In Kwality Biscuits Ltd v. Section 119 (1) And 119(2)(A) Of The Act Reads

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR FRIDAY, THE 16TH DAY OF JANUARY 2015/26TH POUSHA, 1936 WP(C).No. 2791 of 2007 (G) --------------------------- PETITIONER(S): ------------- THE FERTILIZERS AND CHEMICALS TRAVANCORE LTD., UDYOGAMANDAL, COCHIN REPRESENTED BY ITS DEPUTY CHIEF MANAGER (FINANCE) PLACID LOPEZ. BY ADVS. SRI.P.GOPINATH MENON. SRI.ANIL D. NAIR RESPONDENT(S): ---------------- 1. THE DEPUTY COMMISSIONER OF INCOME TAX (ASSMT) SPECIAL RANGE 2, ERNAKULAM. (ASSMT) SPECIAL RANGE 2, ERNAKULAM. 2. THE CHIEF COMMISSIONER OF INCOME TAX, KOCHI. KOCHI. BY ADV.SRI.JOSE JOSEPH, STANDING COUNSEL. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 24.11.2014, THECOURT ON16.1.2015 DELIVERED THE FOLLOWING: WP(C).No. 2791 of 2007 (G) A P P E N D I X PETITIONER'S EXHIBITS : EXT.P1 : TRUE COPY OF ORDER OF THE FIRST DEPUTY COMMISSIONER OFINCOME TAX (ASSMT) DT. 11.11.1992. EXT.P2 : RUE COPY OF THE ORDER ISSUED BY THE FIRST RESPONDENT DT.30.11.1993 TO THE PETITIONER. EXT.P3 : TRUE COPY OF THE ORDER OF THE TRIBUNAL TO THE PETITIONERDT. 9.2.1998. EXT.P4 : TRUE COPY OF THE ORDER OF THE SECOND RESPONDENT TO THEPETITIONER DT. 21.8.2006. TGS (TRUE COPY) P.B.SURESH KUMAR, J. ----------------------------------------------- W.P. (C) No.2791 of 2007 ----------------------------------------------- Dated 16[th] January, 2015. J U D G M E N T Ext.P4 order passed by the second respondent inexercise of the powers conferred on him by the Central Boardof Direct Taxes under Clause (a) of sub-section (2) of Section119 of the Income Tax Act,1961, hereinafter referred to as `theAct' for short, is under challenge in this writ petition. 2.The petitioner is a public sector undertaking.It is an assessee under the Act on the file of the firstrespondent. For the assessment year 1990-91, the petitionerfiled returns claiming the benefit of carried forward loss ofRs.6,42,65,257/-, worked out its book profit at Rs.3,61,32,102/-and offered the same for taxation under Section 115J of theAct. The first respondent while completing the assessmentlevied interest under Section 234C of the Act on the groundthat there was shortfall in the payment of advance tax. Thepetitioner had though challenged the assessment order beforethe first appellate authority, the levy of interest under Section WPC 2791 of 2007 234C of the Act was upheld by the first appellate authority andthe said decision of the first Appellate Authority was confirmedby the Income Tax Appellate Tribunal. Thereafter, the petitionerfiled a petition before the second respondent seeking waiver ofintererst levied under Section 234C of the Act, invoking hispowers under Section 119(2)(a) of the Act and the same wasdismissed by the second respondent holding that in so far asthe levy of interest under section 234C of the Act was upheldby the first appellate authority in the appeal preferred againstthe assessment order and since the said decision of the firstappellate authority was confirmed by the Tribunal, theassessee is not entitled to invoke the powers of the secondrespondent under Section 119(2)(a) of the Act, for waiver ofthe interest payable under Section 234C of the Act. Ext.P4 isthe order issued by the second respondent dismissing thepetition filed by the petitioner seeking waiver of interest. InExt.P4, the second respondent had also held that the case ofthe assessee would not fall under the class of cases andincomes specified by the Central Board of Direct Taxes as pernotification dated 26/6/2006 for the income tax authorities toexercise the power under Section 119(2)(a) of the Act. As WPC 2791 of 2007 stated above, it is aggrieved by the said decision of the secondrespondent, this writ petition is filed. 3. Heard Adv.P.Gopinath Menon, the learnedcounsel for the petitioner and Adv.Jose Joseph, the learnedStanding Counsel for the respondents. WPC 2791 of 2007 stated above, it is aggrieved by the said decision of the secondrespondent, this writ petition is filed. 3. Heard Adv.P.Gopinath Menon, the learnedcounsel for the petitioner and Adv.Jose Joseph, the learnedStanding Counsel for the respondents. 4. The learned counsel for the petitioner contended, relying on the decision of the Karnataka High Court in Kwality Biscuits Ltd. v. Commissioner of Income Tax[2000 Vol.243 ITR 519] that since the book profit cannot bedetermined before the end of the relevant assessment year,the petitioner is not obliged to pay interest under Section 234Cof the Act for non-payment of advance tax on the book profit. 5. Section 119 (1) and 119(2)(a) of the Act reads thus : “119. (1) The Board may, from time to time, issue such orders,instructions and directions to other income-tax authorities as itmay deem fit for the proper administration of this Act, and suchauthorities and all other persons employed in the execution ofthis Act shall observe and follow such orders, instructions anddirections of the Board: Provided that no such orders, instructions or directions shall beissued - (a) so as to require any income-tax authority to make aparticular assessment or to dispose of a particular case in aparticular manner; or (b) so as to interfere with the discretion of the Commissioner(Appeals) in the exercise of his appellate functions. (2) Without prejudice to the generality of the foregoing power,- (a) the Board may, if it considers it necessary or expedient so todo, for the purpose of proper and efficient management of thework of assessment and collection of revenue, issue, from timeto time (whether by way of relaxation of any of the provisions ofsections [115P, 115S], [115WD, 115WE, 115WF, 115WG,115WH, 115WJ, 115 WK,] [139], 143, 144, 147, 148, 154, 155,[158BFA] [sub-section (1A) of section 201, sections 210, 211,[234A, 234B], 234C], 271 and 273 or otherwise), general orspecial orders in respect of any class of incomes [or fringebenefits] or class of cases, setting forth directions orinstructions (not being prejudicial to assessees) as to theguidelines, principles or procedures to be followed by otherincome-tax authorities in the work relating to assessment orcollection of revenue or the initiation of proceedings for theimposition of penalties and any such order may, if the Board isof opinion that it is necessary in the public interest so to do, bepublished and circulated in the prescribed manner for generalinformation;” It is clear from Sections 119(1) and 119(2)(a) of the Act thatthe statute had conferred authority to waive interest payableunder Sections 234A, 234B and 234C only on the Central Boardof Direct Taxes and it is based on the general or special orders WPC 2791 of 2007 issued by the Board, the other income tax authorities areexercising the power of waiver. It is also clear from theaforesaid Sections that the income tax authorities other thanthe Board are empowered and authorised to waive interest onlyin accordance with the guidelines, principles and proceduresspecified by the Board in general or special orders issued bythe Board. The classes of incomes and cases in respect ofwhich the Chief Commissioner of Income Tax is authorised towaive interest payable under Section 234C of the Act as pernotification dated 26/6/2006 referred to in Ext.P4 order, whichwas made available to me by the Standing Counsel for therespondents, read thus: WPC 2791 of 2007 issued by the Board, the other income tax authorities areexercising the power of waiver. It is also clear from theaforesaid Sections that the income tax authorities other thanthe Board are empowered and authorised to waive interest onlyin accordance with the guidelines, principles and proceduresspecified by the Board in general or special orders issued bythe Board. The classes of incomes and cases in respect ofwhich the Chief Commissioner of Income Tax is authorised towaive interest payable under Section 234C of the Act as pernotification dated 26/6/2006 referred to in Ext.P4 order, whichwas made available to me by the Standing Counsel for therespondents, read thus: “(b) Any income chargeable to income-tax under any head ofincome, other than “Capital Gains” is received or accrued afterdue date of payment of the first or subsequent instalments ofadvance tax which was neither anticipated nor was in thecontemplation of the assessee, and the advance tax on suchincome is paid in the remaining instalment or instalments, andthe Chief Commissioner/Director General is satisfied on thefacts and circumstances of the case that this is a fit case forreduction or waiver of the interest chargeable under section234C of the Income-tax Act. (c) Where any income was not chargeable to income-tax in thecase of an assesse on the basis of any order passed by the HighCourt within whose jurisdiction he is assessable to income-tax, and as a result, he did not pay income-tax in relation to suchincome in any previous year, and subsequently, in consequenceof any retrospective amendment of law or the decision of theSupreme court of India, or as the case may be, a decision of alarger Bench of the jurisdictional High Court(which was notchallenged before the Supreme Court and has become final), inany assessment or re-assessment proceedings the advance taxpaid by the assessee during such financial year is found to beless than the amount of advance tax payable on his currentincome, and the assessee is chargeable to interest undersection 234B or section 234C, and the ChiefCommissioner/Director General is satisfied that this is a fit casefor reduction or waiver of such interest.” As stated above, the second respondent is empowered andauthorised to waive interest payable by the petitioner underSection 234C of the Act only if the case of the petitioner fallsunder any of the two classes of cases referred to above. Thepetitioner has no case that its case would fall under the saidclasses of cases. The contention raised by the learned counselfor the petitioner that since the book profit cannot bedetermined before the end of the relevant assessment year,the assessees are not obliged to pay interest under Section234C of the Act for non-payment of advance tax on the bookprofit also cannot be accepted, for, the question whether the petitioner is liable to pay interest under Section 234C of theAct is not the issue in this case. As noticed above, the issue inthis case is as to whether the second respondent is justified indeclining the request made by the petitioner for waiver ofinterest in exercise of his authority under Section 119 of theAct. The decision relied on by the learned counsel for thepetitioner is also not a decision rendered in the context of theauthority of the income tax officers to waive interest underSection 119 the Act. Further, as noticed above, the questionwhether the petitioner is liable to pay tax under Section 234Cof the Act was considered and decided against the petitioner inthe appeal preferred by them against the assessment order ofthe concerned year and the said order has become final. In the aforesaid circumstances, Ext.P4 order of thesecond respondent is perfectly in order. There is, therefore, nomerit in the writ petition and same is, accordingly, dismissed. Sd/- P.B.SURESH KUMAR, JUDGE.