PFIZER LTD ( AS SUCCESSOR TO PARKE DAVIS (I) LTD), MUMBAI V. ACIT CIR 8(2), MUMBAI

ITA 3094/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8589 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 10-10-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 20-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: M D THAKORE
• Keywords: Opportunity of being heard; Bonafide belief; Retrospective amendment; Question of law; Scheme of amalgamation; Revised return
• Section: 143(3); 234B; 115JB; 6; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL (J.M.) AND SHRI D. KARUNAKARA RAO (A.M.) ITA NO. 3094/MUM /2011 ASSESSMENT YEAR : 2002-03 PFIZER LIMITED (AS SUCCESSOR TO PARKE DAVIS (INDIA) LIMITED), 5, PATEL ESTATE, S.V. ROAD, JOGESHWARI (WEST), MUMBAI 400 102. PAN AABCP4210H VS. ASSTT. COMMISSIONER OF INCOME TAX 8(2), R.NO. 216-A, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. (APPELLANT) (RESPONDENT) ITA NO. 4063/MUM /2011 ASSESSMENT YEAR : 2002-03 ASSTT. COMMISSIONER OF INCOME TAX 8(2), R.NO. 216-A, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. VS. M/S PARKE DAVIS (INDIA) LTD., 5, PATEL ESTATE, S.V. ROAD, JOGESHWARI (WEST), MUMBAI 400 102. PAN AABCP4210H (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI M.D. THAKORE DEPARTMENT BY : SHRI OM PRAKASH DATE OF HEARING 10-10-2012 DATE OF PRONOUNCEMENT 19-10-2012 O R D E R PER DINESH KUMAR AGARWAL, J.M. THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENU E ARE DIRECTED AGAINST THE ORDER DTD. 7-1-2011 PASSED BY THE LD. C IT(A) -17, MUMBAI FOR ITA NO. 3094/MUM/2011 & 4063/MUM/2011 2 THE A.Y. 2002-03. BOTH THESE APPEALS ARE DISPOSED O F BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE A SSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING AND MANUFACTURIN G AND SALE OF DRUGS, PHARMACEUTICALS AND CONSUMER HEALTH CARE PRODUCTS. THE RETURN WAS FILED DECLARING TOTAL INCOME AT RS. 28,32,08,540/- WHICH WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (THE ACT) ON 19-2-2003. SUBSEQUENTLY, THE ASSESSEE FILED A REVISED RETURN O N 31-3-2004 FOR THE PERIOD 1-4-2001 TO 30-11-2011 DECLARING TOTAL INCOM E OF RS. 15,73,34,117/- ACCOMPANIED BY AUDIT REPORT ALONG W ITH AUDITED BALANCE SHEET AND P&L ACCOUNT. THE SAID REVISED RETURN WAS FILED IN ACCORDANCE WITH THE SCHEME OF AMALGAMATION OF THE ASSESSEE COM PANY WITH PFIZER LTD., AS PER THE SCHEME APPROVED BY THE MEMBERS AND SUBSEQUENTLY SANCTIONED BY THE HONBLE BOMBAY HIGH COURT, THE SC HEME BEING OPERATIVE WITH RETROSPECTIVE EFFECT FROM 1-12-2001. HOWEVER, THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS. 15,90, 37,220/- VIDE ORDER DTD. 31-3-2005 PASSED U/S 143(3) OF THE ACT. SUBSE QUENTLY, THE ASSESSEE VIDE ITS LETTER DTD. 3-5-2005 HAS POINTED OUT CERTA IN MISTAKES THAT THE INCOME ERRONEOUSLY ROUNDED OF A LOWER INCOME AND CR EDIT OF TDS AND PAYMENT OF SELF ASSESSMENT TAX HAVE NOT BEEN ALLOWE D. THE A.O. PASSED THE ORDER U/S 154 OF THE ACT REVISING THE INCOME AT RS. 15,99,37,220/- ITA NO. 3094/MUM/2011 & 4063/MUM/2011 3 AND DEMAND OF RS. 19,79,123/- INCLUDING OF INTEREST U/S 234B, 234C AND 234D OF THE ACT. 3. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE HA S CHALLENGED THE LEVY OF INTEREST U/S 234D OF THE ACT. VIDE LETTER D TD. 27-4-2006 THE ASSESSEE TAKEN ADDITIONAL GROUNDS OF APPEAL CHALLEN GING THE LEVY OF INTEREST U/S 234B & 234C OF THE ACT. THE LD. CIT(A) ADMITTED THE ADDITIONAL GROUNDS OF APPEAL. THE LD. CIT(A) ON TH E ISSUE OF LEVY OF INTEREST U/S 234D, FOLLOWED THE DECISION OF THE SPE CIAL BENCH OF THE TRIBUNAL IN ITO VS. EKTA PROMOTERS PVT. LTD. (113 I TD 719) AND DELETED THE LEVY OF INTEREST U/S 234D RS. 16,47,842/-. 4. WITH REGARD TO THE LEVY OF INTEREST U/S 234B OF THE ACT, IT WAS SUBMITTED BY THE ASSESSEE THAT THE ORIGINAL RETURN OF INCOME WAS FILED ON 3LST OCTOBER, 2002, CLAIMING REFUND OF RS 1,39,59,8 24/- ON ACCOUNT OF TAXES DEDUCTED AT SOURCE AND ADVANCE TAXES PAID DUR ING THE FINANCIAL YEAR. ACCORDINGLY, ASSESSEE HAD PAID TAXES MORE THA N THE TAX LIABILITY. THEREFORE, PROVISIONS OF SECTION 234B HAD NO APPLIC ATION IN CASE OF ASSESSEE AT THE TIME OF ORIGINAL RETURN FILED. HOWE VER, SUBSEQUENTLY DUE TO AMALGAMATION OF THE COMPANY WITH PFIZER LTD. WIT H EFFECT FROM IST DECEMBER, 2001 ASSESSEE HAD FILED REVISED RETURN FO R THE PREVIOUS PERIOD FROM 1 ST APRIL 2001 TO 30 TH NOVEMBER 2001 AND CONSIDERED CREDIT FOR TAXES PAID DURING THIS PERIOD. THE INCOME WITH EFFE CT FROM 1 ST DECEMBER 2001 TO 31 ST MARCH, 2002 AND CORRESPONDING TAXES PAID DURING TH IS ITA NO. 3094/MUM/2011 & 4063/MUM/2011 4 PERIOD HAD BEEN INCLUDED IN THE RETURN OF INCOME OF PFIZER LTD. AS PER THE REVISED RETURN ASSESSEE HAD PAID SELF-ASSESSMENT TA X OF RS.142,79,220/- BEING THE TAXES DEDUCTED AT SOURCE AND ADVANCE TAXE S FOR THE PERIOD 1 ST DECEMBER 2001 ONWARDS WAS TRANSFERRED TO PFIZER LTD . HENCE, THE SHORTFALL OF TAXES PAID AS PER IN REVISED RETURN WA S NOT ON ACCOUNT OF SHORT TAXES PAID BY ASSESSEE BUT DUE TO THE ALLOCAT ION OF INCOME AND TAXES BETWEEN TWO COMPANIES I.E. ASSESSEE AND PFIZE R LTD. IN ACCORDANCE WITH THE SCHEME OF AMALGAMATION SANCTIONED BY THE H ONBLE BOMBAY HIGH COURT. THEREFORE, THE SHORTFALL WAS DUE TO CIR CUMSTANCES BEYOND THE CONTROL OF ASSESSEE. TO SUPPORT THIS CONTENTION THA T ASSESSEE WAS NOT LIABLE TO INTEREST ON TAX ON FUTURE EVENTS WHICH WE RE IMPOSSIBLE OF ASCERTAINMENT OR CANNOT BE FORESEEN, THE RELIANCE W AS ALSO PLACED ON THE FOLLOWING DECISIONS:- (I) CIT VS. REVATHI EQUIPMENTS LTD. (2008) 298 ITR 67 (MAD.), (II) AAR HOECHST GMHH, IN RE (2007) 289 ITR 312, (III) HARYANA WAREHOUSING CORPORATION VS. DEPUTY CI T (2001) 252 ITR (AT)34 (DEL.), (IV) PRIYANKA OVERSEAS LTD. VS. DEPUTY CIT (2001) 79 ITD 353 (DEL), AND (V) CIT VS. J.H. GOLTA (1985) 56 ITR 323 (SC). IT WAS, THEREFORE, CONTENDED THAT THE INTEREST LEVI ED U/S 234B WAS NOT WARRANTED. THE LD. CIT(A) AFTER CONSIDERING THE SUB MISSION OF THE ASSESSEE, HOWEVER, HELD THAT THE LEVY IS AUTOMATIC AND MANDATORY WHEN ITA NO. 3094/MUM/2011 & 4063/MUM/2011 5 THE APPELLANT HAS COMMITTED THE DEFAULT. REGARDING THE ARGUMENT THAT THE SHORTFALL WAS DUE TO CIRCUMSTANCES BEYOND THE C ONTROL OF THE APPELLANT, THE LD. CIT(A) HELD THAT THE SAME CAN ON LY BE CONSIDERED IN WAIVER PROCEEDING AND ACCORDINGLY UPHELD THE LEVY O F INTEREST U/S 234B OF THE ACT. 5. ON THE ISSUE OF LEVY OF INTEREST U/S 234C OF THE ACT, THE LD. CIT(A) DIRECTED THE A.O. TO VERIFY THE COMPUTATION OF INTE REST AND COMPUTE THE SAME IN ACCORDANCE WITH THE PROVISION OF LAW. 6. BEING AGGRIEVE WITH THE ORDER OF THE LD. CIT(A) THE ASSESSEE AND THE REVENUE BOTH ARE IN APPEAL BEFORE US. ITA NO. 3094/MUM/2011 (ASSESSEES APPEAL) 7. THE SOLE GROUND TAKEN BY THE ASSESSEE IS AGAINST THE LEVY OF INTEREST AMOUNTING TO RS. 35,94,203/- CHARGED U/S 2 34B OF THE ACT. 8. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFOR E THE LD. CIT(A) FURTHER SUBMITS THAT AS PER THE ORIGINAL RETURN OF INCOME FILED BY THE ASSESSEE, THERE WAS A REFUND OF RS. 1,39,59,824/-. THEREAFTER, THE ASSESSEE FILED REVISED RETURN ON 31-3-2004 FOR THE PERIOD FROM IST APRIL, 2001 TO 30 TH NOVEMBER 2001 DECLARING TOTAL INCOME OF RS. 15,73, 34,117 IN ACCORDANCE WITH THE SCHEME OF AMALGAMATION OF TH E COMPANY WITH PFIZER LTD. AS APPROVED BY THE MEMBERS AT A COURT C ONVENED MEETING HELD ITA NO. 3094/MUM/2011 & 4063/MUM/2011 6 ON 21 ST AUGUST, 2002 AND SUBSEQUENTLY SANCTIONED BY THE H ONBLE HIGH COURT OF JUDICATURE AT BOMBAY VIDE ITS ORDER DTD. 7 TH FEBRUARY 2003 WITH RETROSPECTIVE EFFECT FROM 1-12-2001. HE FURTHER SUB MITS THAT THE APPEAL FILED BY FEW DESCENT SHAREHOLDERS AGAINST THE ABOVE APPROVAL BY THE HONBLE BOMBAY HIGH COURT WAS DISMISSED ON 23-7-200 3. THE SPECIAL LEAVE PETITION FILED BY THE DISSENTING SHAREHOLDERS WAS ALSO DISMISSED ON 8-9-2003. HE FURTHER SUBMITS THAT THE SHORTFALL WAS DUE TO CIRCUMSTANCES BEYOND THE CONTROL OF THE ASSESSEE, T HEREFORE, INTEREST U/S 234B IS NOT LEVIABLE. THE RELIANCE WAS ALSO PLACED ON THE FOLLOWING DECISIONS:- 1. EMAMI LTD. V. CIT, (2011) 200 TAXMAN 326 (CAL.) : (2011)337 ITR 470(CAL.) 2. CIT VS. REVATHI EQUIPMENTS LTD. (2008) 298 ITR 67 (MAD.), 3. PRIYANKA OVERSEAS LTD. VS. DEPUTY CIT (2001) 79 ITD 353 (DEL), 4. HARYANA WAREHOUSING CORPORATION VS. DEPUTY CIT ( 2001) 252 ITR (AT)34 (DEL.), 5. PRIME SECURITIES LTD. V. ACIT (INV.) (2011) 333 ITR 464(BOM). IN THE LIGHT OF THE RATIO OF THE ABOVE DECISIONS, T HE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITS THAT THE HONBLE JURISDICT IONAL HIGH COURT IN THE CASE OF PRIME SECURITIES LTD. (SUPRA) AFTER CON SIDERING THE DECISION IN CIT VS. ANJUM M.H. GHASWALA (2001) 252 ITR 1 (SC) H AS HELD THAT IT WAS NOT POSSIBLE FOR THE APPELLANT TO ANTICIPATE THE EV ENTS THAT WERE TO TAKE PLACE IN THE NEXT FINANCIAL YEAR AND PAY ADVANCE TA X ON THE BASIS OF THOSE ANTICIPATED EVENTS. HE, THEREFORE, SUBMITS THAT FOL LOWING THE ABOVE ITA NO. 3094/MUM/2011 & 4063/MUM/2011 7 DECISIONS THE INTEREST U/S 234B CHARGED BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) BE DELETED. 9. ON THE OTHER HAND, THE LD. D.R. SUPPORTS THE ORD ER OF THE A.O. AND THE LD. CIT(A). 10. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUT E THAT THE ASSESSEE AFTER FILING THE ORIGINAL RETURN FOR THE FINANCIAL YEAR 1-4-2001 TO 31-3-2002 RELEVANT TO A.Y. 2002-03 AT AN INCOME OF RS. 28,32,08,540/- CLAIMING REFUND OF RS. 1,39,59,824/- FILED REVISED RETURN FOR THE PERIOD 1- 4-2001 TO 30-11-2001 AT AN INCOME OF RS. 15,73,34,1 17/- AND CONSIDERED CREDIT FOR TAXES PAID DURING THE SAID PE RIOD IN ACCORDANCE WITH SCHEME OF AMALGAMATION OF THE COMPANY WITH PFI ZER LTD. AS APPROVED BY THE MEMBERS AT A COURT CONVENED MEETING HELD ON 21 ST AUGUST, 2002 AND SUBSEQUENTLY SANCTIONED BY THE HON BLE HIGH COURT OF JUDICATURE AT BOMBAY VIDE ITS ORDER DTD. 7 TH FEBRUARY 2003 WITH RETROSPECTIVE EFFECT FROM 1-12-2001. WE FURTHER FIN D THAT ACCORDING TO THE REVISED RETURN THE TAX ON INCOME OF RS. 15,73,34,11 7/- WAS WORKED OUT TO RS. 5,61,68,280/- AND AFTER DEDUCTING THE PAYMEN T OF ADVANCE TAX RS. 3,90,00,000/- AND TDS RS. 60,12,639/- FOR THE RELEV ANT PERIOD I.E. 1-4-2001 TO 30-11-2001, THE NET AMOUNT OF TAX PAYAB LE WAS WORKED OUT TO RS. 1,11,55,641/- AGAINST WHICH THE ASSESSEE HAS DEPOSITED SELF ITA NO. 3094/MUM/2011 & 4063/MUM/2011 8 ASSESSMENT TAX RS. 1,42,79,220/-. HOWEVER, THE A.O. IN HIS ORDER PASSED U/S 154 OF THE ACT INTER ALIA CHARGED INTEREST U/S 234B OF THE ACT RS. 35,94,203/- . IT HAS BEEN CLAIMED BY THE ASSESSEE T HAT NO FINDING HAS BEEN GIVEN IN THE ASSESSMENT ORDER IN RESPECT OF CH ARGING OF INTEREST U/S 234B AND 234C OF THE ACT. IT HAS ALSO BEEN CLAIMED BY THE ASSESSEE THAT DUE TO SUBSEQUENT EVENTS OF SCHEME OF AMALGAMATION SANCTIONED BY THE HONBLE JURISDICTIONAL HIGH COURT VIDE ORDER DTD. 7 -2-2003 WITH RETROSPECTIVE EFFECT FROM 1-12-2001, IT WAS NOT POS SIBLE FOR THE ASSESSEE TO ANTICIPATE THE EVENTS THAT WERE TO TAKE PLACE IN THE NEXT FINANCIAL YEAR AND TO PAY ADVANCE TAX ON THE BASIS OF THOSE ANTICI PATED EVENTS, THEREFORE, THE ASSESSEE WAS NOT LIABLE TO PAY ADVAN CE TAX AND HENCE, INTEREST U/S 234B OF THE ACT IS NOT CHARGEABLE. PE R CONTRA, THE CLAIM OF THE REVENUE IS THAT THE LEVY OF INTEREST IS AUTOMAT IC AND MANDATORY AND, SINCE, THE ASSESSEE HAS COMMITTED DEFAULT, THE A.O. WAS JUSTIFIED IN LEVY OF INTEREST U/S 234B OF THE ACT. 11. ACCORDING TO PROVISIONS OF SECTION 208 AND 209 OF THE ACT FOR THE PURPOSE OF PAYMENT OF ADVANCE TAX, THE ASSESSEE HAS TO ESTIMATE HIS CURRENT INCOME AND THEN HE HAS TO CALCULATE INCOME- TAX ON THAT INCOME AT THE RATE IN FORCE IN THE FINANCIAL YEAR. THUS, T HE AMOUNT OF ADVANCE TAX IS TO BE DECIDED BY THE ASSESSEE AFTER ESTIMATING HIS CURRENT INCOME AND THEN APPLYING LAW IN FORCE FOR DECIDING THE AMOUNT OF TAX. ITA NO. 3094/MUM/2011 & 4063/MUM/2011 9 12. IN ANJUM M.H. GHASWALA (SUPRA) THE HONBLE SUPR EME COURT HAS HELD AS UNDER (HEADNOTE PAGE 4 PLACITUM D):- THE EXPRESSION SHALL USED IN SECTIONS 234A, 234B AND 234C CANNOT BE CONSTRUED AS MAY. PRIOR TO THE FINANCE ACT, 1987, THE CORRESPONDING SECTIONS PERTAINING TO IMPOSITION OF INTEREST USED THE EXPRESSION MAY ; BUT THE CHANGE BROUGHT ABOUT BY THE FINANCE ACT, 19 87, IS A CLEAR INDICATION THAT THE INTENTION OF THE LEGISLATURE WA S TO MAKE THE COLLECTION OF STATUTORY INTEREST MANDATORY. THAT EXPRESSION IS USED DELIBERATELY. 13. IN EMAMI LTD. (SUPRA) IT HAS BEEN HELD (HEADNOT E OF 337 ITR):- HELD, THAT THE LAST DATE OF THE RELEVANT FINANCIAL YEAR WAS MARCH 31, 2001, AND ON THAT DAY, ADMITTEDLY, THE ASSESSEE HAD NO LIABILITY TO PAY ANY AMOUNT OF ADVANCE TAX IN ACCORDANCE WITH THE LA W THEN PREVAILING. THE AMENDED PROVISIONS OF SECTION 115JB HAVING COME INTO FORCE WITH EFFECT FROM APRIL 1, 2001, THE ASSESSEE COULD NOT B E HELD A DEFAULTER WITH RESPECT TO PAYMENT OF ADVANCE TAX. ON THE LAST DATE OF THE FINANCIAL YEAR PRECEDING THE RELEVANT ASSESSMENT YEAR, AS THE BOOK PROFITS OF THE ASSESSEE IN ACCORDANCE WITH THE THEN PROVISION OF L AW WERE NIL, THERE WAS NO ADVANCE TAX PAYABLE WITHIN THE LAST DAY OF THE F INANCIAL YEAR PRECEDING THE RELEVANT ASSESSMENT YEAR AS PROVIDED IN SECTION S 207 AND 208 OR WITHIN THE DATES INDICATED IN SECTION 211. INTEREST COULD NOT BE LEVIED UNDER SECTIONS 234B AND 234C. 14 . IN REVATHI EQUIPMENTS LTD. (SUPRA) IT HAS BEEN HELD THAT THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT ASSESSEE WAS NOT LIABLE TO PAY ADVANCE TAX FOR A.Y. 2001-02 AS IT COULD NOT HAVE E NVISAGED IMPACT OF SECTION 35DDA INTRODUCED BY THE FINANCE ACT, 2001, W.E.F. IST APRIL, 2001, HENCE NOT LIABLE TO INTEREST UNDER SUB SECTIO N 234B AND 234C; NO SUBSTANTIAL QUESTION OF LAW ARISES. 15. IN PRIYANKA OVERSEAS LTD. (SUPRA) IT HAS BEEN H ELD (HEADNOTE) :- ITA NO. 3094/MUM/2011 & 4063/MUM/2011 10 THE AMENDMENT CAME IN THE YEAR 1990 AND THE ESTIMAT E WAS FILED MUCH EARLIER, I.E., ON 6-11-1989. THEREFORE, IT COULD NO T BE SAID THAT THERE WAS ANY MALA FIDE INTENTION ON THE PART OF THE ASSESSEE . IN VIEW OF THE INSTRUCTIONS ISSUED BY THE CBDT IN O RDER NO. F. 400/234/95-IT(B), DATED 21-5-1996 IT IS AMPLY CLEAR THAT INTENTION OF THE TAX AUTHORITIES IS SUCH THAT THE INTEREST SHOULD NO T BE LEVIED WHERE ANY AMENDMENT CAME WITH RETROSPECTIVE EFFECT. IN THE INSTANT CASE ALSO, THE AMENDMENT CAME IN THE YEAR 1990 WITH RETROSPECTIVE EFFECT. THEREFORE, THERE WAS A BONA F IDE INTENTION ON THE PART OF THE ASSESSEE AND ACCORDINGLY IT COULD NOT PAY AD VANCE TAX ON CASH COMPENSATORY AMOUNT. FURTHER, THE ASSESSING OFFICER ALSO DID NOT CHARGE ANY INTEREST UNDER SECTIONS 234B AND 234C WHILE PRO CESSING RETURN UNDER SECTION 143(1)(A). IT CLEARLY SHOWED THAT THE ASSESSING OFFICER WAS OF THE VIEW THAT NO ADVANCE TAX WAS PAYABLE ON ACCO UNT OF CASH COMPENSATORY AMOUNT AS BY THAT DATE AMENDMENT HAD N OT COME AS THE AMENDMENT CAME BY FINANCE ACT, 1990. HENCE, ON FACT S AND CIRCUMSTANCES OF THE CASE NO INTEREST UNDER SECTION 234B OR 234C SHOULD BE CHARGED ON ACCOUNT OF FAILURE TO PAY ADVA NCE TAX ON THE AMOUNT OF CASH COMPENSATORY SUPPORT. 16. IN HARYANA WAREHOUSING CORPORATION (SUPRA) IT HAS BEEN HELD (HEADNOTE):- HELD, THAT SECTION 234B IS MANDATORY IN NATURE. BU T BEFORE INVOKING SECTION 234B IT IS ALSO ESSENTIAL TO SEE WHETHER TH E ASSESSEE COMES WITHIN THE SWEEP OF THIS SECTION. THE CONDITION PRE CEDENT FOR INVOKING THE PROVISIONS OF SECTION 234B IS THAT THE ASSESSEE MUS T BE FASTENED WITH THE LIABILITY TO PAY ADVANCE TAX UNDER SECTION 208. ADM ITTEDLY, UP TO THE ASSESSMENT YEAR 1991-92, THE ASSESSEE DID GET THE B ENEFIT OF SECTION 10(29) OF THE ACT. IT WAS ASSESSED ON NIL INCOME. T HE EXEMPTION WAS GRANTED ON THE BASIS OF THE ALLAHABAD HIGH COURT DE CISION IN CIT V. U. P. STATE WAREHOUSING CORPORATION [1992] 195 ITR 273 (A LL). TILL MARCH 31, 1992, THIS WAS THE ONLY DECISION AVAILABLE ON THE P OINT. AS NO OTHER DECISION WAS AVAILABLE, THE DEPARTMENT ALSO ACCEPTE D THIS DECISION. THE ASSESSEE ACTED BONA FIDE IN CONFORMITY WITH THE DEC ISION OF THE HIGH COURT. JUST BECAUSE THE DECISION WAS REVERSED BY TH E SUPREME COURT LIABILITY TO PAY ADVANCE TAX COULD NOT BE FASTENED ON THE ASSESSEE. AT THE RELEVANT POINT OF TIME IT WAS IMPOSSIBLE ON THE PAR T OF THE ASSESSEE TO FORESEE THE DECISION OF THE SUPREME COURT ON THE PO INT. THE ASSESSEE WAS NOT LIABLE TO MAKE THE PAYMENT OF ADVANCE TAX. THE CASE OF THE ASSESSEE FELL BEYOND THE KEN OF SECTION 208 OF THE ACT. AS S UCH, IT WAS NOT WITHIN THE AMBIT OF SECTION 234B. INTEREST COULD NOT BE LE VIED UNDER SECTION 234B. ITA NO. 3094/MUM/2011 & 4063/MUM/2011 11 17. IN PRIME SECURITIES LTD. (SUPRA) IT HAS BEEN HE LD (HEADNOTE) :- HELD, ALLOWING THE APPEAL, THAT INTEREST IS PAYABL E UNDER SECTION 234B IF THE ADVANCE TAX IS NOT PAID IN CONSONANCE WITH T HE LAW IN FORCE AT THE TIME WHEN THE ADVANCE TAX IS PAID AND THERE IS A DE FAULT. THEREFORE, FOR CHARGING INTEREST UNDER SECTION 234B, DEFAULT IN PA YMENT OF ADVANCE TAX IS THE CONDITION PRECEDENT. FOR THE PURPOSE OF PAYM ENT OF ADVANCE TAX THE ASSESSEE HAS TO ESTIMATE HIS CURRENT INCOME AND THEN CALCULATE INCOME-TAX ON THAT INCOME AT THE RATE IN FORCE IN T HE FINANCIAL YEAR. THUS, THE AMOUNT OF ADVANCE TAX IS TO BE DECIDED BY THE A SSESSEE AFTER ESTIMATING HIS CURRENT INCOME AND THEN APPLYING THE LAW IN FORCE FOR DECIDING THE AMOUNT OF TAX. ADMITTEDLY, ON THE DATE ON WHICH THE ASSESSEE PAID THE ADVANCE TAX IT HAD ESTIMATED ITS INCOME AND LIABILITY FOR PAYMENT OF ADVANCE TAX IN ACCORDANCE WITH LAW T HAT WAS IN FORCE. THEREFORE, THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO PAY ADVANCE TAX IN ACCORDANCE WITH THE PROVISIONS OF SECTIONS 2 08 AND 209. THE ASSESSEE WAS NOT LIABLE TO PAY INTEREST UNDER SECTI ON 234B OF THE ACT. IT WAS NOT POSSIBLE FOR THE ASSESSEE TO ANTICIPATE THE EVENTS THAT WERE TO TAKE PLACE IN THE NEXT FINANCIAL YEAR AND PAY ADVAN CE TAX ON THE BASIS OF THOSE ANTICIPATED EVENTS. THE AMOUNT OF INTEREST RE COVERED FROM THE ASSESSEE WAS TO BE REFUNDED WITH INTEREST IN ACCORD ANCE WITH LAW. 18. IN THE PRESENT CASE IT IS NOT THE CASE OF THE A SSESSEE THAT THERE WAS AN AMENDMENT BY THE RESPECTIVE FINANCE ACTS WITH RE TROSPECTIVE EFFECT, THEREFORE, THE DECISION IN EMAMI LTD. (SUPRA), REVA THI EQUIPMENTS LTD. (SUPRA) AND PRIYANKA OVERSEAS LTD., (SUPRA) RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE ARE DISTINGUISHABLE AND NOT APPLIC ABLE TO THE FACTS OF THE PRESENT CASE. 19. AS REGARDS THE DECISION IN THE CASE OF HARYANA WAREHOUSING CORPORATION (SUPRA) RELIED ON BY THE LD. COUNSEL FO R THE ASSESSEE WE FIND THAT IT IS NOT THE CASE OF THE ASSESSEE THAT THE AS SESSEE WAS UNDER THE BONAFIDE BELIEF THAT NO ADVANCE TAX WAS PAYABLE AS INCOME IS EXEMPTED. ITA NO. 3094/MUM/2011 & 4063/MUM/2011 12 THEREFORE, IN THE ABSENCE THEREOF THE DECISION RELI ED ON BY THE LD. COUNSEL FOR THE ASSESSEE IS DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 20. AS REGARDS THE DECISION IN PRIME SECURITIES LTD . (SUPRA) RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE WHEREIN IT HAS BEE N HELD THAT SINCE IT WAS NOT POSSIBLE FOR THE APPELLANT TO ANTICIPATE TH E EVENTS THAT WERE TO TAKE PLACE IN THE NEXT FINANCIAL YEAR AND PAY ADVAN CE TAX ON THE BASIS OF THOSE ANTICIPATED EVENT, IT HAS BEEN HELD INTEREST U/S 234B IS NOT CHARGEABLE. HOWEVER, IN THE PRESENT CASE THERE IS NO DISPUTE TH AT THE SCHEME OF AMALGAMATION IS EFFECTIVE FROM THE APPOIN TED DATE W.E.F. 1-12-2001 THOUGH IT WAS SANCTIONED BY THE HONBLE B OMBAY HIGH COURT VIDE ORDER DTD. 7-2-2003. THE ASSESSEE HAS PLACED N O MATERIAL ON RECORD TO SHOW THAT THE SAID APPOINTED DATE WAS NOT KNOWN TO THE ASSESSEE DURING THE RELEVANT FINANCIAL YEAR 2001-02. THUS, THE EVENT OF CLAIM OF AMALGAMATION THAT TOOK PLACE ON 1-12-2001 I.E. DURI NG THE RELEVANT FINANCIAL YEAR 2001-02 CORRESPONDING TO THE A.Y. 20 02-03 WAS VERY MUCH KNOWN TO THE ASSESSEE AND, THEREFORE, THE ASSESSEE WAS LIABLE TO PAY ADVANCE TAX ON ITS INCOME. MERELY BECAUSE THE HON BLE JURISDICTIONAL HIGH COURT HAS PASSED AN ORDER SANCTIONING THE CLAI M ON 7-2-2003 DOES NOT MEAN THAT THE ASSESSEE WAS NOT AWARE ABOUT SUCH EVENT OF AMALGAMATION EFFECTIVE FROM APPOINTED DATE I.E. 1-1 2-2001 OR THE ASSESSEE WAS NOT LIABLE TO PAY ADVANCE TAX ON SUCH INCOME AND, HENCE, ITA NO. 3094/MUM/2011 & 4063/MUM/2011 13 THE DECISION RELIED ON BY THE LD. COUNSEL FOR THE A SSESSEE IS DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 21. IN THE PRESENT CASE IN THE REVISED RETURN FILED BY THE ASSESSEE FOR THE PERIOD 1-4-2001 TO 30-11-2001 SHOWING AN INCOME OF RS. 15,73,34,117/- THE TAX LIABILITY WAS WORKED OUT AT RS. 5,61,68,280/-. THE ASSESSEE HAS CLAIMED ADVANCE TAX OF RS. 17,00,0 00/- AND RS. 22,00,000/- AGGREGATING TO RS. 39,00,000/-AND TDS RS. 60,12,639/- TOTALLING TO RS. 4,50,12,639/- ONLY AS AGAINST ADVA NCE TAX PAID RS. 10,60,00,000/- AND TDS RS. 90,65,273/- AGGREGATING TO RS. 11,50,65,273/-. WHEN THE ASSESSEE AFTER ESTIMATING ITS CURRENT INCOME AS PER PROVISIONS OF SECTION 208 AND 209 OF THE ACT HAS WORKED OUT ITS LIABILITY OF ADVANCE TAX RS. 10,60,00,000/- AND TDS RS. 90,65,273/-, THE ASSESSEE HAS FAILED TO SHOW AS TO HOW THE AMOUNT OF ADVANCE TAX AND TDS PAID BY THE ASSESSEE MAY BE ADJUSTED IN THE HAN DS OF ANOTHER ASSESSEE. THIS ASPECT OF THE MATTER HAS NOT BEEN E XAMINED EITHER BY THE A.O. OR BY THE LD. CIT(A). IT APPEARS THAT THERE WA S NO SUCH CLAIM OF THE ASSESSEE BEFORE THE A.O. POINTING OUT ANY SUCH MIST AKE IN RESPECT OF LEVY OF INTEREST U/S 234B OF THE ACT. IT CANNOT BE DISPU TED THAT THE LD. CIT(A) HAD JURISDICTION TO EXAMINE THE SAID ADDITIONAL GRO UND, HAD IT BEEN RAISED BEFORE HIM IN APPEAL EVEN IN THE FIRST ROUND . HOWEVER, THE LD. CIT(A) WHILE ENTERTAINING THE SAID ADDITIONAL GROUN D HAS NOT GIVEN ANY REASON FOR ADMITTING THE SAME AND OVERLOOKED THIS V ITAL FACT THAT THE SAID ITA NO. 3094/MUM/2011 & 4063/MUM/2011 14 GROUND WAS NOT ARISING OUT OF THE ORDER OF THE A.O. INASMUCH AS NO SUCH CLAIM WAS MADE BY THE ASSESSEE BEFORE THE A.O. IN T HE APPLICATION FILED U/S 154 OF THE ACT. WE FURTHER FIND THAT THE LD. C IT(A) WITHOUT EXAMINING THE ISSUE AND CALLING FOR ANY REMAND REPORT FROM TH E A.O. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS DID NOT ALLO W THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE LEVY OF INTEREST IS AUTOMATIC AND MANDATORY. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ORDER PASSED BY THE LD. CIT(A) IS NOT VALID IN LAW. THIS VIEW ALSO FINDS SUPPORT FROM THE DECISION OF THE HONBLE M.P. HIGH COURT IN THE CASE OF CIT VS. TOLLARAM HASSOMAL (2008) 298 ITR 22 (MP) WHEREIN IT HAS BEEN HELD THAT (HEADNOTE) :- HELD, THAT THE TRIBUNAL HAVING PERMITTED THE ASSES SEE TO RAISE FOUR ADDITIONAL GROUNDS TREATING THEM TO BE LEGAL GROUND S IN APPEAL FOR THE FIRST TIME, SHOULD HAVE SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND REMANDED THE CASE TO THE C OMMISSIONER OF INCOME-TAX (APPEALS) FOR DECIDING THE APPEAL AFRESH ON ALL THE ISSUES INCLUDING ON THOSE FOUR GROUNDS RAISED BY THE ASSES SEE IN THE APPEAL BEFORE THE TRIBUNAL RATHER THAN TO DECIDE THE ADDIT IONAL GROUNDS ON THE MERITS FOR THE FIRST TIME BY ITSELF. UNDER THESE CIRCUMSTANCES WE ARE OF THE OPINION THA T IN THE INTEREST OF JUSTICE, THE MATTER SHOULD GO BACK TO THE FILE OF T HE LD. CIT(A) AND ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY THE LD . CIT(A) ON THIS ACCOUNT AND SEND BACK THE MATTER TO HIS FILE TO DEC IDE THE SAME AFRESH IN THE LIGHT OF OUR OBSERVATIONS HEREINABOVE AND ACCOR DING TO LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ITA NO. 3094/MUM/2011 & 4063/MUM/2011 15 GROUND TAKEN BY THE ASSESSEE IS, THEREFORE, PARTLY ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 4063/MUM/2011 (BY REVENUE) 22. ALL THE GROUNDS TAKEN BY THE REVENUE ARE AGAINS T THE DELETION OF INTEREST U/S 234D OF THE ACT. 23. AT THE TIME OF HEARING BOTH THE PARTIES HAVE AG REED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE REVENUE BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN CIT VS. M/S INDIAN OIL CORPORA TION LTD. IN INCOME TAX APPEAL NO. 2012 OF 2011 DTD. 12 TH SEPTEMBER, 2012 . THE LD. D.R. HAS ALSO FILED THE COPY OF THE SAID JUDGMENT. 24. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND MERIT THAT RECENTLY THE HONBLE JURISDICTIONAL HIGH COURT IN M/S INDIAN OIL CORPORATION LTD. (SUPRA) HAS DECIDED THE ISSUE IN FAVOUR OF THE REVE NUE. IN PARA 27 OF THE SAID JUDGMENT IT HAS BEEN HELD AS UNDER:- 27) IN VIEW OF THE ABOVE, WE HOLD THAT THE DECISIO N OF THE TRIBUNAL IN ITO V. EKTA PROMOTERS PVT. LTD. REPORTED IN 113 ITD 719 WHICH HAS BEEN FOLLOWED IN THE IMPUGNED ORDER BY THE TRIBUNAL IS N OT CORRECT. ONE MORE ASPECT OF THE MATTER WHICH MUST BE BORNE IN MIND IS THAT TILL SUCH TIME AS THE ASSESSMENT PROCEEDINGS ARE COMPLETED IN RESP ECT OF ANY ASSESSMENT YEAR, THE AMENDMENT MADE TO THE ACT WOUL D BE APPLICABLE EVEN IN CASE OF PENDING PROCEEDINGS. IT IS NOT THE CASE OF THE RESPONDENT THAT THE PROCEEDING IN REGARD TO REFUND WHICH HAS B EEN GRANTED UNDER SECTION-143(1) OF THE ACT ARE CONCLUDED AND FINAL. THE REFUND WHICH HAS BEEN GRANTED UNDER SECTION 143(1) OF THE ACT IS PRO VISIONAL, TO BE FINALLY DETERMINED WHEN FINAL ASSESSMENT ORDER IS PASSED UN DER SECTION 143(3) OF THE ACT. EXPLANATION-2 TO SECTION 234D OF THE AC T MAKES IT CLEAR THAT IT ITA NO. 3094/MUM/2011 & 4063/MUM/2011 16 WOULD BE APPLICABLE TO PENDING PROCEEDINGS I. E. WH ERE ASSESSMENTS IN RESPECT OF SUCH ASSESSMENT YEAR IS NOT COMPLETED ON 1/6/2003. 25. RECENTLY THE SPECIAL BENCH OF THE TRIBUNAL IN K OTAK MAHINDRA CAPITAL CO. LTD. VS. ACIT (2012) 138 ITD 57 (MUM) [ SB] HAS ALSO CONSIDERED THE SIMILAR ISSUE AND HAS HELD VIDE PARA 48 OF THE ORDER AS UNDER:- 48 . AS REGARDS THE ISSUE INVOLVED IN GROUND NO.3 RELATI NG TO LEVY OF INTEREST U/S.234D, IT IS OBSERVED THAT EXPLANATION 2 HAS BEEN INSERTED IN SEC.234D BY THE FINANCE ACT, 2012 WITH RETROSPECTIV E EFFECT FROM 1.6.2003 CLARIFYING THAT THE PROVISIONS OF SEC.234D SHALL ALSO APPLY TO THE ASSESSMENT YEAR COMMENCING BEFORE THE FIRST DAY OF JUNE, 2003 IF THE PROCEEDINGS IN RESPECT OF SUCH ASSESSMENT YEAR IS C OMPLETED AFTER THE SAID DATE. IN THE PRESENT CASE THE ASSESSMENT YEAR INVOLVED IS AY 2003- 04 AND SINCE THE PROCEEDINGS IN RESPECT OF THE SAID YEAR HAS BEEN COMPLETED ON 30.11.2005, WE ARE OF THE VIEW THAT TH E ASSESSEE IS LIABLE TO PAY AN INTEREST U/S.234D AS PER EXPLANATION 2 TO SE C.234D INSERTED BY THE FINANCE ACT, 2012 WITH RETROSPECTIVE EFFECT FRO M 1.6.2003. IN THAT VIEW OF THE MATTER WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT (A) CONFIRMING THE INTEREST CHARGED BY THE AO U/S.234D AND DISMISS GROUND NO.3 OF THE ASSESSEE'S APPEAL. 26. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, WE ARE OF THE VIEW THAT SINCE IN THE PRESENT CASE THE ASSESSMENT WAS COMPLE TED ON 31-3-2005 I.E. AFTER 1-6-2003, THE A.O. WAS JUSTIFIED IN CHAR GING THE INTEREST U/S 234D OF THE ACT AND ACCORDINGLY WE WHILE REVERSING THE ORDER PASSED BY THE LD. CIT(A) UPHOLD THE ORDER PASSED BY THE A.O. THE GROUNDS TAKEN BY THE REVENUE ARE, THEREFORE, ALLOWED. ITA NO. 3094/MUM/2011 & 4063/MUM/2011 17 27. IN THE RESULT, ASSESSEES APPEAL STAND PARTLY A LLOWED FOR STATISTICAL PURPOSE AND REVENUES APPEAL IS ALLOWED. ORDER PRONOUNCED ON 19-10-2012 SD/- (D. KARUNAKARA RAO ) ACCOUNTANT MEMBER SD/- (DINESH KUMAR AGARWAL) JUDICIAL MEMBER MUMBAI, DATED : 19-10-2012. RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 17, MUMBA I 4. COMMISSIONER OF INCOME TAX 8 MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH C, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI