M/s LG Polymers India Pvt Ltd., Visakhapatnam V. The ACIT, Circle-3(1), Visakhapatnam

ITA 116/VIZ/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0666 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-05-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 18-04-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G S S GOPINATH
• Assessee Lawyers: C V S MURTHY
• Keywords: Rectification of order; Retrospective amendment; Question of law
• Section: 234B; 115JB; 154

Judgement Text

ITA NOS. 116/VIZAG/2007 & ITA NO.477/VIZ/2006 LG POLYMERS (INDIA) (P) LTD., PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.116/VIZ/2007 ASSESSMENT YEAR: 2003-04 LG POLYMERS (INDIA) (P) LTD ., VS. ACIT, CIRCLE-3 (1) VISAKHAPATNAM VISAKHAPATNAM PAN NO.AAACL 8528 P) (APPELLANT) (RESPONDENT) ITA NO. 477/VIZAG/2006 ASSESSMENT YEAR: 2003-04 ACIT, CIRCLE-3(1) VS. LG POLYMERS (INDIA) VISAKHAPATNAM (P) LTD., VISAKHAPATNAM (APPELLANT) (PAN NO.AAACL 8528 P) ( RESPONDENT) APPELLANT BY : SHRI C.V.S. MURTHY, CA RESPONDENT BY : SHRI G.S.S. GOPINATH, DR ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 18-9- 2006 PASSED BY LD CIT (A) I VISAKHAPATNAM FOR THE A.Y 2003-04. THE REVENUE IS ASSAILING THE DECISION OF LD CIT (A) IN HOLDING THAT THE INTEREST U/S 234C OF THE ACT IS NOT LEVIABLE ON THE TAX COMP UTED U/S 115JB OF THE ACT. 2. THE LD CIT (A) LATER PASSED A RECTIFICATION ORDE R U/S 154 OF THE ACT ON 1-12-2006 IN PURSUANCE TO THE RECTIFICATION PETI TION FILED BY THE AO. IN THAT ORDER THE LD CIT (A) REVERSED HIS EARLIER DECI SION AND HELD THAT THE INTEREST U/S 234C IS LEVIABLE ON THE TAX COMPUTED U /S 115JB OF THE ACT. ITA NOS. 116/VIZAG/2007 & ITA NO.477/VIZ/2006 LG POLYMERS (INDIA) (P) LTD., PAGE 2 OF 7 AGGRIEVED AGAINST THAT RECTIFICATION ORDER, THE ASS ESSEE HAS PREFERRED ITS APPEAL BEFORE US. 3. THUS, IN BOTH THE APPEALS, THE ONLY ISSUE THAT N EEDS TO BE ADJUDICATED IS WHETHER INTEREST U/S 234C OF THE ACT IS LEVIABLE IN THE ASSESSEES HANDS ON THE TAX COMPUTED U/S 115JB OF T HE ACT. 4. WE HAVE HEARD THE PARTIES IN THIS REGARD AND ALS O PERUSED THE RECORD. THE LD CIT (A) IN HIS RECTIFICATION ORDER D ATED 1-12-2006 HAS BROUGHT OUT THE FACTS OF THE ISSUE BEFORE US VERY C LEARLY. HENCE WE EXTRACT BELOW HIS OBSERVATIONS ON FACTS AND ALSO HIS DECISI ON: 3. I HAVE CAREFULLY EXAMINED THE RIVAL CONTENTIONS . IT IS TRUE THAT THE DECISION TO THE EFFECT THAT INTEREST U/S 2 34C IS NOT LEVIABLE IN THE CASE OF THE APPELLANT WAS BASED UPO N THE CONTENTION OF THE APPELLANT COMPANY MADE IN THIS RE GARD RELYING UPON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT REPORTED IN 243 ITR 519 AND THE DECISION OF THE HON BLE SUPREME COURT REPORTED IN 284 ITR 434. HOWEVER, AFT ER RECEIPT OF THE MISCELLANEOUS PETITION AND AFTER CAR EFULLY EXAMINING THE SAID DECISIONS, IT IS SEEN THAT THOSE DECISIONS WERE RENDERED WITH REFERENCE TO SECTION 115J OF THE ACT. SUBSEQUENTLY, SECTION 115J HAS BEEN REPLACED BY SEC TION 115JB UNDER WHICH THE BOOK PROFIT OF THE APPELLANT COMPANY WAS COMPUTED. SECTION 115JB DIFFERS SIGNIFICANTLY F ROM THE PROVISIONS CONTAINED IN SECTION 115J BECAUSE OF THE CLAUSE 5 OF SECTION 115JB. CLAUSE 5 OF SECTION 115JB SPECIFICALLY STATES THAT UNLESS SECTION 115JB PROVIDES FOR SOMETHING ALL OTHER PROVISIONS OF THE ACT WILL APPL Y. THIS PROVISION WAS ABSENT IN SECTION 115J . UNDER THESE CIRCUMSTANCES, APPLYING THE RATIO OF THE DECISION O F THE HONBLE KARNATAKA HIGH COURT AS WELL AS THE HONBLE SUPREME COURT WHICH WAS RENDERED WITH REFERENCE TO SECTION 115J TO THE FACTS OF THE APPELLANTS CASE IN WHICH BOOK PRO FIT WAS COMPUTED U/S 115JB OF THE ACT IS DEFINITELY A MISTA KE APPARENT FROM RECORD WHICH NEEDS RECTIFICATION. REL ATING TO QUESTION OF LAW AN ORDER MADE IGNORING OR OVERLOOKI NG A RELEVANT PROVISION OF EXISTING LAW IS A MISTAKE APP ARENT FROM RECORD. ITA NOS. 116/VIZAG/2007 & ITA NO.477/VIZ/2006 LG POLYMERS (INDIA) (P) LTD., PAGE 3 OF 7 3.1 THE BOARD CIRCULAR NO.13/2001 DATED 09/11/2001 CLEARLY STATES THAT ALL COMPANIES ARE LIABLE FOR PAYMENT OF ADVANCE TAX HAVING REGARD TO THE PROVISIONS CONTAIN ED IN THE NEW SECTION 115JB. CONSEQUENTLY, THE PROVISIONS OF SECTION 234B AND 234C FOR INTEREST ON DEFAULTS IN PAYMENTS OF ADVANCE TAX AND DEFAULTS IN PAYMENT OF ADVANCE TAX WOULD ALSO BE APPLICABLE WHERE FACTS OF THE CASE WARRANT . THEREFORE, IT IS AMPLY CLEAR THAT INTEREST U/S 234B AND 234C IS CHARGEABLE ON THE TAX LIABILITY ARISING ON THE BOOK PROFITS COMPUTED BY INVOKING THE PROVISIONS OF SECTION 115J B OF THE ACT. 3.2 THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF JINDAL THERMAL POWER CO. LTD. VS. DY. COMMISSIONER OF INCO ME TAX AND ANOTHER REPORTED IN 286 ITR 182 HELD AS UNDER: CIRCULAR NO.13 OF 2001 ISSUED ON NOVEMBER 9, 2001, BY THE CENTRAL BOARD OF DIRECT TAXES REGARDING THE LIABILI TY OF COMPANIES GOVERNED BY THE NEWLY INTRODUCED MINIMUM ALTERNATE TAX PROVISIONS OF SECTION 115JB OF THE IN COME-TAX ACT, 1961, TO PAY ADVANCE TAX, MAKES IT CLEAR THAT THE NEW PROVISIONS OF SECTION 115JB AS INTRODUCED BY THE FI NANCE ACT, 2000 ARE A SELF-CONTAINED CODE. SUB-SECTION (1) LAY S DOWN THE MANNER IN WHICH INCOME-TAX PAYABLE IS TO BE COMPUTE D. SUB- SECTION (2) PROVIDES FOR COMPUTATION OF BOOK PROFI T. SUB- SECTION (5) SPECIFIES THAT SAVE AS OTHERWISE PROVID ED IN THIS SECTION, ALL OTHER PROVISIONS OF THIS ACT S HALL APPLY TO EVERY ASSESSEE, BEING A COMPANY MENTIONED IN THAT SECTION. IN OTHER WORDS, EXCEPT FOR SUBSTIT UTION OF THE TAX PAYABLE UNDER THE PROVISION AND THE MANN ER 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 SE CTION AND IN VIEW OF THE SCHEME OF THE INCOME-TAX ACT. THE CONTENTION THAT IN SECTION 115JB AS INTRODUCED WITH EFFECT FROM APRIL, 2001, BY THE FINANCE ACT, 2000, THERE W AS MERELY AN OBLIGATION TO PAY TAX AT 7 PER CENT OF THE BOO K PROFIT AND NO DEEMING OF BOOK PROFIT AND HENCE NO OBLIGATI ON TO PAY ADVANCE TAX AND THAT IT WAS ONLY BY THE RETROSPECTI VE AMENDMENT OF SECTION 115JB BY THE FINANCE ACT, 2002 , WITH RETROSPECTIVE EFFECT FROM APRIL, 2001, THAT THE BOO K PROFITS WERE DEEMED AND THE LIABILITY TO PAY ADVANCE TAX AR OSE, AND THAT CONSEQUENTLY, THE LEVY OF INTEREST UNDER SECTI ONS 234B AND 234C WITH RETROSPECTIVE EFFECT WAS UNCONSTITUTI ONAL AS ITA NOS. 116/VIZAG/2007 & ITA NO.477/VIZ/2006 LG POLYMERS (INDIA) (P) LTD., PAGE 4 OF 7 EXCESSIVE OR HARSH OR UNREASONABLE, WAS NOT TENABLE , AND THE DEMANDS FOR INTEREST UNDER SECTION 234B AND 234C RA ISED AGAINST THE PETITIONER FOR THE ASSESSMENT YEARS 200 1-02 AND 2002-03 DID NOT NEED ANY INTERFERENCE. THE ABOVE DECISION OF HONBLE KARNATAKA HIGH COURT IS DIRECTLY ON THE POINT UNDER CONSIDERATION IN THE AP PELLANTS CASE I.E. COMPUTATION OF BOOK PROFIT U/S 115JB OF T HE ACT AS WELL AS THE ADVANCE TAX LIABILITY THEREON. THEREFOR E, FOLLOWING THE SAID DECISION, I HOLD THAT INTEREST U/S 234C IS LEVIABLE IN THE APPELLANTS CASE AND THIS ORDER U/S 154 SHALL B E TREATED AS A SUPPLEMENT TO AND FORM PART OF MY APPELLATE ORDER DATED 18/09/2006. 5. THE HONBLE KARNATAKA HIGH COURT, IN THE CAS E OF JINDAL THERMAL POWER CO. LTD., HAS BROUGHT OUT THE DIFFERENCE BETW EEN THE SECTIONS 115J AND 115JA DUE TO EXISTENCE OF SUB SECTION (4) IN SE CTION 115JA. THE SUB SECTION (5) OF SECTION 115JB IS IDENTICAL WITH THE SUB SECTION (4) OF SECTION 115JA. 6. THE HONBLE KARNATAKA HIGH COURT, WHICH REND ERED THE DECISION U/S 115J OF THE ACT IN THE CASE OF KWALITY BISCUITS LTD HAS ALSO RENDERED THE DECISION IN THE CASE OF M/S JINDAL THERMAL POWER CO . LTD, SUPRA. IN A SUBSEQUENT DECISION IN THE CASE OF CIT V BRINDAVAN BEVERAGES LTD (2010) 228 CTR (KAR) 1 ALSO, THE HONBLE KARNATAKA HIGH CO URT HELD THAT THE INTEREST U/S 234B COULD BE LEVIED IN THE COMPUTATIO N OF INCOME MADE UNDER SECTION 115JA. THE CIRCULAR NO.13 OF 2001 DATED 0 9-11-2001 ISSUED BY THE CBDT ON INTRODUCTION OF SECTION 115JB ALSO CLARIFIE S THAT THE PROVISIONS OF SECTION 234B AND 234C FOR INTEREST ON DEFAULTS OF P AYMENT OF ADVANCE TAX AND DEFERMENT OF ADVANCE WOULD BE APPLICABLE. THE SAID CIRCULAR WAS ALSO TAKEN NOTE OF BY HONBLE KARNATAKA HIGH COURT IN TH E CASE OF BRINDAVAN BEVERAGES LTD., SUPRA. 7. THE SPECIAL BENCH OF ITAT IN THE CASE OF ACIT V ASHIMA SYNTEX LTD. (2009) 117 ITD 1 (AHD) (SB) HAS HELD THAT THE TOTAL INCOME COMPUTED ITA NOS. 116/VIZAG/2007 & ITA NO.477/VIZ/2006 LG POLYMERS (INDIA) (P) LTD., PAGE 5 OF 7 UNDER THE PROVISIONS OF SECTION 115JA IS LIABLE TO ADVANCE TAX AND IN THE EVENT OF DEFAULT IN RELEVANT PROVISIONS OF PAYMENT OF ADVANCE TAX, LEVY OF INTEREST U/S 234C IS MANDATORY. IN A RECENT THIRD MEMBER DECISION, IN THE CASE OF KANEL OIL & EXPORTS INDS. LTD. V JCIT (AHD) (121 ITD 596), IT WAS HELD BY MAJORITY VIEW THAT THE INTEREST U/S 234B AN D 234C IS LEVIABLE ON THE INCOME COMPUTED U/S 115JA. 8. BEFORE US, LD AR PLACED HEAVY RELIANCE ON TH E DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S SNOWCEM INDIA LTD. V DCIT (2009) 221 CTR (B0M) 594, WHERE IN THE HONBLE BOMBAY HIGH COURT, BY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F CIT V KWALITY BISCUITS LTD. (2006) 284 ITR 434 (SC), HELD THAT THE INTERES T U/S 234B AND 234C IS NOT LEVIABLE IN THE CASE OF COMPUTATION OF INCOME U /S 115JA. THE LD AR SUBMITTED THAT THE PROVISIONS OF SECTION 115J, 115J A AND 115JB ARE HAVING SIMILAR OBJECTIVES AND HENCE THE DECISION RENDERED HONBLE SUPREME COURT IN THE CASE OF KWALITY BISCUITS LTD, SUPRA, U/S 115 J IS EQUALLY APPLICABLE TO SECTION 115JB ALSO. HOWEVER, WE ARE UNABLE TO AGRE E WITH THE CONTENTIONS OF LD AR IN VIEW OF THE DECISIONS DISCUSSED IN THE EARLIER PARAGRAPHS. IN THE CASE OF KANEL OIL & EXPORT INDS. LTD., THE HONBLE THIRD MEMBER SHRI R.V.EASWAR, VICE PRESIDENT AS THEN HE WAS, IN PARA 8 OF HIS DECISION, HAS DISCUSSED THE EFFECT OF THE DECISION OF HONBLE BOM BAY HIGH COURT IN THE CASE OF SNOWCEM LTD., AS UNDER: 8. THE OTHER EXCEPTION IS WHERE THE JUDGMENT OF TH E NON- JURISDICTIONAL HIGH COURT, THOUGH THE ONLY JUDGMEN T ON THE POINT, HAS BEEN RENDERED WITHOUT HAVING BEEN INFORM ED ABOUT CERTAIN STATUTORY PROVISIONS THAT ARE DIRECTLY RELE VANT. A JUDGMENT RENDERED WITHOUT NOTICING A PREVIOUS BINDING PRECEDENT OR A RELEVANT STATUTORY RULE IS CONSIDERED TO HAVE BEEN RENDERED PER INCURIAUM. IT IS EVEN SAID THAT SUCH A JUDGMENT NEED NOT BE GIVEN EFFECT TO BY A LOWER COURT. IN THE PRESENT CASE, THE ATTENTIO N OF THE BOMBAY HIGH COURT IN SNOWCEM INDIA LTD. (SUPRA) WAS NOT DRAWN TO SUB-SECTION (4) OF SECTION 115JA, AS HAS B EEN POINTED OUT BY THE LEARNED AM IN HIS DISSENT. THE H IGH COURT ITA NOS. 116/VIZAG/2007 & ITA NO.477/VIZ/2006 LG POLYMERS (INDIA) (P) LTD., PAGE 6 OF 7 THEREFORE HAD NO OCCASION TO EXAMINE THE QUESTION W HETHER THE DECISIONS OF THE KARNATAKA HIGH COURT AND THE S UPREME COURT IN KWALITY BISCUITS LTD. (SUPRA) , RENDERED IN THE CONTEXT OF SECTION 115J WHICH DID NOT HAVE A SUB-SECTION SI MILAR TO SUB-SECTION (4) OF SECTION 115JA WOULD STILL BE APP LICABLE AS BINDING PRECEDENT IN A CASE WHICH ARISES UNDER SECT ION 115JA. THIS ASPECT HAS ALSO BEEN HIGHLIGHTED BY THE LEARNE D AM. THE ARGUMENT ON BEHALF OF THE ASSESSEE BEFORE ME WAS TH AT THE SECTION IN ITS ENTIRETY WAS BEFORE THE BOMBAY HIGH COURT IN SNOWCEM INDIA LTD. (SUPRA) WHICH INCLUDES SUB-SECTION (4). I AM UNABLE TO ACCEPT THIS ARGUMENT BECAUSE THE SUB-S ECTION IS CONSIDERED CRUCIAL AND IT IS THE CONTENTION OF THE DEPARTMENT THAT IT HAS MADE ALL THE DIFFERENCES BETWEEN SECTIO N 115J ON THE ONE HAND AND SECTIONS 115JA AND 115JB ON THE OTHER , AND THEREFORE, NON-ADVERTENCE TO THE SAME MAKES I T IMPOSSIBLE FOR THE ASSESSEE TO RELY ON THE JUDGMENT AS AUTHORITY ON THE INTERPRETATION OF THE SUB-SECTION. IT IS FUTILE TO SPECULATE WHAT WOULD HAVE BEEN THE DECISION IF S UB-SECTION (4) OF SECTION 115JA HAD BEEN BROUGHT TO THE NOTICE OF THE HONBLE BOMBAY HIGH COURT, BUT SUFFICE TO SAY, FOR THE PRESENT PURPOSE, THAT THE JUDGMENT CANNOT BE RELIED UPON BY THE ASSESSEE AS BEING ENTIRELY IN ITS FAVOUR ON ALL THE ASPECTS OF SECTION 115JA OR, MORE PARTICULARLY, ON THE INTE RPRETATION OF SUB-SECTION (4) OF THAT SECTION AND THEREFORE IT CANNOT BE SAID THAT IT SHOULD BE FOLLOWED IN PREFERENCE TO TH E ORDER OF THE SPECIAL BENCH IN ASHIMA SYNTEXS CASE (SUPRA). 9. THUS THE OBSERVATIONS OF THE HONBLE THIRD MEMBE R CLARIFY THE POSITION OF HONBLE BOMBAY HIGH COURTS DECISION IN THE CASE OF M/S SNOWCEM INDIA LTD., SUPRA, AND IT WAS FINALLY CONCL UDED THAT THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF ASHIMA SYNTEX LTD., SUPRA, SHALL HAVE BINDING FORCE. THOUGH ALL THESE DECISIONS HAVE BEE N RENDERED IN THE CONTEXT OF SECTION 115JA(4), SINCE THE PROVISIONS OF SECTION 115JA(4) AND 115JB(5) ARE IDENTICAL IN NATURE, IN OUR VIEW, ALL THESE DECISIONS ARE EQUALLY APPLICABLE TO SECTION 115JB(5), WITH WHICH WE ARE C ONCERNED. SINCE THE DECISION RENDERED BY THE LD CIT(A) IN HIS RECTIFICA TION ORDER IS IN ACCORDANCE WITH THE VIEW TAKEN BY THE SPECIAL BENCH IN THE CAS E OF ASHIMA SYNTEX LTD., ITA NOS. 116/VIZAG/2007 & ITA NO.477/VIZ/2006 LG POLYMERS (INDIA) (P) LTD., PAGE 7 OF 7 SUPRA, WE UPHOLD HIS VIEW THAT INTEREST U/S 234C IS LEVIABLE IN THE HANDS OF THE ASSESSEE ON THE TAX COMPUTED U/S 115JB OF THE A CT. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED AND THE APPEAL OF THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 30.06.2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 30 TH JUNE, 2010 COPY TO 01 M/S. L.G. POLYMERS INDIA (P) LTD., R.R. VENKATAPURA M PO, VISAKHAPATNAM 02 THE ACIT, CIRCLE-3(1) VISAKHAPATNAM 03 THE CIT (A)-1, VISAKHAPATNAM 04 THE CIT-1 VISAKHAPATNAM 05 THE DR, ITAT, VISAKHAPATNAM 06 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM