GEORGE P.MATHEWS V. CHIEF COMMR.OF INCOMETAX

OP/14606/2002

AI Insights

The case involves the partners of a firm, M/S Paul Mathews & Sons, who were assessed for income tax and subsequently directed to pay advance tax based on a Supreme Court decision that disallowed the carry forward of unabsorbed depreciation by the firm's partners. The petitioners argued that the imposition of interest under Section 234B for the late payment of this advance tax was unjust, citing a change in law as the reason for their delayed payment. They sought a waiver of this interest, which was supported by a notification from the Central Board of Direct Taxes that allowed for such waivers under specific circumstances. The Income-tax Department opposed this, arguing that the notification did not apply as the Supreme Court's decision did not result in an increase in income but rather a decrease in allowable deductions. The court found in favor of the petitioners, agreeing that the notification covered their case and thus waived the interest.

• Counselvise Citation: [2009] 140 COUNSELVISE.COM (IT) 693776 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 06-11-2009
• Assessment Year: misc
• Other Referred Cases: Garden Silk Weaving Factory v. Commissioner of Income-tax, (1991) 189 ITR 512
• Laws Referred To: Income-tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: JOSE JOSEPH
• Assessee Lawyers: P BALAKRISHNAN; R AMRITHARAJ
• Keywords: Advance tax; Central Board of Direct Taxes; Supreme Court decision; Unabsorbed depreciation; Waiver of interest
• Section: 234B

Judgement Text

" IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN FRIDAY, THE 6TH NOVEMBER 2009 / 15TH KARTHIKA 1931 OP.No. 14606 of 2002(L) ----------------------------------- PETITIONERS: --------------------- 1. SRI.GEORGE P. MATHEWS. 2. SRI.ROY MATHEWS. 3. SRI.ABRAHAM P.MATHEWS. 4. SRI.M.M.MATHEWS AND 5. SRI.JOHN P.MATHEWS, PARTNERS, M/S.PAUL MATHEWS & SONS, ELOOR MURI, KALAMASSERY. BY ADVS. MR.P.BALAKRISHNAN, MR.R.AMRITHARAJ. RESPONDENTS: ------------------------ 1. THE CHIEF COMMISSIONER OF INCOME TAX, COCHIN. 2. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE I, ALUVA. 3. THE TAX RECOVERY OFFICER, OFFICE OF THE JOINT COMMISSIONER OF INCOME TAX, ALUVA RANGE, ALUVA. R1 TO R3 BY MR. JOSE JOSEPH, S.C, GOVT. OF INDIA (TAXES). THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 06/11/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: O.P. NO. 14606/2002-L: APPENDIX PETITIONERS' EXHIBITS: EXT.P.1: ORDER UNDER SECTION 154 DTD. 21/01/94 OF THE R.2. EXT.P.2: ORDER DTD. 20/07/1994 OF THE R.1. EXT.P.3: PETITION DTD. 15/11/1994 ADDRESSED TO THE R.1. EXT.P.4: ORDER DTD. 25/03/1999 OF THE R.1. EXT.P.5: PETITION DTD. 30/05/1996 ADDRESSED TO THE R.1. EXT.P.6: PETITION DTD. 13/041/999 ADDRESSED TO THE CENTRAL BOARD OF DIRECT TAXES. EXT.P.7: ORDER DTD. 26/07/2000 OF THE R.1. EXT.P.8: PETITION DTD. 10/02/2001 ADDRESSED TO THE R.1. EXT.P.9: LETTER DTD. 06/03/2002 FROM THE R.3. EXT.P.10: LETTER DTD. 14/01/2003 FROM THE R.3. EXT.P.11: NOTICE IN FORM TTCP 1 DTD. 14/1/2003 RESPONDENTS' EXHIBITS: NIL. //TRUE COPY// P.S. TO JUDGE. Prv. S. Siri Jagan, J. =-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=-= O.P. No. 14606 of 2002 =-=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-= Dated this, the 6th November, 2009. J U D G M E N T The petitioners are income-tax assessees and partners of a firm. For various assessment years, they had been claiming carrying forward of unabsorbed depreciation of the firm for the purpose of computing income tax payable by them. They were computing liability to pay advance tax on that basis. The question as to whether such unabsorbed depreciation of a firm can be allowed to be carried forward in respect of its partners was the subject matter of a decision of the Supreme Court in Garden Silk Weaving Factory v. Commissioner of Income-tax, (1991) 189 ITR 512, which was answered in the negative. As a result of the Supreme Court decision, the income-tax assessments of the petitioners for various years were revised and the petitioners were directed to pay advance tax. The petitioners promptly paid the same. However, the petitioners were directed to pay interest under Section 234B on the advance tax so paid. The petitioners filed various applications for waiver of the interest, which were rejected by Exts.P2, P4, P7 and P9 orders. According to the petitioners, the non-payment of advance tax was not because of any fault on the part of the petitioners but purely because of change of law on the basis of a Supreme Court decision. In such circumstances, the petitioners are entitled to waiver of interest under Section 234B. The petitioners also rely on the notification of the Central Board of Direct Taxes dated 23rd May, 1996 wherein, the Central Board of Direct Taxes had delegated powers to the Chief Commissioners and Directors General (Investigation) of Income-tax to waive interest under Section 234B in such circumstances. 2. The learned standing counsel for the Income-tax Department would oppose the contentions of the petitioners. According to him, the notification relied upon by the petitioners is applicable only in O.P. No. 14606/02 -: 2 :- cases where income goes higher on the basis of a decision of the Supreme Court or the High Court. In this case, the result of the Supreme Court decision is that the petitioners would become disentitled to carry forward depreciation, which result cannot be stated to be on of income becoming higher. 3. I have considered the rival contentions in detail. 4. I am of opinion that because of the Supreme Court decision, the petitioners became disentitled to carry forward unabsorbed depreciation. It is the direct result of the same that the petitioners' income became higher and the petitioners became liable for payment of advance tax on the basis of that higher income. Therefore, I am unable to countenance the contention of the standing counsel for the Income-tax Department that the petitioners' case is not covered by the notification issued by the Central Board of Direct Taxes relied upon by the petitioner. I am of opinion that the said notification covers the petitioners' case also. 5. The result of the above discussion is that the petitioners are entitled to the reliefs prayed for. Accordingly, the impugned orders are quashed. It is declared that the petitioners are not liable to pay any interest under Section 234B of the Income-tax Act for the assessment years 1991-92 and 1992-93. The original petition is allowed as above. Sd/- S. Siri Jagan, Judge. Tds/ "