M/S CANBANK FINANCIAL SERVICES LTD V. CHIEF COMMISSIONER OF INCOME TAX

WP/7276/2017

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M/s.Canbank Financial Services Ltd. challenged the order of the Chief Commissioner of Income Tax, Bengaluru, which granted a partial waiver of interest charged under Section 234C of the Income Tax Act, 1961, due to non-payment of advance tax installments. The company argued that the interest for the second quarter should also be waived, as the income from a Supreme Court judgment was received after the due date for the second installment. However, the court found that the income was assessable and the tax liability should have been anticipated and accounted for in the advance tax payments.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 764743 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 21-08-2017
• Assessment Year: misc
• Other Referred Cases: M/s.Canbank Financial Services Ltd. Vs. Chief Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: BALRAM RAO
• Keywords: Advance tax; Assessment Year 2014-15; Income Tax; Waiver of interest
• Section: 143(1); 115JB; 234C; 226; 227; 119(2)(a)

Judgement Text

" 1/13 IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 21st DAY OF AUGUST 2017 BEFORE THE HON'BLE Dr.JUSTICE VINEET KOTHARI WRIT PETITION No.7276/2017 (T-IT) BETWEEN: M/S.CANBANK FINANCIAL SERVICES LTD., (WHOLLY OWNED SUBSIDIARY OF CANARA BANK) HAVING ITS REGISTERED OFFICE AT: NAVEEN COMPLEX 14, M.G.ROAD, TRINITY CIRCLE BANGALORE-560 001. …PETITIONER (BY SRI.BALRAM R RAO, ADV.) AND: CHIEF COMMISSIONER OF INCOME TAX BENGALURU-1, CENTRAL REVENUE BUILDING QUEEN’S ROAD BENGALURU-560 001 KARNATAKA. …RESPONDENT THIS W.P. IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE ORDER DATED 19-09-2016 PASSED UNDER SECTION 119(2)(a) OF THE ACT FOR ASSESSMENT YEARS 2014-15, IN FILE NO.WAIVER/119(2)(1)CCIT-1/2016-17/593 DATED 19-09-2016 VIDE aNNEXURE-d. Date of Order 21-08-2017 in W.P.No.7276/2017 M/s.Canbank Financial Services Ltd. Vs. Chief Commissioner of Income Tax. 2/13 THIS W.P. COMING ON FOR PRELIMINARY HEARING THIS DAY, THE COURT MADE THE FOLLOWING:- ORDER Mr.Balaram R Rao, Adv. for Petitioner Heard the learned Counsel for the Petitioner. 2. M/s.Canbank Financial Services Limited has filed this petition challenging the order passed by the Respondent-Chief Commissioner of Income Tax, Bengaluru under Section 119(2)(a) of the Income Tax Act, 1961 (‘the Act’ for brevity) giving partial relief of waiver of interest under Section 234C of the said Act on account of non-payment of installment of advance tax for the quarter end of 15-09-2013 and while waiving of said interest under Section 234C of the Act for quarter end of 15-06-2013 amounting to Rs.5,05,359/-, out of the total interest imposed by the assessing authority under Section 234C of the Act as per the intimation under Section 143(1) of the Act was levied at Date of Order 21-08-2017 in W.P.No.7276/2017 M/s.Canbank Financial Services Ltd. Vs. Chief Commissioner of Income Tax. 3/13 Rs.20,12,466/-. A waiver application was filed by the petitioner-assessee before the Chief Commissioner. 3. The facts leading to the said partial waiver as narrated in the impugned order are quoted below for ready reference: “2. The assessee filed return of income for A.Y. 2014-15 on 22-11-2014 declaring total income of Rs.56,01,36,000/-. 2.1 The e-filed return of income was processed by CPC on 21-04-2015, accepting the income returned, while charging interest u/s 234C of Rs.20,21,466/-, raising a demand of Rs.98,178/- as against the refund of Rs.19,23,290/- claimed by the assessee. 2.2 On receipt of the intimation u/s 143(1) from CPC, the assessee filed a petition u/s 119(2)(a) seeking waiver of interest u/s 234C for Asst. Year 2014-15. The assessee has prayed for waiver of interest on the following grounds: Date of Order 21-08-2017 in W.P.No.7276/2017 M/s.Canbank Financial Services Ltd. Vs. Chief Commissioner of Income Tax. 4/13 (a) As per the directions of Hon’ble Supreme Court of India, during the 3rd quarter of the F Y 2013-14, i.e., on 03-10-2013, the company received a sum of Rs.102,59,36,115/- from the Registry of the Hon'ble Supreme Court which resulted in profit of Rs.56,01,36,301/- for the F Y 2013-14 and due to this receipt of extra-ordinary item of income, the company has become liable to pay tax u/s.115JB of IT Act, 1961. (b) By taking into consideration the above receipt of income, the company’s tax liability for the F Y 2013-14, net of TDS, works out to Rs.11,37,08,775/-. As the amount is received subsequent to the due date for payment of 1st and 2nd installments of advance tax, the 3rd installment being 75% of the above tax, i.e., Rs.8,52,81,582/- is to be discharged before 15-12-2013. (c) The company had paid Rs.8,50,00,000/- as 3rd installment of advance tax on 11-12-2013 in addition to advance tax of Rs.6,32,000/- paid during first and second quarters. (d) However, in the intimation u/s.143(1) received from CPC the interest u/s 234C is charged for shortfall in payment of advance tax for 1st and 2nd quarter of the F Y 2013-14 which is requested to be waived as the company is Date of Order 21-08-2017 in W.P.No.7276/2017 M/s.Canbank Financial Services Ltd. Vs. Chief Commissioner of Income Tax. 5/13 in receipt of money only during 3rd quarter of F Y 2013-14. 3. The petition filed by the assessee has been considered and accordingly, the report of the Assessing Officer, DCIT, Circle-2(1)(1), Bengaluru, on the facts of the case was obtained along with the comments of Pr.CIT, Bengaluru-2, Bengaluru. 3.1 The Assessing Officer, in her report has stated that the Hon'ble Supreme Court vide its order dated 15-07-2013 had dismissed appeal filed by M/s.HSBC which owed money to the assessee and directed the registry of the court to release the money to the assessee. This resulted in profit of Rs.56,01,36,301/- for the F Y 2013-14 and the company became liable to pay tax u/s.115JB. The amount was received on 03-10-2013 which is subsequent to the due date for payment of installments for 1st and 2nd quarter and also the company has paid 75% of its tax liability by 11-12-2013. Hence, the conditions stipulated in Board’s order in F.No.400/29/2002-IT(B) dated 26-06-2006 is satisfied. Therefore, the Date of Order 21-08-2017 in W.P.No.7276/2017 M/s.Canbank Financial Services Ltd. Vs. Chief Commissioner of Income Tax. 6/13 assessee’s application for waiver of interest u/s.234C may be considered favorably based on the facts of the case. This view of the Assessing Officer is endorsed by the Principal Commissioner. 4. It is pertinent to note that the matter of waiver of interest levied u/s 234A, 234B & 234C of the I.T. Act is strictly governed by CBDT’s order u/s 119(2)(a) in F.No.400/29/2002-IT(B) dated 26-06-2006. 4.1 Waiver of Interest u/s 234C : Waiver of interest charged u/s 234C is governed by the guidelines specified in paragraph No.2 of the Board’s order (supra) as reproduced below:- “Para 2(b) Any income chargeable to income-tax under any head of income, other than Capital gains is received or accrued after due date of payment of the first or subsequent installments of advance tax, which was neither anticipated nor was in the contemplation of the assessee, and the advance tax on such income is paid in the remaining installment or installments, and the Chief Commissioner/Director General is satisfied on the facts and circumstances Date of Order 21-08-2017 in W.P.No.7276/2017 M/s.Canbank Financial Services Ltd. Vs. Chief Commissioner of Income Tax. 7/13 of the case that this is a fit case for reduction or waiver of the interest chargeable under Section234C of the Income Tax Act.” 5. In the instant case, during the course of hearing and the submissions made by the assessee, it is observed that M/s.Hong Kong & Shanghai Bank Corporation Ltd. (HSBC) had filed an appeal against the order of Hon. High Court of Bombay directing M/s. HSBC to pay Rs.55,45,78,122/- to the assessee company. On admitting the appeal filed by M/s. HSBC the Hon'ble Supreme Court had directed M/s. HSBC to deposit the decrial amount of Rs.55,45,78,122/- in Registry of the Hon'ble Supreme Court of India. 5.1 On 15-07-2013 the Hon'ble Supreme Court dismissed the appeal filed by M/s.HSBC directing the registry on 05-08-2013 to release the money to the assessee company. The Decree amount was kept in fixed deposit by the Registry with Canara Bank, Overseas Branch, New Delhi. On 17-09-2013 the Registry directed AGM, Canara Bank to foreclose the Fixed deposit and release Date of Order 21-08-2017 in W.P.No.7276/2017 M/s.Canbank Financial Services Ltd. Vs. Chief Commissioner of Income Tax. 8/13 the money, with interest and after deducting their charges and TDS on interest, to the assessee company. Based on this direction, the assessee company received a pay order of Rs.102,59,36,115/- on 03-10-2013. 5.2 Now, coming to the aspect of charging of Interest u/s 234C for first and second quarter of the F Y 2013-14, the Income in question is deemed to have accrued/anticipated once the Hon'ble Supreme Court has passed the order on 15-07-2013 and its subsequent directions on 05-08-2013, irrespective of the Review Petition filed by M/s.HSBC and also on the fact that the assessee had already received the sum well before the review petition was dismissed. Thereby, the Income has accrued on 15-07-2013 itself. As such, the assessee is liable for payment of advance tax from the second installment itself which was due on 15-09-2013. However, the liability of payment of advance tax in the first installment due on 15-06-2013 does not arise and accordingly the interest for Date of Order 21-08-2017 in W.P.No.7276/2017 M/s.Canbank Financial Services Ltd. Vs. Chief Commissioner of Income Tax. 9/13 this default needs to be waived and the Interest for the default of payment on 15-09-2013 stands levied. 5.3 The Interest u/s. 234C charged in the intimation is worked out as under – Profit u/s. 115JB Rs.56,01,36,301 Tax liability Rs.11,74,07,369 Less: TDS Rs. 36,98,594 Tax liability net of TDS Rs.11,37,08,712 Interest u/s.234C for the Q.E 15-06-2013 Rs. 5,05,359 Interest u/s.234C for the Q.E 15-09-2013 Rs. 15,16,107 Total Interest charged u/s 234C as per intimation u/s. 143(1) Rs. 20,21,466 6. In view of the above, I find that the present case is fit for waiver of interest charged u/s 234C for first quarter of the F Y 2013-14 which amounts to Rs.5,05,359/-. Hence, the Interest u/s. 234C for the A Y 2013-14 as charged in the Date of Order 21-08-2017 in W.P.No.7276/2017 M/s.Canbank Financial Services Ltd. Vs. Chief Commissioner of Income Tax. 10/13 intimation u/s 143(1) is reduced from Rs.20,21,466/- to Rs.15,16,107/-.” 4. Learned counsel for the petitioner submitted that since the review petition filed by the HSBC Bank was pending before the Hon'ble Supreme Court against the order dated 15-07-2013 passed by the Apex Court in favour of the petitioner-assessee, the petitioner-assessee could not anticipate its accrued income while paying the advance tax of quarter ending 15-09-2013 and therefore, waiver even for that interest under Section 234C of the Act for the quarter ending 15-09-2013 ought to have been granted by the learned Chief Commissioner in the impugned order amounting to Rs.15,16,107/- and therefore, aggrieved by the said partial relief given by the respondent-Chief Commissioner, the present petition is filed before this Court. Date of Order 21-08-2017 in W.P.No.7276/2017 M/s.Canbank Financial Services Ltd. Vs. Chief Commissioner of Income Tax. 11/13 5. Having heard the learned counsel for the petitioner, this Court is satisfied that there is no error in the impugned order. The CBDT circular dated 26-06-2006 quoted by the respondent-Chief Commissioner in the impugned order read with Section 234C of the Act clearly stipulates that such waiver can be granted only in respect of income which was neither anticipated nor was in the contemplation of the assessee and the advance tax on the remaining income was duly paid by the assessee. 6. In the present case, the moment an order favourable to the petitioner-assessee was passed by the Hon'ble Supreme Court on 15-07-2013 directing the HSBC to pay the amount of Rs.102,59,36,115/- which was deposited by the HSBC Bank with the Registry of the Hon'ble Supreme Court followed by order dated 05-08-2013 to release the amount and which fund was released to the petitioner-assessee on 03-10-2013, that Date of Order 21-08-2017 in W.P.No.7276/2017 M/s.Canbank Financial Services Ltd. Vs. Chief Commissioner of Income Tax. 12/13 amount of Rs.102,59,36,115/- became assessable to tax under Section 115JB of the Income Tax Act, 1961. After the said order passed by the Hon'ble Supreme Court on 15-07-2013 followed by order dated 05-08-2013, the assessee-Company could not have contended that it could not anticipate the accrual of income under Section 115JB of the Act and therefore, it ought to have paid advance tax installments taking into account such accrued income for the quarter ending 15-09-2013. Having not paid that amount, the interest liability under Section 234C of the Act automatically stood attracted. 7. Learned Chief Commissioner has already granted 100% waiver for non-payment of advance tax on this amount for the quarter end of 15-06-2013 amounting to Rs.5,05,359/- which the assessee perhaps deserved in the facts and circumstances of the case. But thereafter, merely because the review petition came to Date of Order 21-08-2017 in W.P.No.7276/2017 M/s.Canbank Financial Services Ltd. Vs. Chief Commissioner of Income Tax. 13/13 be filed by the HSBC Bank which was ultimately dismissed by the Hon'ble Supreme Court vide Annexure-3 dated 03-12-2013, the assessee-company could not have prayed for waiver of interest under Section 234C of the Act for the quarter ending 15-09-2013. Therefore, the impugned order passed by the respondent-Chief Commissioner appears to be perfectly just and legal and does not require any interference by this Court. 8. The petition is devoid of merits. Accordingly, the same is dismissed. A copy of the order be sent to the Respondent. Sd/- JUDGE mpk/-* "