Haryana Warehousing Corporationpanchkula v. Deputy Commissioner Of Income-Taxspecial Range, Panchkula

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH --- Income-tax Appeal No. 258 of 2005Date of decision: Haryana Warehousing CorporationPanchkula --- Appellant Versus Deputy Commissioner of Income-taxSpecial Range, Panchkula --- Respondent CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present:Mr. Rajesh Garg, Advocatefor the appellant. --- AJAY KUMAR MITTAL, J. This order will dispose of Income-tax Appeal Nos. 258and 259 of 2005 as common question is involved in bothappeals. These appeals, under Section 260A of the Income-tax Act, 1961(for short “the Act’”), have been filed by the assessee against theorder dated 15.9.2004, of the Income Tax Appellate Tribunal,Chandigarh Bench “B” Chandigarh, (in short “the Tribunal”), forthe assessment years 1995-96 and 1996-97. The facts have beentaken from ITA No. 258 of 2005. Briefly, the facts of the case as narrated in the appealare that Haryana Warehousing Corporation constituted underthe Warehousing Corporation Act, 1962, filed return on30.11.1995 showing nil income as according to it, its entireincome was exempt under Section 10(29) of the Act. It has beenfurther averred in the appeal that total exemption from tax wasavailable up to the assessment year 1991-92 in view of judgmentof the Jurisdictional High Court in appellant’s own case reportedin Commissioner of Income-tax, Patiala-II v. Haryana WarehousingCorporation (1978)112 ITR 374 and judgments in U.P. StateWarehousing Corporation v. ITO, (1974) 94 ITR 129 (Allahabad),Union of India and another v. U.P. State Warehousing Corporation(1991) 187 ITR 54 (Supreme Court) and Commissioner of Income-Tax v. U.P. State Warehousing Corporation (1992)195 ITR 273(Allahabad). But the Supreme Court, for the first time, in itsjudgment rendered on 1.4.1999 in Orissa State WarehousingCorporation and Rajasthan State Warehousing Corporation v.Commissioner of Income-Tax, (1999) 237 ITR 589 held in thecases of Orissa Warehousing Corporation and RajasthanWarehousing Corporation that only the income from rent of god- owns and warehouses was exempt from tax under Section 10(29)of the Act and all other income was taxable. Further more, theSupreme Court in its another judgment in the case of U.P. StateWarehousing Corporation held that interest on refund received bythe assessee-Corporation from the Income-tax Department wasalso exempt from tax under Section 10(29) of the Act. Theassessing officer framed assessment in the case of the appellant-Corporation under Section 143(3) of the Act by order dated17.2.1998 allowing exemption to income from rent of god-ownsand warehouses and taxed the other income. The assessingofficer also charged interest under Sections 234B and 234C ofthe Act, amounting to Rs. 2,91,03,000/-. The Commissioner ofIncome-tax (Appeals), [in short “the CIT(A)”] quashed the interestcharged, holding that the appellant was not liable to pay advancetax as on 31.3.1995 and accordingly further held that interestwas not payable. On Revenue’s appeal, the Tribunal, vide orderdated 15.9.2004 reversed the order of the CIT(A) holding thatcharging of interest under Sections 234B and 234C of the Actwas mandatory as held by the Supreme Court in Commissionerof Income-tax v. Anjum H.M. Ghaswala, (2001) 252 ITR 1. This ishow the assessee is in appeal before us. Before we embark upon the controversy in the appeal,we feel appropriate to note down the following three questionswhich according to the appellant are the substantial questions oflaw and arise in this appeal for determination by this Court: Before we embark upon the controversy in the appeal,we feel appropriate to note down the following three questionswhich according to the appellant are the substantial questions oflaw and arise in this appeal for determination by this Court: 1-Whether the Income-tax Appellate Tribunal was rightin law in holding that interest under Section 234B and234C is mandatory and it cannot be quashed eventhough the appellant was not liable to pay advance taxduring the year?in law in holding that interest under Section 234B and234C is mandatory and it cannot be quashed eventhough the appellant was not liable to pay advance taxduring the year? 2-Whether the Tribunal was justified in law in notquashing the interest charged under Section 234Band 234C even though the appellant was not liable topay advance tax “the liability to pay the advance taxhaving arisen only after the Supreme Court judgmentdated 1.4.1999?quashing the interest charged under Section 234Band 234C even though the appellant was not liable topay advance tax “the liability to pay the advance taxhaving arisen only after the Supreme Court judgmentdated 1.4.1999? 3-Whether the Tribunal was justified in law in notfollowing the order of a Co-ordinate Bench of theTribunal?”following the order of a Co-ordinate Bench of theTribunal?” We have heard learned counsel for the appellant andperused the record. Learned counsel for the appellant contested the issueof charging of interest under Sections 234B and 234C of the Actas assessed by the Assessing Officer, which though was quashedby the CIT (A), but confirmed by the Tribunal in appeal at theinstance of the Revenue. The counsel submitted that theTribunal in the case of the appellant itself, pertaining to theassessment years 1992-93 and 1993-94 had quashed interest onthe ground that the appellant was not liable to pay advance taxand as such the same could not be charged and, thus, the Tribunal ought to have followed the ratio of that judgment andaccepted the plea of the appellant. We are unable to accept the plea of the assesseeregarding chargeability of interest under Section 234B of the Actfor the reasons enumerated hereinafter. The assessee had neither raised any such plea withrespect to decision of the Co-ordinate Bench before the Tribunalas is evident from the perusal of the order of the Tribunal norhad produced any order of the Tribunal for those years beforethis Court along with the appeal. Further, the apex Court inGhaswala’s case (supra) had categorically held that levy ofinterest under Section 234B of the Act was mandatory incharacter. Still further, the learned counsel for the assessee wasunable to justify on merits that no interest was exigible underSection 234B of the Act. Adverting to the merits of the controversy, this Courthad the occasion to consider the scope of chargeability of interestunder Sections 234B and 234C of the Act in Income-tax AppealNo. 149 of 2003 (Commissioner of Income-tax (Central) Ludhianav. Arun Kapoor) decided on 22.7.2010. It was held that interestunder Section 234B of the Act is payable on the income assessedand not on the income declared by the assessee. It was furtherheld that interest for deferment of advance tax under Section234C of the Act is chargeable on the income returned by theassessee. The relevant observations recorded therein read asunder: “6. The chargeability of interest under Section 234B ofthe Act came up for consideration in a recentjudgment dated 20.7.2010 passed in ITA No. 851 of2008 (M/s Jacob Export House v. Commissioner of Income Tax) wherein it was held as under:- “7. The matter is no longer res integra. This “6. The chargeability of interest under Section 234B ofthe Act came up for consideration in a recentjudgment dated 20.7.2010 passed in ITA No. 851 of2008 (M/s Jacob Export House v. Commissioner of Income Tax) wherein it was held as under:- “7. The matter is no longer res integra. This Court in Parkash Agro’s case (supra), whileconsidering the effect of amendment toExplanation-I retrospectively w.e.f. 1.4.1989 hadheld that an assessee is liable to pay interestunder Section 234B of the Act on the incomeassessed under Section 143 (1) or143(3) of theAct and not on the basis of income declared inthe return by the assessee. The relevantobservations read as under:- “9. It is no doubt true that prior to theamendment brought by Finance Act, 2001, whichhas been made effective retrospectively from1.4.1989, the interest under section 234B of theAct was chargeable with reference to the totalincome as had been declared by the assessee inits return and not on the assessed income.Explanation 1 to section 234B of the Act wasamended by Finance Act, 2001. It reads thus:- “Explanation 1. – In this Section, ‘assessedtax’ means the tax on the total incomedetermined under sub-section (1) of section143 or on regular assessment as reduced bythe amount of tax deducted or collected atsource in accordance with the provisions ofChapter XVII on any income which issubject to such deduction or collection andwhich is taken into account in computingsuch total income. (b) in sub-section (3), for the words ‘one halfper cent’, the words ‘one and one-fourth percent’ shall be substituted with effect from1.6.2001.” 10. The said Explanation was subject-matter of challenge before this Court in RajKumar Singhal’s case (supra) where theDivision Bench while upholding the validityof the said provision, interpreted it asunder:- “......A comparison of the twoprovisions shows that under the originalprovision interest was leviable on theincome as declared in the return filed by theassessee. By the amended provision, theinterest is leviable on the income asdetermined by the assessing authorityminus the income on which the tax hasbeen paid or deducted. The amendment isonly calculated to clarify the ambiguity thatwas felt in the original provision. It is notarbitrary or unreasonable..... (p.562)”. 7. Section 234C of the Act provides forinterest for deferment of advance tax.Section 234C (1)(b) is relevant in thepresent case as it applies in case ofassessees other than company. According tothe aforesaid provision, the assessee isliable to pay interest on the returnedincome at the rate specified therein for theperiod for which advance tax has beendeferred. In view of the above, so far as the liability to payinterest under Section 234B is concerned, since the assessing officer had created a demand in the assessment order, theassessee is liable to pay interest on the basis of assessed tax.However, as regards interest under Section 234C of the Act isconcerned, since the assessee had paid the advance tax on thereturned income in view of the law prevailing then, the liability topay interest under Section 234C could not be said to havearisen. Accordingly, we answer the questions proposed by theappellant, holding that so far as charging of interest underSection 234B is concerned, it is chargeable on the basis ofassessed tax determined vide assessment order passed by theassessing officer whereas interest under Section 234C was notpayable by the assessee. In view of the above, the appeals stand disposed of inthe manner indicated above. (AJAY KUMAR MITTAL) JUDGE September , 2010*rkmalik* (ADARSH KUMAR GOEL)JUDGE