 determining the total income at 30% of the book profit without giving set off to the unabsorbed depreciation. Aggrieved by the assessment, an appeal was filed which was dismissed. Before the appellate Tribunal inter alia the assessee challenged the levy of interest under Section 234B and 234C (Rs.2,70,018/- and Rs.4,756/- respectively). It was contended that when the income is determined under Section 115J, the advance tax under Section 207 is not required to pay and therefore, charge of interest is impermissible under Sections 234B and 234C. Following the decision in another case decided by them, the Tribunal repelled the contention and uphold the charge of interest. Aggrieved thereby, the assessee sought reference and above question has been referred to this Court. The counsel for assessee made submissions relying on the decision of the Karnataka High Court in Kwality Biscuits Limited v CIT[1], and unreported decision of a Bench of this Court in R.C.No.44 of 1996, dated 27.09.2010, to which one of us (VVSR,J) is a member. According to her, the issue is no more res integra and the charge of interest when the income is computed as per the provisions of Section 115J is not permissible. Per contra, the Junior Standing Counsel for Income Tax Department places reliance on the latest judgment of the Supreme Court in Joint Commissioner, Income Tax v Rolta India Limited [2] and contends that even when the income is determined in accordance with Section 115J, advance tax is payable and interest thereon is also payable under the relevant Sections. In R.C.No.44 of 1996, the second question was almost in similar terms and reads, “whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that interest under Sections 234B and 234C of the Income Tax Act, 1961, are attracted for non-payment of advance tax on “Book Profits” under Section 115J of the Act”? Dealing with the same, this Court answered the question in favour of assessee observing as under. The 2nd question is also no longer res integra. The Karnataka High Court, in Kwality Biscuits, considered the question whether in an assessment year, where the assessee company’s income is computed as per the provisions of Section 115J, interest under Section 234-B and 234-C can be levied. It was held as follows: “Section 234B casts the liability for payment of interest for default in payment of advance tax if the assessee is liable to pay advance tax under section 208 and has failed to pay such tax, or where the advance tax paid by such assessee under the provisions of section 210 is less than 90 per cent. Of the assessed tax, then he is liable to pay simple interest at the rate of two per cent. For every month to the date of determination of total income under section 143(1) and, where the regular assessment is made, to the date of such regular assessment on the amount equal to the assessed tax or, as the case maybe, on the amount by which the advance tax paid has fallen short of the assessed tax. Under the Explanation, “assessed tax” means the tax on the total income as declared in the return or the tax on the total income determined under section 143(1) or on regular assessment, as reduced by the amount of tax deducted or collected as source in accordance with the provisions of Chapter XVII. Under Section 234C also, if there is liability to pay advance tax under section 208 and if there is failure to pay such tax or if it is not paid in instalments prescribed in the section, then the liability for interest arises.” When the revenue carried the matter in appeal to the Supreme Court, the same was dismissed in Kwality Biscuits. I n Deputy Commissioner of Income-tax (Asstt.) v Bhopal Motors Limited [3], the Division bench of the Madhya Pradesh High Court, following the decision of the Supreme Court in Kwality Biscuits, concurred with the Karnataka view. We are bound by the decision of the Supreme Court and, therefore, these references are answered accordingly in favour of the assessee. In Rolta India, the Supreme Court considered the question which is as follows, “whether interest under Section 234B can be charged on the tax calculated on the book profits under Section 115JA? In other words, whether advance tax was at all payable on book profits under Section 115JA?” The Supreme Court considered Kwality Biscuits and Jindal Thermal Power v Deputy CIT [4] and held that interest under Section 234B and 234C shall be payable on failure to pay advance tax in respect of tax payable under Section 115JA/115JB. Therein, it was further observed 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 per cent of the book profit, the total income of the assessee shall be deemed to be an amount equal to 30 per cent of such book profit. (emphasis supplied) In view of the ratio laid down by the Supreme Court that even in relation to the income assessed as per Section 115J/115JA, advance tax is payable and payment of interest thereon is inescapable. We answer the question in the affirmative in favour of the Revenue and against the assessee. The Reference shall stand disposed of accordingly, without any order as to costs. _______________ (V.V.S.RAO, J) ____________________ (B.N.RAO NALLA, J) 23.11.2011 pln [1] (2000) 243 ITR 519 (Kar) [2] (2011) 330 ITR 470 (SC) [3] (2010) 323 ITR 684 (MP). [4] (2006) 154 Taxman 547 : (2006) 286 ITR 182 (Kar) "