Commissioner Of Income Tax v. M/S Nahar Spinning Mills Ltd

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 8 of 2004 Date of Decision: 6.7.2011 Commissioner of Income Tax Versus M/s Nahar Spinning Mills Ltd. ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL,ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Denesh Goyal, Standing Counsel,for the appellant. Mr. Sanjay Bansal, Senior Advocate with Mr. Robin Jarial, Advocate,for the respondent. AJAY KUMAR MITTAL, J. 1.This appeal has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order dated 3.6.2003 passed by the Income Tax Appellate Tribunal,Chandigarh, Bench “A”, Chandigarh (hereinafter referred to as “theTribunal”) in ITA No. 1078/Chandi/97, relating to the assessment year1989-90. The appeal was admitted on 11.7.2006 to consider thefollowing substantial question of law:- “Whether, on the facts and in the circumstances ofthe case, the interpretation of Section 234B(4) made by the ITAT is sustainable in law as the same beingbased on misinterpretation of law as well as facts ofthe case in as much as order passed u/s 147 r.w.143(3) of the I.T. Act in view of Explanation 2 toSection 234B was a regular assessment as earlieronly processing u/s 143(1)(a) was made?” 2.Briefly stated, the facts necessary for adjudication asnarrated in the appeal are that the assessee filed its return on 1.1.1990declaring an income of Rs.43,58,142/- under Section 115J of the Act.The said return was processed under Section 143(1)(a) of the Act on26.2.1990 which resulted into a refund of Rs.1,76,518/-. Thereafter,notice under Section 148 of the Act was issued to the assessee for theexcess deduction claimed under Section 80HHC and 80-I of the Act on28.9.1990. Notices under Sections 142(1) and 143(2) of the Act wereissued on 4.7.1991. The assessment for the first time was completedon 25.8.1992 under Section 143(3)/147 of the Act at a total income ofRs.11,62,739/-. The Assessing Officer vide order dated 25.8.1992computed the total income as per provisions of Section 115J of the Actat Rs.45,90,182/- and also charged interest under Section 234B of theAct. Feeling aggrieved, the assessee approached the Commissioner ofIncome Tax (Appeals) [in short “the CIT(A)”] who vide order dated27.11.1992 partly allowed the appeal on the issue of charging of interestunder Section 234B of the Act. Feeling dissatisfied, the departmenttook the matter before the Tribunal and the assessee filed cross-objections. The Tribunal upheld the order of the CIT(A) vide orderdated 28.8.2001 by observing that the assessment completed under ITA No. 8 of 2004-3- Section 147 of the Act was not a regular assessment. Further, theassessment made by the Assessing Officer was revised by thedepartment under Section 263 of the Act vide order dated 23.3.1995and a direction was issued to the Assessing Officer to withdraw reliefgranted under Section 80-I of the Act on the receipt of duty drawbackrelating to the goods exported which were manufactured by theassessee in the industrial undertaking. Accordingly, the AssessingOfficer made assessment under Section 143(3) of the Act on 31.1.1997and recomputed the assessed income at Rs.68,83,294/- afterrecomputing deduction under Section 80-I of the Act. The interestunder Section 234B of the Act was increased by Rs.9,82,000/- onaccount of enhancement. Against the said assessment order, theassessee filed an appeal before the CIT(A) who vide order dated12.8.1997 upheld the quantum addition. On the issue of charging ofinterest under Section 234B of the Act, the CIT(A) held that the samewas not chargeable as the assessment order which had been revisedwas not a regular assessment. Being dissatisfied, the departmentapproached the Tribunal. The Tribunal vide order dated 3.6.2003upheld the order of the CIT(A) and dismissed the appeal. Hence, thepresent appeal by the revenue. 3.We have heard learned counsel for the parties. 4.Learned counsel for the revenue submitted that theassessee having failed to pay the advance tax on the assessed incomeunder the provisions of the Act was liable to pay interest under Section234B of the Act. Learned counsel with the aid of Explanation 2 toSection 234B of the Act sought to draw support to contend that the assessment which was framed by the Assessing Officer under Section143(3)/147 on 25.8.1992 was the first assessment as earlier the returnwhich was filed by the assessee was processed under Section 143(1)(a) of the Act on 26.2.1990 which had resulted into a refund ofRs.1,76,518/-. According to the learned counsel, the order of the CIT(A) dated 27.11.1992 and the Tribunal dated 28.8.2001 deleting theinterest levied under Section 234B of the Act was contrary to thedecision of the Kerala High Court in Commissioner of Income Tax v.K. Govindan and sons (Ker) [1999] 238 ITR 1005 and affirmed by theSupreme Court in K. Govindan & Sons v. Commissioner of IncomeTax [2001] 247 ITR 192 (SC) and also Allahabad High Court in AbdulMajid v. Commissioner of Income Tax [2006] 281 ITR 366 (All). Hesubmitted that no appeal had been filed against the said decision inview of tax effect involved being below monetary limit of Rs.2 lacs fixedfor filing appeal under Section 260A of the Act by CBDT's InstructionNo. 1979 dated 27.3.2000 and 1985 dated 29.6.2000 as mentioned inpara 4 of the appeal. He urged that the decisions of the Tribunal andthe CIT(A) being contrary to the statutory provision contained inExplanation 2 to Section 234B of the Act and the decision of the ApexCourt in K. Govindan & Sons' case (supra) which was binding underArticle 141 of the Constitution would render the order ineffective andwould not take away the rightof the revenue to charge interest underSection 234B(4) of the Act. According to the learned counsel, interestunder Section 234B of the Act was correctly charged in the assessmentorder passed under Section 143(3)/147 and, therefore, it could besubsequently enhanced on completion of set aside assessment. 5.Controverting the aforesaid submissions, learned counselfor the assessee submitted that the CIT(A) vide order dated 27.11.1992and the Tribunal vide order dated 28.8.2001 had held that sub-section(1) of Section 234B of the Act was not applicable to the present caseand no interest was chargeable thereunder as it was not firstassessment framed in pursuance to notice issued under Section 147 ofthe Act. Even application filed under Section 254(2) of the Act forrectification of order dated 28.8.2001 was dismissed on 11.5.2004.Continuing further, learned counsel argued that accordingly sub-section(4) of Section 234B would not apply and the question of levy of interestunder Section 234B of the Act was not called for in the present case.He submitted that the Tribunal had rightly decided the issue in favour ofthe assessee. Reliance was placed by the learned counsel on thejudgment of this Court in Darshan Lal Gulati v. Commissioner ofIncome-tax, Jalandhar [2008] 173 TAXMAN 268. 6.In the alternative, it was urged by the learned counsel thatthe income having been assessed on book profits under Section 115Jof the Act, the judgment of the Karnataka High Court in Commissionerof Income-Tax v. Kwality Biscuits Ltd. [2000] 243 ITR 519 (Kar) wasapplicable which stood affirmed by the Apex Court as the civil appealfiled there against was dismissed by the judgment reported inCommissioner of Income Tax v. Kwality Biscuits Ltd. [2006] 284ITR 434 (SC) and on that basis, no interest under Section 234B of theAct was exigible. 7.In rejoinder, learned counsel for the revenue reiterated hisearlier submissions. Adverting to the alternative plea of the assessee, ITA No. 8 of 2004-6- 6.In the alternative, it was urged by the learned counsel thatthe income having been assessed on book profits under Section 115Jof the Act, the judgment of the Karnataka High Court in Commissionerof Income-Tax v. Kwality Biscuits Ltd. [2000] 243 ITR 519 (Kar) wasapplicable which stood affirmed by the Apex Court as the civil appealfiled there against was dismissed by the judgment reported inCommissioner of Income Tax v. Kwality Biscuits Ltd. [2006] 284ITR 434 (SC) and on that basis, no interest under Section 234B of theAct was exigible. 7.In rejoinder, learned counsel for the revenue reiterated hisearlier submissions. Adverting to the alternative plea of the assessee, ITA No. 8 of 2004-6- he relied upon the decision of the Apex Court in Joint Commissionerof Income-Tax v. Rolta India Ltd. [2011] 330 ITR 470 (SC) and thejudgments of this Court in ITA No. 589 of 2006(M/s Amtek AutoLimited v. The Commissioner of Income Tax, Gurgaon) decided on25.3.2011 and ITA No. 176 of 2003 (The Commissioner of IncomeTax v. M/s Steel Strips Leasing Ltd.) decided on 4.3.2011 tocontrovert the said contention. 8.After giving our thoughtful consideration to the respectivesubmissions of learned counsel for the parties, we find substantial forcein the submissions raised by the learned counsel for the revenue. 9.It is not disputed that the earlier return which was filed bythe assessee was processed under Section 143(1)(a) of the Act on26.2.1990 and a refund of Rs.1,76,518/- was made. The assessmentwas framed in pursuance to the notice under Section 148 of the Act on25.8.1992. The point for consideration would be whether theassessment which was framed on 25.8.1992 under Section 143(3)/147of the Act was a regular assessment and, therefore, interest underSection 234B of the Act could be charged by virtue of that order.Section 234B of the Act at the relevant time read thus:- “234B. (1)Subject to the other provisions of thissection, where, in any financial year an assesseewho is liable to pay advance tax under section 208has failed to pay such tax or, where the advance taxpaid by such assessee under the provisions ofsection 210 is less than ninety per cent of theassessed tax, the assessee shall be liable to pay simple interest at the rate of two per cent for everymonth or part of a month comprised in the periodfrom the Ist day of April next following such financialyear to the date of determination of total incomeunder sub-section (1) of section 143 or regularassessment, on an amount equal to the assessed taxor, as the case may be, on the amount by which theadvance tax paid as aforesaid falls short of theassessed tax. -Explanation 1.In this section, “assessed tax”means,- (a)for the purposes of computing the interestpayable under section 140A, the tax on thetotal income as declared in the return referredto in that section;payable under section 140A, the tax on thetotal income as declared in the return referredto in that section; (b)in any other case, the tax on the total incomedetermined under sub-section (1) of section143 or on regular assessment,determined under sub-section (1) of section143 or on regular assessment, as reduced by the amount of tax deducted orcollected at source in accordance with the provisionsof Chapter XVII on any income which is subject tosuch deduction or collection and which is taken intoaccount in computing such local income. Explanation 2.- Where, in relation to an assessmentyear, an assessment is made for the first time undersection 147, the assessment so made shall be regarded as a regular assessment for the purposesof this section. Explanation 3.- In Explanation 1 and in sub-section(3) “tax on the total income determined under sub-section (1) of Section 143” shall not include theadditional income-tax, if any, payable under section143. as reduced by the amount of tax deducted orcollected at source in accordance with the provisionsof Chapter XVII on any income which is subject tosuch deduction or collection and which is taken intoaccount in computing such local income. Explanation 2.- Where, in relation to an assessmentyear, an assessment is made for the first time undersection 147, the assessment so made shall be regarded as a regular assessment for the purposesof this section. Explanation 3.- In Explanation 1 and in sub-section(3) “tax on the total income determined under sub-section (1) of Section 143” shall not include theadditional income-tax, if any, payable under section143. (2)Where, before the date of determination oftotal income under sub-section (1) of section 143 orcompletion of a regular assessment, tax is paid bythe assessee under section 140A or otherwise,- (i)interest shall be calculated in accordancewith the foregoing provisions of this sectionup to the date on which the tax is so paid,and reduced by the interest, if any, paidunder section 140A towards the interestchargeable under this section;with the foregoing provisions of this sectionup to the date on which the tax is so paid,and reduced by the interest, if any, paidunder section 140A towards the interestchargeable under this section; (ii)thereafter, interest shall be calculated atthe rate aforesaid on the amount by whichthe tax so paid together with the advancetax paid falls short of the assessed tax.the rate aforesaid on the amount by whichthe tax so paid together with the advancetax paid falls short of the assessed tax. (3)Where, as a result of an order of reassessment or recomputation under section 147, the amount onwhich interest was payable under sub-section (I) isincreased, the assessee shall be liable to pay simpleinterest at the rate of two per cent for every month or part of a month comprised in the period commencingon the day following the date of determination of totalincome under sub-section (1) of section 143 orregular assessment referred to in sub-section (1)and ending on the date of the reassessment orrecomputation under section 147, on the amount bywhich the tax on the total income determined on thebasis of the reassessment or recomputation exceedsthe tax on the total income determined under sub-section (1) of section 143 or on the basis of theregular assessment aforesaid. (4)Where, as a result of an order under section154 or section 155 or section 250 or section 254 orsection 260 or section 262 or section 263 or section264 or an order of the Settlement Commission undersub-section (4) of section 245D, the amount on whichinterest was payable under sub-section (1) or sub-section (3) has been increased or reduced, as thecase may be, the interest shall be increased orreduced accordingly, and- (i)in a case where the interest is increased,the Assessing Officer shall serve on theassessee a notice of demand in theprescribed form specifying the sumpayable and such notice of demand shallbe deemed to be a notice under sectionthe Assessing Officer shall serve on theassessee a notice of demand in theprescribed form specifying the sumpayable and such notice of demand shallbe deemed to be a notice under section 156 and the provisions of this Act shallapply accordingly; (ii)in a case where the interest is reduced, theexcess interest paid, if any, shall berefunded. (5)The provisions of this section shall apply inrespect of assessments for the assessment yearcommencing on the Ist day of April, 1989 andsubsequent assessment years.” 10.Explanation 2 to Section 234 of the Act postulates thatwhere an assessment is made for the first time in pursuance toproceedings under Section 147, it shall be regarded as a regularassessment for the purposes of Section 234B of the Act. 11.Kerala High Court in K. Govindan and Sons's case(supra) while considering identical Explanation 2 to Section 139(8) ofthe Act had recorded as under:- 156 and the provisions of this Act shallapply accordingly; (ii)in a case where the interest is reduced, theexcess interest paid, if any, shall berefunded. (5)The provisions of this section shall apply inrespect of assessments for the assessment yearcommencing on the Ist day of April, 1989 andsubsequent assessment years.” 10.Explanation 2 to Section 234 of the Act postulates thatwhere an assessment is made for the first time in pursuance toproceedings under Section 147, it shall be regarded as a regularassessment for the purposes of Section 234B of the Act. 11.Kerala High Court in K. Govindan and Sons's case(supra) while considering identical Explanation 2 to Section 139(8) ofthe Act had recorded as under:- “Considering Explanation 2 to Section 139(8) whichis clarificatory in nature and the other case law, weare of the considered view that the assessment madefor the first time under section 147(a) read withsection 148 is a regular assessment and that being so, the Assessing Officer could legally chargeinterest under section 139(8).” 12.The Apex Court while affirming the decision of the KeralaHigh Court in K. Govindan and Sons's case (supra) had held asunder:- “The view taken by us that a first or initialassessment under section 147 of the Act is a “regularassessment” within the meaning of section 139(8) ofthe Act, has been the position of law even before theExplanation in section 139(8) was added byamendment. In that view of the matter theExplanation merely clarified the position taking itbeyond the pale of doubt. Parliament thought itnecessary to add the Explanation with a view toremove the doubt raised in certain decisions ofdifferent High Courts in which a contrary view wastaken. Thus, the Explanation is merely a clarificatoryprovision and has application to the period ofassessment in the case, i.e., assessment year 1984-85.” 13.It would be apposite to refer to the order of the Tribunaldated 28.8.2001 which had affirmed the order of the CIT(A) dated27.11.1992 deleting the levy of interest under Section 234B of the Act inthe order of assessment under Section 143(3)/147 dated 25.8.1992passed by the Assessing Officer. The relevant observation in the orderreads thus:- “12.In this case the assessee filed its originalreturn declaring income at Rs.43,58,142/-. The samewas processed u/s 143(1)(a) and the AO found thatthe assessee has claimed excess deduction u/s80HHC and 80-I which were allowed while processing the return u/s 143(1)(a) on 26.2.1990,was served upon the assessee on 11.10.1990.Thereafter, the assessment u/s 147/143(3) of IT Actwas framed on 25.8.1992 and the AO chargedinterest u/s 234B of IT Act. 13.On going through the provision of Exp. 1 & 2 ofsection 234B, the CIT(A) came to the conclusion thatthe interest 234B can only be charged by the AO inthe case of regular assessment framed by the AO u/s143(1)(a) or first time u/s 143(3) of IT Act becausethe sub-section (3) of section 234B of IT Act givespower to AO to increase the interest u/s 234B if theinterest is charged u/s 143(1) or under regularassessment and not otherwise. The CIT(A), thereafter concluded that as theassessment was made for the first time u/s 147 buthas been framed without assessment u/s 143(1) hasalready been completed so the AO was not justifiedin invoking the provisions of section 234B forcharging interest from the assessee as it was not aregular assessment first time framed by the AO. TheCIT(A) thus deleted the interest amount charged u/s234B of the IT Act by the AO. 14.Keeping in view the provisions of section 234B,we do not find any illegality or infirmity in the wellreasoned and well discussed order of CIT(A) The CIT(A), thereafter concluded that as theassessment was made for the first time u/s 147 buthas been framed without assessment u/s 143(1) hasalready been completed so the AO was not justifiedin invoking the provisions of section 234B forcharging interest from the assessee as it was not aregular assessment first time framed by the AO. TheCIT(A) thus deleted the interest amount charged u/s234B of the IT Act by the AO. 14.Keeping in view the provisions of section 234B,we do not find any illegality or infirmity in the wellreasoned and well discussed order of CIT(A) because assessment framed u/s 147 being not madefor the first time is not a regular assessment andhence the order of CIT(A) in holding that the interestu/s 234B of IT Act can only be charged in a case ofregular assessment, does not call for anyinterference from out side and accordingly the same,in this regard is upheld. In this view of the matter, wefind support from the decision of Jurisdictional HighCourt of Punjab and Haryana in the case ofKamlavati v. CIT, reported in 111 ITR 248 wherein ithas been held that the assessment or reassessmentmade u/s 147 cannot be considered to be a regularassessment. Accordingly, Ground No.3 of revenue'sappeal, having no merits, is rejected.” 14.The legal position enunciated in the order of the Tribunaldated 28.8.2001 being contrary to statutory provision and settled law asheld by the Apex Court in K. Govindan and Sons's case (supra)decided on December 1, 2000, the order of the Tribunal would notaffect the rights of the revenue as the law declared by the Apex Courtwas binding under Article 141 of the Constitution of India. Further, itmay be noticed that as submitted by the learned counsel for therevenue, no appeal under Section 260A of the Act had been filedagainst the order of the Tribunal dated 28.8.2001 as the tax effectinvolved was below monetary limit prescribed by the circulars of theCBDT. The order of the Tribunal being contrary to statutory provisionand the legal enunciation of the Apex Court would be rendered ITA No. 8 of 2004-14- ineffective in view of law propounded in para 16 in Director ofSettlements, A.P. and others v. M.R. Apparao and another [2002] 4SCC 638. The Supreme Court following its earlier decision in M/sShenoy and Co. represented by its partner, Bele Srinivasa RaoStreet Bangalore and others v. Commercial Tax Officer and others[1985] 2 SCC 512 had held that Article 141 of the Constitution of Indiaempowers the Supreme Court to declare the law and statement of courton matter of facts may not have binding force but the ratio of thedecision is binding. It was further observed that the judgment of theHigh Court or the subordinate court which does not follow the decisionof the Apex Court on law would be a nullity. Thus, no indefeasibleright would accrue on the basis of order of the Tribunal dated 28.8.2001in favour of the assessee notwithstanding the fact that no appeal hadbeen filed against the said order. In the facts and circumstances of thepresent case, the order of the Tribunal dated 28.8.2001 would not comein the way of the revenue to invoke Section 234B of the Act. Once thatis so, then the assessment order dated 31.1.1997 passed in pursuanceof revisional order dated 23.3.1995 enhancing the assessed incomewould make the assessee liable to interest under Section 234B(4) of theAct. The CIT(A) and the Tribunal were not right in holding otherwise. 15.Suffice it to notice, that the reliance of the learned counselfor the assessee on Darshan Lal Gulati's case (supra) does not cometo the rescue of the assessee as the same was on the individual factsituation involved therein. 16.Now adverting to the alternative submission of the learnedcounsel for the assessee, reference is made to the judgment of the Karnataka High Court in Kwality Biscuits Ltd's case (supra). TheHigh Court while disagreeing with the Tribunal had held as under:- 15.Suffice it to notice, that the reliance of the learned counselfor the assessee on Darshan Lal Gulati's case (supra) does not cometo the rescue of the assessee as the same was on the individual factsituation involved therein. 16.Now adverting to the alternative submission of the learnedcounsel for the assessee, reference is made to the judgment of the Karnataka High Court in Kwality Biscuits Ltd's case (supra). TheHigh Court while disagreeing with the Tribunal had held as under:- “Under Section 115J, where the total income of thecompany is less than 30 per cent of its book profit,the total income of such assessee chargeable to taxfor the relevant previous year shall be deemed to bean amount equal to 30 per cent of such book profit. Itis, thus, by way of deeming fiction that this incomehas been considered to be the deemed income.Profit and loss account has to be prepared inaccordance with the provisions of Parts II and III ofSchedule VI to the Companies Act. In theExplanation under section 115J(1A) it is provided thatfor the purposes of this section 'book profit' meansthe net profit as shown in the profit and loss accountfor the relevant previous year prepared under sub-section (1A) as increased by various amounts givenin the section. Thus, for the purpose of assessing taxunder section 115J, firstly, the profit as computedunder the Income-tax Act has to be prepared andthereafter the book profits as contemplated by theprovisions of section 115J are to be determined andthen the tax is to be levied. The liability of theassessee for payment of tax under section 115Jarises if the total income as computed under theprovisions of the Act is less than 30 per cent of its book profits. This exercise for determining the totalincome in accordance with the provisions of the Actand that of book profit can be only after the end ofthe relevant assessment year. It is only the deemedincome for which the provisions of section 115J havebeen incorporated. When a deeming fiction isbrought under the statute, it is to be carried to itslogical conclusion but without creating furtherdeeming fiction so as to include other provisions ofthe Act which have not specifically been madeapplicable. Since the entire exercise of computingthe income or that of book profit could be only at theend of the financial year, the provisions of section207, 208, 209 or 201 cannot be made applicable untiland unless the accounts are audited and the balancesheet is prepared – even the assessee may not knowwhether the provisions of section 115J would beapplicable or not. The liability could be after the bookprofits are determined in accordance with theCompanies Act. The words 'for the purpose of thissection' in the Explanation to section 115J(A) arerelevant and cannot be construed to extend beyondthe computation of liability of tax. Accordingly, weare of the view that the Tribunal was not justified indirecting to charge interest under sections 234B and234C. Thus, question No.2 is, therefore, answered in favour of the assessee and against the revenue.” 17.The judgment in Kwality Biscuits Ltd's case (supra) wasaffirmed by the Apex Court as the Civil Appeal was dismissed asreported in (2006) 284 ITR 434 (SC). favour of the assessee and against the revenue.” 17.The judgment in Kwality Biscuits Ltd's case (supra) wasaffirmed by the Apex Court as the Civil Appeal was dismissed asreported in (2006) 284 ITR 434 (SC). 18.Similar issue had also been considered by Gauhati HighCourt in Assam Bengal Carriers Ltd. v. Commissioner of IncomeTax [1999] 239 ITR 862; Madhya Pradesh High Court in Itarsi Oils andFlour (P) Ltd. v. Commissioner of Income Tax [2001] 250 ITR 686;Madras High Court in Commissioner of Income Tax v. HolidayTravels (P) Ltd. [2003] 263 ITR 307; and Bombay High Court inCommissioner of Income Tax v. Kotak Mahindra Finance Ltd.[2004] 265 ITR 119, wherein it was held that that there is no mention inSection 234B and 234C of the Act that in cases of determination ofincome under Section 115J of the Act, the provisions of the same wouldnot be attracted. The Bombay High Court had concurred with thejudgment of the Gauhati High Court and Madhya Pradesh High Court. 19.This Court in Commissioner of Income Tax v. M/s UpperIndia Steel Manufacturing and Engineering Co.Ltd. [2005] 279 ITR123 was considering identical issue of levy of interest under Section234B and 234C of the Act where there was non-payment or shortpayment due to computation of income on the basis of book profitsunder Section 115J of the Act. The view of the High Courts of Gauhati,Madhya Pradesh, Madras and Bombay was followed and that ofKarnataka High Court in Kwality Biscuits Ltd's case (supra) wasdissented. It was noted that the provisions of Sections 234A, 234B and234C of the Act were not penal but compensatory in the following terms:- “It is, thus, clear that the provisions contained insections 234A, 234B and 234C of the Act are surelynot penal provisions but are compensatory in naturefor breach of civil obligation. These provisions havebeen introduced to obviate the arbitrariness and toeliminate the subjective decisions of the taxauthorities ensuring uniform treatment to similarlysituated persons. The provisions are mandatory andthe levy thereunder is automatic, the moment it isproved that a default has been committed within thecomprehension of any one of the provisions inquestion.” It was further observed:- “Section 207 of the Act provides that tax shall bepayable in advance during the financial year inaccordance with the scheme provided in sections208 to 219 in respect of the total income of theassessee that would be chargeable to tax for theassessment year immediately following that financialyear. Such income has been described as “currentincome”. Thus, this section contemplates estimationof current income by the end of the financial year andon the basis of such estimation, the assessee isrequired to pay advance tax. Advance tax is payableon the current income irrespective of whether the same is computed under section 115J or under theother provisions of the Act. In other words, theexpression “current income”, on which advance tax ispayable under the provisions of section 207, doesnot exclude the income computed under theprovisions of section 115J. We, therefore, find nomerit in the contention that the provisions of sections234B and 234C of the Act would not be attracted incases where a company is assessed on the incomecomputed under section 115J.” 20.The view of the Karnataka High Court in Kwality BiscuitsLtd's case (supra) was dissented with the following observations:- same is computed under section 115J or under theother provisions of the Act. In other words, theexpression “current income”, on which advance tax ispayable under the provisions of section 207, doesnot exclude the income computed under theprovisions of section 115J. We, therefore, find nomerit in the contention that the provisions of sections234B and 234C of the Act would not be attracted incases where a company is assessed on the incomecomputed under section 115J.” 20.The view of the Karnataka High Court in Kwality BiscuitsLtd's case (supra) was dissented with the following observations:- “From the above, it is clear that two factors hadweighed with the High Court while granting relief tothe assessee. Firstly, that the provisions of section207 are not applicable to an income determinedunder section 115J and; secondly, that a hardship iscaused to the assessee because the liability to paytax on the book profits is determined only at the endof the financial year. Both the grounds, according tous, are not tenable. As already observed earlier, theprovisions of section 207 do not exclude the incomedetermined under section 115J from the purview ofcurrent income on which advance tax is payable.Similarly, there is no scope for considering thehardship of the assessee as the levy is automatic and does not require any opportunity to be given tothe assessee. We, therefore, dissent from thejudgment of the Karnataka High Court in the case ofKwality Biscuits Ltd. [2000] 243 ITR 519.” 21.This Court while concurring with the view of the High Courtsof Gauhati, Madhya Pradesh, Madras and Bombay had concluded asunder:- “We fully concur with the view expressed in theaforesaid judgments. The Madras High Court hascorrectly pointed out that for the purpose of paymentof advance tax, all assessees including companies,are required to make an estimate of their currentincome. Even before the introduction of theprovisions of section 115J of the Act, companies hadbeen estimating their total income after providingdeductions admissible under the Act. In fact, allassessees who maintain books of account have toundertake this exercise for the purpose of payment ofadvance tax. If a profit and loss account can bedrawn up on estimate basis for the purpose of theIncome tax Act, it is not understood as to why asimilar profit and loss account on estimate basisunder the Companies Act cannot be drawn up. If theexplanation of the companies that the profits undersection 115J of the Act can only be determined afterthe close of the year were to be accepted, then no assessee who maintains regular books of accountwould be liable to pay advance tax as in those casesalso, income can only be determined after the closeof the books of account at the end of the year.” 22.Civil Appeal No. 459 of 2006 had been filed against thejudgment of this Court in Upper India Steel Manufacturing andEngineering Co. Ltd's case (supra) which was heard by the ApexCourt along with the case of Joint Commissioner of Income Tax v.Rolta India Ltd. [2011] 330 ITR 470 (SC) and was affirmed as hasbeen noticed therein. 23.The Apex Court in Rolta India Ltd's case (supra) hadrecorded as under:- “7. In our view, Section 115J/115JA are specialprovisions. Section 207 envisages that tax shall bepayable in advance during any financial year oncurrent income in accordance with the schemeprovided in Sections 208 to 219 (both inclusive) inrespect of the total income of the assessee thatwould be chargeable to tax for the assessment yearimmediately following that financial year. Section 215(5) of the Act defined what is “assessed tax”, i.e., taxdetermined on the basis of regular assessment so faras such tax relates to income subject to advance tax.The evaluation of the current income and thedetermination of the assessed income had to bemade in terms of the statutory scheme comprising 23.The Apex Court in Rolta India Ltd's case (supra) hadrecorded as under:- “7. In our view, Section 115J/115JA are specialprovisions. Section 207 envisages that tax shall bepayable in advance during any financial year oncurrent income in accordance with the schemeprovided in Sections 208 to 219 (both inclusive) inrespect of the total income of the assessee thatwould be chargeable to tax for the assessment yearimmediately following that financial year. Section 215(5) of the Act defined what is “assessed tax”, i.e., taxdetermined on the basis of regular assessment so faras such tax relates to income subject to advance tax.The evaluation of the current income and thedetermination of the assessed income had to bemade in terms of the statutory scheme comprising Section 115J/115JA of the Act. Hence, levying ofinterest was inescapable. The assessee was boundto pay advance tax under the said scheme of the Act.Section 115J/115JA of the Act were specialprovisions which provided that where in the case ofan assessee, the total income as computed underthe Act in respect of any previous year relevant to theassessment year is less than 30% of the book profit,the total income of the assessee shall be deemed tobe an amount equal to 30% of such book profit. Theobject is to tax zerotax companies. 8. Section 115J was inserted by Finance Act, 1987w.e.f. 1.4.1988. This section was in force from1.4.1988 to 31.3.1991. After 1.4.1991, Section 115JAwas inserted by Finance Act of 1996 w.e.f. 1.4.1997.After insertion of Section 115JA, Section 115JB wasinserted by Finance Act, 2000 w.e.f. 1.4.2001. It isclear from reading Sections 115JA and 115JB thatthe question whether a company which is liable topay tax under either provision does not assumeimportance because specific provision(s) is made inthe section saying that all other provisions of the Actshall apply to the MAT Company (Section 115JA(4)and Section 115JB(5)). Similarly, amendments havebeen made in the relevant Finance Acts providing forpayment of advance tax under Sections 115JA and 115JB. So far as interest leviable under Section 234Bis concerned, the section is clear that it applies to allcompanies. The pre-requisite condition forapplicability of Section 234B is that assessee is liableto pay tax under Section 208 and the expression“assessed tax” is defined to mean the tax on the totalincome determined under Section 143(1) or underSection 143(3) as reduced by the amount of taxdeducted or collected at source. Thus, there is noexclusion of Section 115J/115JA in the levy ofinterest under Section 234B. The expression“assessed tax” is defined to mean the tax assessedon regular assessment which means the taxdetermined on the application of Section 115J/115JAin the regular assessment. 9. The question which remains to be considered iswhether the assessee, which is a MAT Company,was not in a position to estimate its profits of thecurrent year prior to the end of the financial year on31[st] March. In this connection the assessee placedreliance on the judgment of the Karnataka High Courtin the case of Kwality Biscuits Ltd. v. CIT reported in(2000) 243 ITR 519 and, according to the KarnatakaHigh Court, the profit as computed under the IncomeTax Act, 1961 had to be prepared and thereafter thebook profit as contemplated under Section 115J of 9. The question which remains to be considered iswhether the assessee, which is a MAT Company,was not in a position to estimate its profits of thecurrent year prior to the end of the financial year on31[st] March. In this connection the assessee placedreliance on the judgment of the Karnataka High Courtin the case of Kwality Biscuits Ltd. v. CIT reported in(2000) 243 ITR 519 and, according to the KarnatakaHigh Court, the profit as computed under the IncomeTax Act, 1961 had to be prepared and thereafter thebook profit as contemplated under Section 115J of the Act had to be determined and then, the liability ofthe assessee to pay tax under Section 115J of theAct arose, only if the total income as computed underthe provisions of the Act was less than 30% of thebook profit. According to the Karnataka High Court,this entire exercise of computing income or the bookprofits of the company could be done only at the endof the financial year and hence the provisions ofSections 207, 208, 209 and 210 (predecessors ofSections 234B and 234C) were not applicable untiland unless the accounts stood audited and thebalance sheet stood prepared, because till then eventhe assessee may not know whether the provisionsof Section 115J would be applied or not. The Court,therefore, held that the liability would arise only afterthe profit is determined in accordance with theprovisions of the Companies Act, 1956 and,therefore, interest under Sections 234B and 234C isnot leviable in cases where Section 115J applied.This view of the Karnataka High Court in KwalityBiscuits Ltd. case was not shared by the GauhatiHigh Court in Assam Bengal Carriers Ltd. v. CITreported in (1999) 239 ITR 862 and Madhya PradeshHigh Court in Itarsi Oil and Flours (P.) Limited v. CITreported in (2001) 250 ITR 686 as also by theBombay High Court in the case of CIT v. Kotak Mahindra Finance Ltd. reported in (2003) 130TAXMAN 730 which decided the issue in favour ofthe Department and against the assessee. It appearsthat none of the assesses challenged the decisionsof the Gauhati High Court, Madhya Pradesh HighCourt as well as Bombay High Court in the SupremeCourt. However, it may be noted that the judgment ofthe Karnataka High Court in Kwality Biscuits Ltd. wasconfined to Section 115J of the Act. The Order of theSupreme Court dismissing the Special Leave Petitionin limine filed by the Department against KwalityBiscuits Ltd. is reported in (2006) 284 ITR 434. Thus,the judgment of Karnataka High Court in KwalityBiscuits stood affirmed. However, the Karnataka HighCourt has thereafter in the case of Jindal ThermalPower Company Ltd. v. Dy. CIT reported in (2006)154 TAXMAN 547 distinguished its own decision incase of Kwality Biscuits Ltd. (supra) and held thatSection 115JB, with which we are concerned, is aself-contained code pertaining to MAT, whichimposed liability for payment of advance tax on MATcompanies and, therefore, where such companiesdefaulted in payment of advance tax in respect of taxpayable under Section 115JB, it was liable to payinterest under Sections 234B and 234C of the Act.Thus, it can be concluded that interest under Sections 234B and 234C shall be payable on failureto pay advance tax in respect of tax payable underSection 115JA/115JB. For the aforestated reasons,Circular No. 13/2001 dated 9.11.2001 issued byCBDT reported in 252 ITR(St.)50 has no application.Moreover, in any event, para 2 of that Circular itselfindicates that a large number of companies liable tobe taxed under MAT provisions of Section 115JBwere not making advance tax payments. In the saidcircular, it has been clarified that Section 115JB is aself-contained code and thus, all companies wereliable for payment of advance tax under Section115JB and consequently provisions of Sections 234Band 234C imposing interest on default in payment ofadvance tax were also applicable.” Sections 234B and 234C shall be payable on failureto pay advance tax in respect of tax payable underSection 115JA/115JB. For the aforestated reasons,Circular No. 13/2001 dated 9.11.2001 issued byCBDT reported in 252 ITR(St.)50 has no application.Moreover, in any event, para 2 of that Circular itselfindicates that a large number of companies liable tobe taxed under MAT provisions of Section 115JBwere not making advance tax payments. In the saidcircular, it has been clarified that Section 115JB is aself-contained code and thus, all companies wereliable for payment of advance tax under Section115JB and consequently provisions of Sections 234Band 234C imposing interest on default in payment ofadvance tax were also applicable.” 24.In view of the above, the alternative contention of theassessee is also rejected as the order of the Apex Court dismissing civilappeal reported as Kwality Biscuits Ltd's case (supra) would notcome to its rescue in view of the decision of the Bench of three Hon'bleJudges of the Apex Court in Rolta India Ltd's case (supra). 25.Accordingly, the question of law is answered in favour ofthe revenue and against the assessee. The appeal stands allowed. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE