M/s. Precot Meridian Limited, Coimbatore V. ACIT, Coimbatore

ITA 1870/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0854 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 10-01-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 19-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: K RAVI
• Keywords: Capital asset; Depreciation; Question of law; Revenue expenditure; Capital expenditure
• Section: 143(3); 234B; 37; 154; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE N.S. SAINI, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.1870/MDS/2012 (ASSESSMENT YEAR: 2006-07) M/S.PRECOT MERIDIAN LTD., SUPREM, 737, GREEN FIELDS, PULIAKULAM ROAD, COIMBATORE-641 045. PAN: AABCP3038K VS. ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(2) COIMBATORE. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. K.RAVI, ADVOCATE RESPONDENT BY : MR. ANIRUDH RAI, CIT DR DATE OF HEARING : 10 TH JANUARY, 2013 DATE OF PRONOUNCEMENT : 20 TH FEBRUARY, 2013 O R D E R PER VIKAS AWASTHY, JM: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE IMPUGNING THE ORDER OF THE CIT(A)-I, COIMBATORE DA TED 3.9.2012 RELEVANT TO THE ASSESSMENT YEAR 2006-07. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE O F COTTON YARN AND FABRIC AND GENERATION OF WIND POWER. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ADMITTING AN INCOME OF ` 9,36,45,339/-. THE CASE OF THE ITA NO.1870/MDS/2012 2 ASSESSEE WAS SELECTED FOR SCRUTINY. UNDER SCRUTINY ASSESSMENT, A SUM OF ` 6,20,07,785/- , CLAIMED AS REVENUE EXPENDITURE ON ACCOUNT OF REPLACEMENT OF MACHINERY WAS DISALLOWED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 30.12.2008 ASSESSED THE TOTAL INCOME OF THE ASSESSEE AS ` 14,38,52,548/- AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSESS EE PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE VIDE ORDER DATED 20.03.2 009 AND HELD THE EXPENDITURE INCURRED TOWARDS THE REPLACEME NT OF MACHINERY AS REVENUE EXPENDITURE. THE DEPARTMENT C ARRIED THE MATTER TO THE TRIBUNAL. THE TRIBUNAL VIDE ORDER DATED 20.7.2010 IN ITA NO.886/MDS/2009 RESTORED THE ISSU E TO ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE IM PUGNED ISSUE IN ACCORDANCE WITH THE OBSERVATION OF THE HON BLE APEX COURT. 3. THE ASSESSING OFFICER IN SECOND ROUND OF LITIGAT ION VIDE ASSESSMENT ORDER DATED 21.12.2011 HELD THAT THE EXP ENDITURE INCURRED ON THE REPLACEMENT OF MACHINERY IN SPINNIN G MILLS IS CAPITAL IN NATURE. IN SUPPORT OF HIS FINDINGS THE ASSESSING ITA NO.1870/MDS/2012 3 OFFICER RELIED ON THE FOLLOWING JUDGEMENTS OF THE H ONBLE SUPREME COURT OF INDIA:- I) CIT VS. SARAVANA SPINNING MILLS PVT.LTD., 293 ITR 201 II) TRAVANCORE COCHIN CHEMICALS LTD. VS. CIT., 1977 CTR (SC) 148 III) LAKSHMI SUGAR MILLS (P) LTD. VS. CIT., AIR (19 72) SC 159 IV) RAMARAJU SURGICAL COTTON MILLS LTD. 294 ITR 32 8 V) CIT VS. M/S. MANGAYARKARASI MILLS P.LTD., 315 I TR 114(SC) VI) CIT VS. M/S. HINDUSTAN TEXTILES SLP (CIVIL) NO. 2037 OF 2009 DECIDED ON 3.11.2009. THE ASSESSING OFFICER FURTHER LEVIED INTEREST UNDER SECTION 220(2) AND UNDER SECTION 234B AND 234C OF THE ACT. NOW, BEFORE THE CIT(A), THE ASSESSEE HAS ASSAILED THE ASSESSMENT ORDER DATED 21.12.2011 ON THE FOLLOWING GROUNDS:- I) DISALLOWANCE MADE BY THE ASSESSING OFFICER ON TH E EXPENDITURE INCURRED ON REPLACEMENT OF MACHINERY; II) LEVY OF INTEREST UNDER SECTION 220(2) OF THE IN COME TAX ACT, 1961; & ITA NO.1870/MDS/2012 4 III) LEVY OF INTEREST UNDER SECTION 234B & 234C OF THE ACT. GROUND NO. 2 AND 3 OF THE ASSESSEE WAS OUT-RIGHTLY DISMISSED BY THE CIT(A). THE CIT(A) HELD THAT LEVY OF INTER EST UNDER SECTION 220(2) IS NOT APPELLABLE. AS REGARDS INTE REST UNDER SECTION 234B & 234C, IT IS MANDATORY. HOWEVER, WIT H REGARD TO GROUND NO.1, THE CIT(A) PARTLY ALLOWED THE EXPEN DITURE AS REVENUE . THE CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE TO THE EXTENT OF ` 40,17,571/- AS REVENUE EXPENDITURE UNDER SECTION 37 OF THE ACT. TH E BALANCE AMOUNT INCURRED FOR REPLACEMENT OF MACHINERY WAS HELD AS CAPITAL EXPENDITURE, THE ASSESSING OFFICER WAS DIRE CTED TO ALLOW DEPRECIATION THEREON AS PER THE PROVISIONS OF THE ACT. AGGRIEVED AGAINST THE ORDER OF THE CIT(A), THE ASS ESSEE HAS COME IN SECOND APPEAL BEFORE THE TRIBUNAL. 4. SHRI K.RAVI, ADVOCATE APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE CIT(A) HAS ERRED IN UPH OLDING THE FINDINGS OF THE ASSESSING OFFICER IN DISALLOWIN G EXPENDITURE TO THE TUNE OF ` 5,79,90,214/- INCURRED FOR REPLACEMENT OF MACHINERY CLASSIFYING IT AS A CAPIT AL EXPENDITURE. THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ITA NO.1870/MDS/2012 5 CHANGE OR REPLACEMENT OF TEXTILE MACHINERY HAS NOT INCREASED THE PRODUCTION CAPACITY AND THERE IS NO ENDURING BE NEFIT FROM REPLACEMENT OF MACHINERY. THE COUNSEL CONTENDED TH AT THE REPLACEMENTS WERE NECESSITATED DUE TO CHANGING TECH NOLOGY AND WEAR AND TEAR OF MACHINERIES. THE OLD MACHINERY AND TECHNOLOGY WERE AFFECTING THE PRODUCTIVITY AND PROF ITABILITY OF THE ASSESSEE. THE EXPENDITURE WAS INCURRED IN ORDE R TO MAINTAIN THE VERY BUSINESS RUNNING. HE FURTHER CONT ENDED THAT AS AGAINST TOTAL VALUE OF MACHINERY OF ` 10,629.79 LAKHS, THE VALUE OF REPLACED MACHINERY IS ` 620.08 LAKHS ONLY. THUS, THE VALUE OF REPLACED MACHINERY AS COMPARED TO THE VALU E OF TOTAL MACHINERY WORKS OUT TO 5.83% ONLY. THEREFORE, IT CA NNOT BE SAID THAT THERE IS A SUBSTANTIAL REPLACEMENT OF MAC HINERY. THE COUNSEL FURTHER STATED THAT THE AUTHORITIES BEL OW HAVE NOT GIVEN THEIR SPECIFIC FINDING WITH REGARD TO ENDURIN G BENEFIT BY VIRTUE OF REPLACEMENT OF MACHINERY PARTS. THEREFORE , BY NO STRETCH OF IMAGINATION, IT CAN BE SAID THAT THE AMO UNT INCURRED ON REPLACEMENT OF MACHINERY CAN BE TERMED AS CAPITA L IN NATURE. IN ORDER TO SUPPORT HIS CONTENTIONS, THE C OUNSEL RELIED ON THE JUDGEMENT OF THE HONBLE MADRAS HIGH COURT I N THE ITA NO.1870/MDS/2012 6 CASE OF CIT VS. SUPER SPINNING MILLS LTD., IN TAX CASE APPEAL NO.1073 OF 2010 DECIDED ON 10.01.2011. THE COUNSEL FURTHER RELIED ON THE JUDGEMENT OF THE HON BLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. HINDU STAN TEXTILES REPORTED AS 230 CTR 105(SC). 5. THE SECOND GROUND ON WHICH THE ASSESSEE HAS ASSA ILED THE ORDER OF THE CIT(A) IS WITH REGARD TO LEVY OF I NTEREST UNDER SECTION 220(2) OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT INTEREST UNDER SECTION 220( 2) CANNOT BE CHARGED FROM THE DATE OF ORIGINAL ASSESSMENT OR DER AS THE SAME WAS SET ASIDE AND THE TRIBUNAL HAD DIRECTED T HE ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH. THE ASSESSEE IS LIABLE TO PAY INTEREST UNDER SECTION 220(2) ONLY I F THE ASSESSEE FAILS TO PAY THE AMOUNT DEMANDED WITHIN T HIRTY DAYS OF SERVICE OF DEMAND NOTICE ISSUED IN ACCORDAN CE WITH THE SUBSEQUENT /FRESH ASSESSMENT ORDER. IN SUPPORT OF HIS CONTENTION, THE COUNSEL RELIED ON THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CH IKA OVERSEAS P.LTD., REPORTED AS 247 CTR 134(BOM). ITA NO.1870/MDS/2012 7 6. ASSAILING THE LEVY OF INTEREST UNDER SECTION 234 B AND 234C THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT INTEREST UNDER AFORESAID SECTIONS CANNOT BE LEVIED UNLESS THE SAME IS MENTIONED IN THE ASSESSMENT ORDER. NO SUCH INTEREST WAS CHARGED IN THE ORIGINAL ASSESSMENT ORDER, THERE FORE, NOW INTEREST CANNOT BE CHARGED UNDER SECTION 234B AND 2 34C OF THE ACT. THE LEARNED COUNSEL IN ORDER TO SUPPORT HI S CONTENTIONS RELIED ON THE JUDGEMENT OF THE HONBLE ALLAHABAD HIGH COURT IN ITA NO.81 OF 2002 IN THE CASE OF CIT VS. M/S. DEEP AWADH HOTELS (P) LTD., DECIDED ON 3.8.2011 AND THE JUDGEMENT OF THE HONBLE HIGH COURT OF UTTARAKHAND IN ITA NO.15 OF 2006 IN THE CASE OF CIT VS. M/S.DEHRADUN C LUB LTD. DECIDED ON 14 TH OCTOBER, 2011. 7. ON THE OTHER HAND, SHRI ANIRUDH RAI APPEARING ON BEHALF OF THE REVENUE VEHEMENTLY SUPPORTING THE ORD ER OF THE CIT(A) SUBMITTED THAT THE REPLACEMENT OF MACHINERY CARRIED OUT BY THE ASSESSEE HAS SUBSTANTIALLY IMPROVED THE FUNCTIONING AND QUALITY OF THE MACHINERY. THE DR CO NTENDED THAT EVEN THOUGH THE PRODUCTION CAPACITY HAS REMAIN ED THE SAME YET, THE EXPENDITURE INCURRED ON REPLACEMENT CANNOT ITA NO.1870/MDS/2012 8 BE ALLOWED AS REVENUE EXPENDITURE. HOWEVER, THE ASS ESSEE IS ENTITLED TO CLAIM DEPRECIATION ON IT AS THE EXPENDI TURE IS CAPITAL IN NATURE. IN ORDER TO SUPPORT HIS CONTENTI ONS, THE DR RELIED ON THE ORDERS OF THE TRIBUNAL IN THE CASE OF ITA NO.476/MDS/2012 IN THE CASE OF M/S. SRI BALASUBRAMA NIA MILLS LTD., DECIDED ON 5.11.2012 AND IN ITA NO.754/ MDS/2012 IN THE CASE OF THE KUMARAN MILLS LTD. DECIDED ON 12 .09.2012. 8. WITH REGARD TO CHARGING OF INTEREST UNDER SECTIO N 220(2), THE DR SUBMITTED THAT THE ORDER IS NOT APPEALABLE. IN ORDER TO SUPPORT HIS CONTENTION, THE DR RELIED ON THE JUDGEM ENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SU RESH GOKULDAS REPORTED AS 229 ITR 721(MAD). THE DR FURTH ER CONTENDED THAT INTEREST HAS TO BE CHARGED FROM THE DATE OF ORIGINAL ASSESSMENT. IN SUPPORT OF HIS SUBMISSIONS, THE DR RELIED ON THE JUDGEMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF SUPER SPINNING MILLS LTD. VS. CIT REPOR TED AS 244 ITR 814(MAD). HE FURTHER CONTENDED THAT INTEREST UN DER SECTION 234B AND 234C IS CONSEQUENTIAL AND THEREFO RE, NO SPECIFIC ORDER NEED TO BE PASSED. IN SUPPORT OF HIS ITA NO.1870/MDS/2012 9 SUBMISSIONS, HE RELIED ON THE JUDGEMENT OF THE HON BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS . VIJAY YARN & TEXTILES P. LTD., REPORTED AS 303 ITR 219(P & H). 9. TO CONTROVERT THE SUBMISSIONS OF THE DR, THE COU NSEL FOR THE ASSESSEE SUBMITTED THAT ORDER OF LEVYING IN TEREST UNDER SECTION 220(2) IS AN APPEALABLE ORDER. TO SUPPORT H IS SUBMISSION, THE COUNSEL FOR THE ASSESSEE RELIED ON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF VIKRANT TYRES LTD. VS. FIRST ITO REPORTED AS 247 IT R 821(SC). 10. WE HAVE HEARD THE SUBMISSIONS MADE BY BOTH THE PARTIES. WE HAVE ALSO PERUSED THE ORDERS OF THE AUT HORITIES BELOW AND THE JUDGEMENTS/ORDERS CITED BY THE RESPEC TIVE PARTIES TO SUPPORT THEIR CONTENTIONS. THE ISSUE R EGARDING WHETHER THE EXPENDITURE INCURRED ON REPLACEMENT OF TEXTILE MACHINERY IS REVENUE OR CAPITAL IN NATURE HAS CROPP ED UP SEVERAL TIMES. THE ISSUE HAS BEEN DECIDED ON THE FA CTS AND CIRCUMSTANCES OF EACH CASE BY FOLLOWING THE PRINCIP LES LAID DOWN BY THE HONBLE SUPREME COURT OF INDIA IN VARI OUS JUDGEMENTS. THE CASES ADJUDICATED FROM TIME TO TI ME HAVE EVOLVE VARIOUS TESTS TO DEMARCATE LINE BETWEEN THE CAPITAL ITA NO.1870/MDS/2012 10 AND REVENUE EXPENDITURE. EVERY CASE HAS TO BE DECID ED ON ITS OWN FACTS KEEPING IN MIND BROAD PICTURE OF THE WHOL E OPERATION IN RESPECT OF WHICH THE EXPENDITURE HAS B EEN INCURRED. THE HONBLE SUPREME COURT IN EMPIRE JUTE COMPANY LTD., VS. CIT REPORTED AS 124 ITR 1(SC) HA S OBSERVED THAT THIS TEST, AS THE PARENTHETICAL CLAUSE SHOWS, MUST YIELD WHERE THERE ARE SPECIAL CIRCUMSTANCES LEADING TO A CONTRARY CONCLUSION. THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT T HAT THERE IS NO ENDURING BENEFIT FROM THE REPLACEMENT O F MACHINERY. THE COUNSEL FOR THE ASSESSEE HAS RELIED ON THE JUDGEMENT OF THE HONBLE MADRAS HIGH COURT IN THE C ASE OF SUPER SPINNING MILLS LTD. (SUPRA) TO SAY THAT IT IS ESSENTIAL THAT THERE SHOULD BE A SPECIFIC FINDING WITH REGARD TO E NDURING NATURE OF THE ASSETS OR THE INCREASE IN THE PRODUCT ION CAPACITY BY VIRTUE OF REPLACEMENT OF MACHINERY PARTS. 11. ON THE OTHER HAND, THE D.R. RELIED ON THE ORDER OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SR I BALASUBRAMANIA MILLS LTD.(SUPRA) AND THE KUMARAN MI LLS LTD., ITA NO.1870/MDS/2012 11 (SUPRA). THE TRIBUNAL HAS RELIED ON THE JUDGEMENT O F THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. MA DURA COATS REPORTED AS 205 TAXMAN 357 (MADRAS), WHEREIN IT HAS BEEN HELD THAT WHETHER THE MILL IS AN INTEGRATED WHOLE OR NOT, WHETHER THE REPLACEMENT OF MACHINES RESULTED IN INC REASED CAPACITY OR NOT, WILL HAVE NO BEARING AND WHEN ANY ITEM BELONGING TO THE BLOCK IS REMOVED, ITS VALUE IS RED UCED AND IF ANY NEW ITEM COMES IN PLACE, ITS VALUE IS ADDED TO THE BLOCK. THE CIT(A) IN HIS ORDER HAS DEALT WITH THIS ISSUE I N DETAIL. AFTER EXAMINING THE DETAILS OF MACHINERY REPLACED, THE C IT(A) CONCLUDED THAT EXPENDITURE INCURRED ON MACHINERY TO THE TUNE OF ` 40,17,571/- IS REVENUE IN NATURE AND IS ALLOWABLE UNDER SECTION 37 OF THE ACT. THE REMAINING EXPENDITURE IN CURRED ON REPLACEMENT OF MACHINERY HAS EITHER RESULTED IN GIV ING ENDURING BENEFIT OR UPGRADATION OF THE EXISTING MAC HINERY OR REPLACEMENT OF THE WORN OUT MACHINERY WHICH IS CAPI TAL IN NATURE. WE CONCUR WITH THE FINDINGS OF THE CIT(A) O N THE ISSUE. WE ARE OF THE CONSIDERED OPINION THAT, I N THE PRESENT CASE THE ASSESSEE HAS INCURRED EXPENDITURE FOR THE EFFICIENT WORKING OF THE EXISTING MACHINERY. THE EX PENDITURE ITA NO.1870/MDS/2012 12 INCURRED ON REPLACEMENT OF PARTS OF THE EXISTING MA CHINERY IN ORDER TO MAKE THE MACHINERY WORK MORE EFFICIENTLY H AS TO BE CAPITALIZED. THE ASSESSEE IS ENTITLED TO CLAIM DEP RECIATION ON THE SAME IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. OUR VIEW IS FURTHER FORTIFIED BY THE JUDGEMENT OF THE H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MADURA CO ATS (SUPRA) WHEREIN IT HAS BEEN HELD AS UNDER:- 13. WITH REGARD TO THE THIRD SUBSTANTIAL QUESTION OF LAW, IT IS SUBMITTED BY THE LEARNED COUNSEL FOR THE APPELLANT THAT WHEN EACH OF THE MACHINERY IN QUESTION SUCH AS RING FRAMES, DRAW FRAMES AND SPEED FRAME IS PURCHASED FOR THE FIRST TIME, THEN IT IS A CAPITAL ASSET, ON WHIC H DEPRECIATION SHOULD BE GRANTED. WHEREAS, IT IS SUBMITTED THAT THE SALE OF A WORN OUT MACHINERY AND REPLACEMENT THEREOF BY NEW MACHINERY CAN ONLY BE TREATED AS REDUCTION AND ADDITION TO THE BLOCK OF ASSETS, WHICH IS A PART OF REPLACEMENT. I T IS ALSO SUBMITTED THAT WHILE UNDER THE LAW, AS IT STOOD PRIOR TO 1988-89, THE FACT OF TREATING THE ENTIRE MILL AS AN INTEGRATED UNIT MAY HAVE HAD THE EFFECT OF TREATING THE REPLACEMENT OF MACHINERY AS REPLACEMENT OF PARTS OF A LARGER WHOLE AND THUS TREATED AS REVENUE EXPENDITURE AND ONCE THE CONCEPT OF BLOCK OF ASSETS HAS BEEN BROUGHT IN BY THE PARLIAMENT FROM THE ASSESSMENT YEAR 1988- 89,WHETHER THE MILL IS AN INTEGRATED WHOLE OR NOT, WHETHER THE REPLACEMENT OF MACHINES RESULTED IN INCREASED CAPACITY OR NOT, WILL HAVE NO BEARING AND WHEN ANY ITEM BELONGING TO THE BLOCK IS REMOVED, ITS VALUE IS REDUCED AND IF ANY NEW ITEM COMES IN ITS PLACE, ITS VALUE IS ADDED TO THE BLOCK . IN VIEW OF THE ABOVE, IT IS SUBMITTED THAT THE THIR D ITA NO.1870/MDS/2012 13 SUBSTANTIAL QUESTION OF LAW IS ALSO COVERED AS PER THE JUDGMENT OF THIS COURT DATED 25.04.2011 IN TAX CASE (APPEALS) NOS. 71 & 72 OF 2008. IN VIEW OF THE SAID SUBMISSION MADE BY THE LEARNED COUNSEL FOR THE APPELLANT, WE HOLD THAT THE THIRD QUESTION OF LAW IS ALSO ANSWERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. IN VIEW OF THE ABOVE DISCUSSION, WE UPHOLD THE FIN DINGS OF THE CIT(A) ON THE ISSUE AND DISMISS THIS GROUND OF APPE AL OF THE ASSESSEE. 12. THE NEXT ISSUE RAISED BY THE ASSESSEE IS WITH R EGARD TO LEVY OF INTEREST UNDER SECTION 220(2) OF THE ACT. THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 21.12 .2011 HAS LEVIED INTEREST UNDER SECTION 220(2) FOR THE P ERIOD OF 35 MONTHS FROM 1.2.2009 TO 31.12.2011. 13. THE COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT SINCE THE ORIGINAL ASSESSMENT ORDER WAS SET ASIDE AND THE TRIBUNAL HAD REMANDED THE MATTER BACK TO THE ASSESSING OFFIC ER FOR DECIDING THE ISSUE AFRESH AFTER TAKING INTO CONSIDE RATION THE JUDGEMENT PASSED BY THE HONBLE SUPREME COURT OF IN DIA, INTEREST UNDER SECTION 220(2) CANNOT BE LEVIED FROM THE DATE OF ORIGINAL ASSESSMENT ORDER I.E. DATED 30.12.2008. WHEREAS ITA NO.1870/MDS/2012 14 THE LEARNED DR HAS VEHEMENTLY ARGUED THAT LEVY OF I NTEREST UNDER SECTION 220(2) CANNOT BE A SUBJECT MATTER OF APPEAL AS THE SAME IS NOT APPELLABLE. TO SUPPORT HIS CONTENTI ONS THE DR HAS RELIED ON THE JUDGEMENT OF THE HONBLE JURIS DICTIONAL HIGH COURT IN THE CASE OF CIT VS. SURESH GOKULDAS (SUPRA) . 14. A PERUSAL OF THE AFORESAID JUDGEMENT WOULD SHOW THAT THE HONBLE HIGH COURT HAS HELD THAT THE ASSESSEE W AS ASKED TO PAY INTEREST UNDER SECTION 220(2) OF THE ACT BY DEMAND NOTICE ISSUED UNDER SECTION 156. NOTICE OF DEMAND I SSUED UNDER SECTION 156 CANNOT BE CONSIDERED TO BE AN ORD ER. THEREFORE, IF ANY MISTAKE HAS OCCURRED THEREIN, IT CAN BE CORRECTED BY AN ADMINISTRATIVE ORDER. ANY ORDER PA SSED BY INCOME TAX OFFICER UNDER SECTION 154 FOR RECTIFYING ANY MISTAKE IN THE ORIGINAL DEMAND NOTICE UNDER SECTION 154 IS NON-EST IN THE EYE OF LAW. THEREFORE, NO APPELLATE PROCEED INGS LIE AGAINST SUCH ORDER. THE RATIO LAID DOWN BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF SURESH GOKULDAS (S UPRA) IS NOT APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF TH E PRESENT CASE. IN THE PRESENT CASE, THE ASSESSING OFFICER HA S SPECIFICALLY MENTIONED IN THE ASSESSMENT ORDER PASS ED UNDER ITA NO.1870/MDS/2012 15 SECTION 143(3) READ WITH SECTION 254 OF THE ACT ABO UT THE LEVY OF INTEREST UNDER SECTION 220(2). THERE IS NO BAR F OR ASSAILING ANY ISSUE WHICH IS PART OF THE ASSESSMENT ORDER. TH EREFORE, THE CONTENTION OF THE DR THAT INTEREST LEVIED U/S.2 20(2) IS NOT APPELLABLE IN THE PRESENT CASE IS NOT TENABLE. 15. MOREOVER, IN CIRCULAR NO.334 DATED 3.4.1982 TH E DEPARTMENT HAS CLARIFIED THAT WHERE AN ASSESSMENT ORDER IS CANCELLED U/S.146 OR CANCELLED/SET ASIDE BY AN APP ELLATE/ REVISIONAL AUTHORITY AND THE CANCELLATION/SETTING A SIDE BECOMES FINAL, NO INTEREST UNDER SECTION 220(2) CA N BE CHARGED PURSUANT TO THE ORIGINAL DEMAND NOTICE. THE NECESSARY COROLLARY OF THIS POSITION WILL BE THAT E VEN WHEN THE ASSESSMENT IS REFRAMED, INTEREST CAN BE CHARGED ONL Y AFTER THE EXPIRY OF 35 DAYS FROM THE DATE OF SERVICE OF D EMAND NOTICE PURSUANT TO SUCH FRESH ASSESSMENT ORDER. 16. THE ASSESSING OFFICER HAS LEVIED INTEREST UNDER THE PROVISIONS OF SECTION 220(2) FROM THE DATE OF PASSI NG OF THE ORIGINAL ASSESSMENT ORDER WHEREAS THE ORIGINAL ASSE SSMENT ORDER WAS SET ASIDE BY THE TRIBUNAL AND THE SAME W AS REMITTED BACK TO THE ASSESSING OFFICER FOR DECIDING THE MATTER ITA NO.1870/MDS/2012 16 AFRESH. SINCE A FRESH ASSESSMENT ORDER HAS BEEN PA SSED BY THE ASSESSING OFFICER, THE DEMAND NOTICE PERIOD SPECIFIED UNDER SECTION 220(1) HAS TO BE TAKEN INTO CONSIDER ATION FROM THE DATE OF PASSING OF THE FRESH ASSESSMENT ORDER. THE ASSESSEE IS LIABLE TO PAY DEMAND WITHIN THIRTY DAYS FROM THE SERVICE OF THE DEMAND NOTICE IN PURSUANCE OF THE AS SESSMENT ORDER DATED 21.12.2011. IF THE ASSESSEE FAILS TO PA Y THE AMOUNT DEMANDED WITHIN THE PERIOD SPECIFIED UNDER S ECTION 220(1), THE ASSESSEE IS LIABLE TO PAY INTEREST U/S. 220(2) OF THE ACT. ON THIS ISSUE, WE DO NOT AGREE WITH THE FINDIN GS OF CIT(A). OUR VIEW IS FURTHER FORTIFIED BY THE HONBL E BOMBAY HIGH COURT IN THE CASE OF CIT VS. CHIKA OVERSEAS (P ) LTD. (SUPRA) AND THE JUDGEMENT OF THE HONBLE SUPREME CO URT OF INDIA IN THE CASE OF VIKRANT TYRES LTD. (SUPRA). IN VIEW OF OUR ABOVE FINDING, THIS GROUND OF APPEAL OF THE ASSESSE E IS ALLOWED. 17. THE THIRD ISSUE IN THE APPEAL IS WITH REGARD TO LEVY OF INTEREST UNDER SECTION 234B & 234C OF THE ACT. THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE ORIGINAL ASS ESSMENT ORDER NO SUCH INTEREST WAS CHARGED. NO REASON WHAT SOEVER ITA NO.1870/MDS/2012 17 WAS GIVEN FOR LEVY OF INTEREST UNDER SECTION 234B & 234C OF THE ACT BY THE ASSESSING OFFICER. WITHOUT DISCUSSI ON INTEREST CANNOT BE LEVIED UNDER SECTIONS 234B & 234C.THE D.R . HAS STATED THAT THERE IS NO NEED TO PASS A SPEAKING ORD ER FOR LEVY OF INTEREST UNDER SECTION 234B AND 234C . THE INTER EST HAS TO BE LEVIED AS IT IS MANDATORY IN NATURE. 18. WE ARE IN AGREEMENT WITH THE SUBMISSIONS OF THE DR THAT THERE IS NO NEED TO PASS A SPEAKING ORDER FOR CHARGING OF INTEREST U/S.234B & 234C AS IT IS MANDATORY IN NATU RE. THE INTEREST UNDER SECTION 234B & 234C IS CHARGED FOR CONTRAVENING THE PROVISIONS OF THE ACT I.E. NON-PAY MENT OF ADVANCE TAX WITHIN THE STIPULATED TIME. THE PROVISI ON IS COMPENSATORY IN NATURE INASMUCH AS THE REVENUE IS D EPRIVED OF SUCH PAYMENT WHICH SHOULD NOT HAVE BEEN MADE ON AN EARLIER DATE. THE INTEREST UNDER SECTION 234B IS C HARGED FOR THE PERIOD OF DELAY IN RECEIVING THE PAYMENT OF TAX . THERE IS NO INFIRMITY IN THE ORDER OF CIT(A) ON THE ISSUE, THEREFORE, WE UPHOLD THE SAME AND DISMISS THIS GROUND OF APPEAL O F THE ASSESSEE. ITA NO.1870/MDS/2012 18 19. IN VIEW OF THE ABOVE, THE APPEAL OF THE ASSESSE E IS PARTLY ALLOWED IN THE AFORESAID TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON WEDNESDAY, T HE 20 TH DAY OF FEBRUARY, 2013 AT CHENNAI. SD/- SD/- ( N.S. SAINI ) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 20 TH FEBRUARY, 2013. SOMU COPY TO: (1) APPELLANT (4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.