Ita/1208/2009 Of Commissioner Of Income Tax, Cochin v. Fertiizers And Chemicals Travancore Ltd

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON THURSDAY, THE 1ST DAY OF MARCH 2018 / 10TH PHALGUNA, 1939 ITA.No. 1208 of 2009 AGAINST THE ORDER/JUDGMENT IN ITA 1213(COCH)/2004 OF INCOME TAX APPELLATETRIBUNAL,COCHIN BENCH DATED 24-04-2007 APPELLANT(S)/RESPONDENT/REVENUE THE COMMISSIONER OF INCOME TAX,COCHIN. BY ADVS.SRI.P.K.R.MENON, SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S):/APPELLANT/ASSESSEE THE FERTILIZERS AND CHEMICALS TRAVANCORE LTD., UDYOGAMANDAL. BY ADV. SRI.E.K.NANDAKUMAR (Sr.) SRI.P.GOPINATH THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 01-03-2018,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: APPENDIX APPELLANT'S EXHIBITS ANNEXURE-A :COPY OF ORDER UNDER SECTION 154 DATED 3.9.2003 FOR THEASSESSMENT YEAR 1996-97. ANNEXURE-B :COPY OF ORDER DATED 20.9.2004 OF THE COMMISSIONER OF INCOMETAX (APPEALS). ANNEXURE-C :COPY OF ORDER DATED 24.4.2007 OF THE INCOME TAX APPELLATETRIBUNAL, COCHIN BENCH IN ITA NO.1213/COCH/2004. ANNEXURE-A1 :COPY OF ASSESSMENT ORDER UNDER SECTION 143(3) READ WITHSECTION 147 DATED 18.03.2002 FOR THE ASSESSMENT YEAR 1996-97. //TRUE COPY// jg PS TO JUDGE. K.VINOD CHANDRAN & ASHOK MENON, JJ. ------------------------------------------- ITA No.1208 of 2009------------------------------------------- Dated this the 1[st] day of March, 2018 J U D G M E N T Vinod Chandran, J. The Revenue has raised the following questions oflaw: “1. Whether, on the facts and in thecircumstances of the case is not thecomputation of interest under Section 234 fora period from 27.3.1999 to 18.3.2002 at therate applicable from time to time inaccordance with law?2.Whether, on the facts and in thecircumstances of the case and on aninterpretation of the relevant provision, theTribunal is right in law:(i)in holding that the interest liabilityof the assessee under Section 234B(3) isfor the period from 1.4.1997 to 12.6.1997.(ii) in interfering with the computation ofinterest under Section 234B of the IncomeTax Act confirmed by the Commissioner ofIncome Tax (Appeals)?” 2.For the assessment year 1996-97, what is impugned before us is levy of interest under Section234B(3) of the Income Tax Act, 1961 (‘Act’, for short).Regular assessment of the assessee under Section 143(3)was completed on 26.3.1999. Interest under Section243B & C was levied and later that under Section 234B -2- was reduced considerably. A re-assessment was carriedout, under Section 143(3) read with Section 147 dated18.3.2002. The Assessing Officer did not levy anyinterest under Section 234B(3), despite there being anincrease in the tax liability on re-assessment. Later,by Annexure-A order under Section 154 of the Act, theAssessing Officer levied interest on the enhanced taxcomponent. An appeal was filed to the first appellateauthority which stood rejected. The assessee wasbefore the Income Tax Appellate Tribunal (‘Tribunal’,for short), in which the levy was modified to theextent of directing that the levy would be possibleonly between 1.4.1997 and 12.6.1997. In fact, the date12.6.1997 is wrongly stated, since the finding of theTribunal was that the levy is possible only from1.4.1997 to the date on which Section 140A tax waspaid. The said payment was made on 29.6.1996. 3.The Tribunal reasoned that when tax was paidunder Section 140A, due benefit should be given to thesame when computing interest under Section 234B(1) and(3). The Tribunal looked into Section 234B(2) to findthat the allowance insofar as the reduction of interestto the extent of such interest paid under Section 140A, 3.The Tribunal reasoned that when tax was paidunder Section 140A, due benefit should be given to thesame when computing interest under Section 234B(1) and(3). The Tribunal looked into Section 234B(2) to findthat the allowance insofar as the reduction of interestto the extent of such interest paid under Section 140A, has to be permitted even in the case of sub-Section (3)of Section 234B. It was also held that the demand evenon re-assessment, was less than that paid under Section140A, and there could be no claim of interest from thedate of payment of tax under Section 140A. 4.Considering the assessment and re-assessmentand payment of tax under Section 140A as also theconsequential refund, we thought it fit to have theAssessing Officer present before us. The AssessingOfficer has provided us a working of the assessment andinterest levied across the Bar with notice to theassessee's counsel. 5.We are of the opinion that the interpretationof the provisions by the Tribunal is flawless, buthowever the same cannot be applied in the case of theassessee. We say so because the amounts paid underSection 140A did not include any interest and the samewas refunded on 27.3.1998 with interest. In theregular assessment under Section 143, the total taxcomputed along with surcharge came to Rs.3,31,30,433/-.The regular assessment was made on 26.3.1999 and thepayment under Section 140A of Rs.6,20,06,000/- was on29.6.1996. However, we see from the assessment order that even before the regular assessment was completed,the refund as claimed by the assessee even as per therevised assessment on which tax under Section 140A waspaid, was made to the assessee with interest, on27.3.1998. The refund was of Rs.7,26,91,413/-. Thebalance demand as per the regular assessment wasRs.6,26,58,924/-. 6.On re-assessment as per Annexure-A1, on18.3.2002, there was again an increase in the taxcomputation. The total tax computed along withsurcharge came to Rs.4,73,80,327/-. Interest claimedunder Section 234B in the regular assessment came tomore than Rs.4 crores, which we find from the order onre-assessment (Annexure-A1) having been reduced toRs.18,12,000/-. The balance demand after adjusting thetax paid under Section 140A as also the consequentialrefund was Rs.3,84,93,240/-. If, as the Tribunal found,the tax paid under Section 140A was less than therevised demand, on assessment or reassessment, therecould not have been a further demand. 7.Admittedly, there was a demand raised as perthe re-assessment. The flaw committed by the Tribunalwas insofar as assuming that the tax paid under Section ITA 1208/09 140A remained with the Department. Even before theregular assessment, the same was returned with intereston 27.3.1998. Hence, the Department did not have anybenefit of the amounts and whatever was paid underSection 140A stood refunded with interest to theassessee. The tax paid by the assessee under Section140A also did not include any interest. Hence, therewas no question of applying sub-Section (2) of Section234B. On re-assessment after the re-computation of thetotal income, the tax demand was raised after givingcredit of tax paid under Section 140A and also addingon the refund with interest. There again was a demandraised after adjustments. Under Section 234B(3) on re-assessment if theinterest leviable, for reason of short fall in paymentof advance tax is increased, then from the first day ofApril next following such financial year, there shallbe interest levied at the rate of 2% on thedifferential tax component, i.e. the increased demandof tax on such re-assessment, from that assessed as perthe regular assessment. As we have noticed, there isdefinite increase of tax liability from the regularassessment at the time of re-assessment. There is no Under Section 234B(3) on re-assessment if theinterest leviable, for reason of short fall in paymentof advance tax is increased, then from the first day ofApril next following such financial year, there shallbe interest levied at the rate of 2% on thedifferential tax component, i.e. the increased demandof tax on such re-assessment, from that assessed as perthe regular assessment. As we have noticed, there isdefinite increase of tax liability from the regularassessment at the time of re-assessment. There is no dispute that the advance tax payable at 90% of theliability to tax, had not been satisfied. The interestpayable under sub-Section (1) of Section 234B waslevied in the regular assessment. On re-assessment,the liability for advance tax also stood increased andin that circumstances, the differential tax on re-assessment had to be levied interest at the rateprovided under sub-Section (3) of Section 234B. Wehence set aside the order of the Tribunal and restorethat of the Assessing Officer under Section 154 asconfirmed in first appeal. We allow the appeal of theRevenue. The questions of law, in the facts of thiscase, are answered in favour of the Revenue and againstthe assessee. Sd/- K.VINOD CHANDRAN JUDGE Sd/- ASHOK MENON JUDGE