M/S.mrf Ltd v. The Deputy Commissioner Of Income-Tax, Large Tax Payer Unit, Chennai 600 101

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 04.08.2016 THE HONOURABLE MR.JUSTICE S.MANIKUMARandTHE HONOURABLE MR.JUSTICE D.KRISHNA KUMAR Tax Case (Appeal) No.234 of 2016 M/s.MRF Ltd.,No.124, Greams Road,Chennai 600 006... Appellantversus The Deputy Commissioner of Income-Tax,Large Tax Payer Unit, Chennai 600 101... Respondent Prayer: Tax Case (Appeal) is filed under Section 260A ofIncome Tax Act, 1961, against the common order inITA.No.1377/Mds/2010, dated 06.11.2015 on the file of theIncome Tax Appellate Tribunal, “A” Bench, Chennai, against theorder of the Commissioner of Income Tax (Appeals) large forpayer unit in ITA.No.52/09-10/LTU(A) dt.28.7.2010 inPAN.No.AAACM4154G for the Assessment Year 2007-08. Against the order of the deputy Commissioner of IncomeTax, large Tax Payer unit, Chennai dt.21.12.2009 inPAN.No.AAACM4154G for the Assessment Year 2007-08.For Appellant: Mr.N.Vijayaraghavan, Senior Counsel for M/s.Subbraya Aiyar Padmanabhan For Respondent : Mrs.Hema Muralikrishan Standing Counsel for IT JUDGMENT(Judgement of this Court was made by S.MANIKUMAR, J.)Instant Tax Case Appeal is filed, challenging the orderin ITA.No.1377/Mds/2010, dated 06.11.2015, passed by theIncome Tax Appellate Tribunal, “A” Bench, Chennai. 2.Short facts leading to the appeal are as follows:For the assessment year 2007-08, the appellant-Company filed return of income on 29.10.2007, admitting atotal income of Rs.138,47,34,567/-. The Deputy Commissioner ofIncome Tax, Large Tax Payer Unit, Chennai, respondent herein,made the following additions/dis-allowances and completed theassessment on 21.12.2009, determining the total income atRs.142,58,72,271/-, https://hcservices.ecourts.gov.in/hcservices/ “(1) The amortization of amount paid in respectof leasehold land of Rs.947,146 was disallowed. (2) Amount of Rs.1,92,63,136 was disallowedu/s.14A r/w.Rule 8D as the expenditure incurred forearning income exempt under the Act and same wasadded to the total income. (3) Expenditure incurred of Rs.2,45,00,000/- inpromoting the MRF Pace Foundation as advertisementexpenditure for promotion of company brand image wasdisallowed as not for purpose of business and beingof charitable nature. (4) Deduction under Chapter VIA, Rs.19,19,096u/s.80JJAA and Rs.1,17,500 u/s.80G, was denied tothe appellant as it did not appear in the e-returneven though the tax is computed on the total incomeafter considering the Chapter VIA deduction. (5) Additional TDS claim of Rs.4,20,981/- forTDS certificates filed during the course ofassessment was denied to the appellant. (6) Interest u/s.234C was determined atRs.86,31,067 in the Assessment Order as againstRs.68,87,057 in the Return.” 3.While completing the assessment, the DeputyCommissioner of Income Tax, Large Tax Payer Unit, Chennai,respondent herein, disallowed the expenses on amortization ofamount paid in respect of leasehold land, disallowance underSection 14A and advertisement expenditure, amounting toRs.4,47,10,282/-. The assessing officer also charged interest,under Section 234C of the Income Tax Act, 1961, amounting toRs.86,31,067/-, as against Rs.68,87,057/-, calculated in thereturn of income. (5) Additional TDS claim of Rs.4,20,981/- forTDS certificates filed during the course ofassessment was denied to the appellant. (6) Interest u/s.234C was determined atRs.86,31,067 in the Assessment Order as againstRs.68,87,057 in the Return.” 3.While completing the assessment, the DeputyCommissioner of Income Tax, Large Tax Payer Unit, Chennai,respondent herein, disallowed the expenses on amortization ofamount paid in respect of leasehold land, disallowance underSection 14A and advertisement expenditure, amounting toRs.4,47,10,282/-. The assessing officer also charged interest,under Section 234C of the Income Tax Act, 1961, amounting toRs.86,31,067/-, as against Rs.68,87,057/-, calculated in thereturn of income. 4.Being aggrieved by the additions/disallowances andinterest charged under the above provision, an appeal has beenpreferred to the Commissioner of Income-Tax (Appeals),wherein, it has been contended that the assessee is entitledto the exceptional income of Rs.36.41 Crores, during the year,as a result of a favourable decision rendered by the Hon'bleSupreme Court, relating to purchase tax benefits of KottayamFactory, that was disputed by the Kerala Sales Tax Department.The judgment of the Hon'ble Supreme Court was rendered on21.09.2006, by which time, 1[st] and 2[nd] installments of advancetax were already paid by the assessee and that the appellanthad no knowledge of this income, while arriving at the firsttwo advance tax installments, payable. The Commissioner ofIncome-Tax (Appeals), in his order in ITA.No.52/09-10, dated28.07.2010, held that levy of interest, under Section 234C ismandatory. 5.Aggrieved by the order of the Commissioner ofIncome-Tax (Appeals), dated 28.07.2010, the assessee preferredan appeal to the Income Tax Appellate Tribunal, which alsohttps://hcservices.ecourts.gov.in/hcservices/held that levy of interest under Section 234C as mandatory. As against the abovesaid order of the Tribunal, instant Tax CaseAppeal is filed on the following substantial question of law,“Whether the Tribunal was right in law, inholding that the levy of interest under Section 234Cof the Act is mandatory without appreciating that thedeferment in payment of advance tax was beyond thecontrol of the assessee?” 6.Mr.N.Vijayaraghavan, learned counsel for theappellant submitted that Sections 234B and 234C operate ondifferent fields. Interest u/s 234B is levied, if advance taxpayment is less than 90% of the assessed tax. There are twoaspects, for this shortfall: (a) advance tax paid is less thanthat payable on the returned income and (b) advance tax paidbeing less than 90% of the assessed income. He furthersubmitted that due to an unexpected event, ie., the judgmentof the Hon'ble Supreme Court rendered on 21.09.2006, there isno question of shortfall in payment of advance tax, on theunanticipated income, during the previous year. 7.Referring to Section 234C of the Income-Tax Act,learned counsel for the appellant further submitted thatadvance tax was paid by the Company, on its current income, onor before the dates specified in Section 234(C) of the Act. Hefurther submitted that the first two installments of advancetax have already been made on the income. On 21.09.2006, theHon'ble Supreme Court rendered a decision, in favour of theassessee and that the said income earned could not beincluded, for the purpose of computation and payment ofadvance tax. 8.Placing reliance on a decision in Prime SecuritiesLtd., v. Assistant Commissioner of Income Tax (Investigation)reported in 2011 (333) ITR 464, learned counsel for theappellant further submitted that when there was no possibilityfor the appellant to anticipate the events that would takeplace, in the next financial year, and when advance tax waspaid by the Company, on its current income, levy of interestunder Section 234C is liable to be set aside, which accordingto him, the authorities, including the ITAT, have failed to doso. 8.Placing reliance on a decision in Prime SecuritiesLtd., v. Assistant Commissioner of Income Tax (Investigation)reported in 2011 (333) ITR 464, learned counsel for theappellant further submitted that when there was no possibilityfor the appellant to anticipate the events that would takeplace, in the next financial year, and when advance tax waspaid by the Company, on its current income, levy of interestunder Section 234C is liable to be set aside, which accordingto him, the authorities, including the ITAT, have failed to doso. 9.According to the learned counsel for the appellant,Section 234(C) cannot be blindly applied, but it should beinterpreted and applied to the case on hand, on the samereasons and logic, as held by a Hon'ble Division Bench inCommissioner of Income-Tax v. Revathi Equipment Ltd., reportedin 2008 (298) ITR 67. In the said reported case, the Hon'bleDivision Bench held that, “the assessee was not liable to pay advance taxand therefore levy of interest under Sections 234Band 234C is not justified.”and therefore levy of interest under Sections 234Band 234C is not justified.” https://hcservices.ecourts.gov.in/hcservices/ 10.Placing reliance on a decision of this Court inCommissioner of Income-Tax v. REPCO Home Finance Ltd.,reported in 2014 (90) CCH 195 (MAD), learned counsel for theappellant further submitted that computation of advance tax iscertainly a matter, which is appealable, and hence, there is asubstantial question of law, involved in this appeal. 11.Placing reliance on a decision of the Hon'bleSupreme Court in Central Provinces Manganese Ore Co. Ltd., v.Commissioner of Income-Tax reported in 1986 (160) ITR 961,learned counsel for the appellant further submitted that inthe context Section 139(8) and 215, similar to Section 234A /234B of the Income Tax Act, 1961, the Hon'ble Supreme Courtheld that even though there is a provision for waiver, underRule 117A and Rule 40 of the IT Rules, still, if the assesseeobjects to the very levy or its computation, an appeal wouldlie. Thus, according to the learned counsel for the appellant,right of appeal against levy of interest, cannot be taken awayby the circular of CBDT, on the grounds that the Commissionercan consider waiver of interest. 12.Inviting the attention of this Court to a decisionin Shriram Chits (Bangalore) Ltd., v. Joint Commissioner ofIncome-Tax reported in 2010 (325) ITR 219, learned counsel forthe appellant submitted that in the above reported judgment,while considering the retrospective effect of an amendedprovision, a Hon'ble Division Bench of the Karnataka HighCourt held that the assessee cannot be held liable to payinterest, under Section 234(C). In the light of the abovecontentions, learned counsel for the appellant sought for ananswer on the substantial questions of law, raised in thisappeal, in favour of the appellant and to set aside the orderimpugned in this instant appeal. 12.Inviting the attention of this Court to a decisionin Shriram Chits (Bangalore) Ltd., v. Joint Commissioner ofIncome-Tax reported in 2010 (325) ITR 219, learned counsel forthe appellant submitted that in the above reported judgment,while considering the retrospective effect of an amendedprovision, a Hon'ble Division Bench of the Karnataka HighCourt held that the assessee cannot be held liable to payinterest, under Section 234(C). In the light of the abovecontentions, learned counsel for the appellant sought for ananswer on the substantial questions of law, raised in thisappeal, in favour of the appellant and to set aside the orderimpugned in this instant appeal. 13.Per contra, Mrs.Hema Muralikrishan, learned counselfor the respondent submitted that Shriram Chit's case (citedsupra) was decided, on the facts and circumstances of the casetherein, when exemption was withdrawn retrospectively, andtherefore, she contended that the said decision is notapplicable to the instant case. She further submitted that thelogic and reasoning in Prime Securities Ltd.'s case (citedsupra), cannot be made applicable to cases, arising underSection 234(B) or 234(C) of the Income-Tax Act, 1961, for thereason that payment of advance tax, on the current income ofthe financial year, has to be made and if there is any failureto pay advance tax on such current year income, then theassessee is liable to pay interest for deferment. She alsosubmitted that in a recent decision in Commissioner of Income-Tax, Delhi v. Bhagat Construction Co. (P) Ltd., reported in2015 (60) TAXMANN 334 (SC), the Hon'ble Supreme Court heldthat levy of interest, is automatic and therefore, thedecisions relied on by the learned counsel for the appellant,would not lend any support. https://hcservices.ecourts.gov.in/hcservices/ 14.Placing reliance on the order of the CBDT, dated26.06.2006, learned counsel for the respondent furthersubmitted that the assessee could have approached the ChiefCommissioner of Income-Tax or the Director General of Income-Tax either for reduction or waiver and in the instant case, itwas not done. 15.Learned counsel for the respondent further submittedthat interest for deferment of advance tax, can be saved onlyunder two exceptions, provided under Section 234(C)(1)(b),which states that, “nothing contained in this sub-sectionshall apply to the shortfall in the payment of tax due on thereturned income, where such shortfall is on account of under-estimate or failure to estimate, (a) the amount of capitalgains, or (b) income of the nature referred to in sub-clause(ix) of clause (24) of section 2. Clause (ix) of Section 2(24)states that any winnings from lotteries, crossword puzzles,races including horse races, card games and other games of anysort or from gambling or betting of any form or naturewhatsoever. She therefore submitted that in all other cases,interest for deferment for payment of advance tax ismandatory. According to her, there is no substantial questionof law involved in this appeal and for the reasons stated,prayed for dismissal of the appeal. 16.By way of reply, Mr.N.Vijayaraghavan, learnedcounsel for the appellant submitted that the decision of theHon'ble Supreme Court in the case of CIT Vs BhagatConstruction Co Pvt Limited [235 Taxman 0135], relied on bythe revenue has been rendered on a completely different issuein respect of charging interest u/s.234B of the Act. The issueon appeal in the present case, according to him, is whetherinterest u/s.234C can be levied, when the order of assessmentdid not contain any direction for payment of interest underSection 234B of the Act. While deciding this issue, accordingto him, the Hon'ble Supreme Court held that Sec.234B isleviable inasmuch as Form ITNS 150, contained calculation ofinterest, payable on tax assessed and this Form, is a part ofthe assessment order, and therefore, interest under Sec.234Bis leviable. It is his further submission that in suchcircumstances, while coming to the conclusion, the Hon'bleSupreme Court has held that Sec.234B is mandatory, whetherlevied in the assessment order or not. 17.According to the learned counsel for the appellant,Bhagat Construction's (cited supra), was a case, dealing withshortfall of advance tax, payable on the assessed income andactually paid. Referring to Bhagat Construction's case, hefurther submitted that the High Court relied on the decisionsin the case of Ranchi Club Ltd (217 ITR 72 Patna) confirmed bythe Hon'ble Apex Court in 247 ITR 209, as well as J.K.Synthetics 119 CTR 222. These decisions deal only withshortfall in advance tax on the assessed income and not onhttps://hcservices.ecourts.gov.in/hcservices/returned income. The argument that the assessee cannot anticipate the acceptance of return, was only in the contextin assessment. According to him, the Hon'ble Apex Court merelyreiterated the provisions of section 234B, that interestshould be calculated on shortfall and this should be viewed inthe context of issue under appeal before the Hon'ble ApexCourt. He further submitted that there is no dispute sec 234Cis also mandatory, but the dispute is only on computation. 18.Learned counsel for the appellant further submittedthat the decisions relied upon by revenue were rendered in thecontext of Section 234B of the Act and in these decisions, theCourts were not called upon to decide, as to whether theunexpected income during the year can be excluded. Accordingto him, there cannot be shortfall in payment of advance tax,due to unanticipated income, in so far as Section 234B isconcerned, as payment of advance tax upto the last day ofprevious year, is taken into account for section 234B. Hencethe receipt of unexpected income during the year is notrelevant for deciding the shortfall u/s 234B and it was notthe subject matter of consideration in the cases relied by theRevenue. 18.Learned counsel for the appellant further submittedthat the decisions relied upon by revenue were rendered in thecontext of Section 234B of the Act and in these decisions, theCourts were not called upon to decide, as to whether theunexpected income during the year can be excluded. Accordingto him, there cannot be shortfall in payment of advance tax,due to unanticipated income, in so far as Section 234B isconcerned, as payment of advance tax upto the last day ofprevious year, is taken into account for section 234B. Hencethe receipt of unexpected income during the year is notrelevant for deciding the shortfall u/s 234B and it was notthe subject matter of consideration in the cases relied by theRevenue. 19.Placing reliance on a decision of the Hon'ble ApexCourt in CIT v. Sun Engineering Works P Ltd (198 ITR 297 atpage 320), learned counsel for the appellant further submittedthat the judgment of the Hon'ble Apex Court must be read as awhole, and observations made in a judgment have to beconsidered, in the light of the questions, raised. He alsosubmitted that a decision of the court takes its colour fromthe questions involved in the case, in which it is renderedand, while applying the decision to a later case, courts mustcarefully try to ascertain the true principle laid down by thedecision and not to pick out words or sentences from thejudgment, divorced from the context of the questions underconsideration by the court, to support their reasoning. Healso submitted that the Hon'ble Apex Court has cautioned thatit is not proper to regard a word, clause or sentenceoccurring in the judgment of the Hon'ble Supreme Court,divorced from its context as containing a full exposition ofthe law on a question, when the question did not even fall tobe answered in that judgment. Thus the decision of the Hon'bleSupreme Court cited is not authority for deciding the issue inappeal before us, as it deals with another section underdifferent circumstance and the question raised in this appealwas considered by the Hon'ble Apex Court, in that decision. Heard the learned counsel for the parties and perused thematerials available on record. 20.Section 234(C) of the Income Tax, deals withInterest for deferment of advance tax and the same isreproduced hereunder: “Where in any financial year,— (a) the company which is liable to pay advancetax under section 208 has failed to pay such tax or—https://hcservices.ecourts.gov.in/hcservices/(i) the advance tax paid by the company on its current income on or before the 15th day of June isless than fifteen per cent of the tax due on thereturned income or the amount of such advance taxpaid on or before the 15th day of September is lessthan forty-five per cent of the tax due on thereturned income or the amount of such advance taxpaid on or before the 15th day of December is lessthan seventy-five per cent of the tax due on thereturned income, then, the company shall be liableto pay simple interest at the rate of one per centper month for a period of three months on the amountof the shortfall from fifteen per cent or forty-fiveper cent or seventy-five per cent, as the case maybe, of the tax due on the returned income; (ii) the advance tax paid by the company on itscurrent income on or before the 15th day of March isless than the tax due on the returned income, then,the company shall be liable to pay simple interestat the rate of one per cent on the amount of theshortfall from the tax due on the returned income: (ii) the advance tax paid by the company on itscurrent income on or before the 15th day of March isless than the tax due on the returned income, then,the company shall be liable to pay simple interestat the rate of one per cent on the amount of theshortfall from the tax due on the returned income: Provided that if the advance tax paid by thecompany on its current income on or before the 15thday of June or the 15th day of September, is notless than twelve per cent or, as the case may be,thirty-six per cent of the tax due on the returnedincome, then, it shall not be liable to pay anyinterest on the amount of the shortfall on thosedates; (b) the assessee, other than a company, who isliable to pay advance tax under section 208 hasfailed to pay such tax or,— (i) the advance tax paid by the assessee on hiscurrent income on or before the 15th day ofSeptember is less than thirty per cent of the taxdue on the returned income or the amount of suchadvance tax paid on or before the 15th day ofDecember is less than sixty per cent of the tax dueon the returned income, then, the assessee shall beliable to pay simple interest at the rate of one percent per month for a period of three months on theamount of the shortfall from thirty per cent or, asthe case may be, sixty per cent of the tax due onthe returned income; (ii) the advance tax paid by the assessee onhis current income on or before the 15th day ofMarch is less than the tax due on the returnedincome, then, the assessee shall be liable to paysimple interest at the rate of one per cent on theamount of the shortfall from the tax due on thereturned income : Provided that nothing contained in this sub-section shall apply to any shortfall in the paymentof the tax due on the returned income where suchhttps://hcservices.ecourts.gov.in/hcservices/ shortfall is on account of under-estimate or failureto estimate— (a) the amount of capital gains; or (b) income of the nature referred to in sub-clause (ix) of clause (24) of section 2, and the assessee has paid the whole of the amount oftax payable in respect of income referred to inclause (a) or clause (b), as the case may be, hadsuch income been a part of the total income, as partof the remaining instalments of advance tax whichare due or where no such instalments are due, by the31st day of March of the financial year: Provided further that nothing contained in thissub-section shall apply to any shortfall in thepayment of the tax due on the returned income wheresuch shortfall is on account of increase in the rateof surcharge under section 2 of the Finance Act,2000 (10 of 2000), as amended by the Taxation Laws(Amendment) Act, 2000 (1 of 2001), and the assesseehas paid the amount of shortfall, on or before the15th day of March, 2001 in respect of the instalmentof advance tax due on the 15th day of June, 2000,the 15th day of September, 2000 and the 15th day ofDecember, 2000 : Provided also that nothing contained in thissub-section shall apply to any shortfall in thepayment of the tax due on the returned income wheresuch shortfall is on account of increase in the rateof surcharge under section 2 of the Finance Act,2000 (10 of 2000) as amended by the Taxation Laws(Amendment) Act, 2001 (4 of 2001) and the assesseehas paid the amount of shortfall on or before the15th day of March, 2001 in respect of the instalmentof advance tax due on the 15th day of June, 2000,the 15th day of September, 2000 and 15th day ofDecember, 2000. Explanation.—In this section, “tax due on thereturned income” means the tax chargeable on thetotal income declared in the return of incomefurnished by the assessee for the assessment yearcommencing on the 1st day of April immediatelyfollowing the financial year in which the advancetax is paid or payable, as reduced by the amountof,- Explanation.—In this section, “tax due on thereturned income” means the tax chargeable on thetotal income declared in the return of incomefurnished by the assessee for the assessment yearcommencing on the 1st day of April immediatelyfollowing the financial year in which the advancetax is paid or payable, as reduced by the amountof,- (i) any tax deductible or collectible at sourcein accordance with the provisions of Chapter XVII onany income which is subject to such deduction orcollection and which is taken into account incomputing such total income; (ii) any relief of tax allowed under section 90on account of tax paid in a country outside India;(iii) any relief of tax allowed under section90A on account of tax paid in a specified territoryoutside India referred to in that section;https://hcservices.ecourts.gov.in/hcservices/ (iv) any deduction, from the Indian income-taxpayable, allowed under section 91, on account of taxpaid in a country outside India; and (v) any taxcredit allowed to be set off in accordance with theprovisions of section 115JAA. (2) The provisions of this section shall applyin respect of assessments for the assessment yearcommencing on the 1st day of April, 1989 andsubsequent assessment years.” 21.In Commissioner of Income-Tax v. Revathi EquipmentLtd., reported in 2008 (298) ITR 67, the assessment year,subject matter of consideration, was 2001-02. Accounting yearended on 31[st] March' 2001. Assessee therein filed return ofincome on 31[th] October, 2001, admitting a total income ofRs.16,67,51,520/-. Return was processed under Section 143(1)of the Income-Tax Act and completed under Section 143(3),determining the total income of Rs.17,31,76,488/-. The case ofthe assessee was that it was under the impression thatpayments made under Voluntary Retirement Scheme are allowabledeductions. A new provision under Section 35DDA wasintroduced, for the first time, in the Finance Act, 2001, witheffect from 1[st] April, 2001. The Assessee has failed to pay theadvance tax. Hence, the Assessing Officer levied interest,under Sections 234B and 234C of the Income-Tax Act andcompleted the assessment. Appeal filed before the Commissionerof Income-Tax (Appeals), was dismissed. Income-Tax AppellateTribunal allowed the assessee's appeal and hence, the Revenuepreferred a Tax Case Appeal, in this Court. At the time, whendeduction was made, there were two binding decisions of thisCourt, viz., CIT v. George Oakes Ltd., [(1992) 197 ITR 288(Mad.)] and CIT v. Simpson & Company Ltd., [(1998) 230 ITR 794(Mad.)]. Thus, he deducted expenditure incurred, by way ofpayments made for Voluntary Retirement Scheme. Sections 207and 208 of the Income-Tax Act, pressed into service areextracted hereunder: “207. Tax shall be payable in advance duringany financial year, in accordance with theprovisions of Section 208 to 219 (both inclusive),in respect of the total income of the assessee whichwould be chargeable to tax for the assessment yearimmediately following that financial year, suchincome being hereafter in this Chapter referred toas "current income".208. Advance tax shall be payable during afinancial year in every case where the amount ofsuch tax payable by the assessee during that year,as computed in accordance with the provisions ofthis Chapter, is five thousand rupees or more.". On the facts and circumstances of the case, a Hon'ble DivisionBench of this Court, at Paragraph 7, held as follows:https://hcservices.ecourts.gov.in/hcservices/ “207. Tax shall be payable in advance duringany financial year, in accordance with theprovisions of Section 208 to 219 (both inclusive),in respect of the total income of the assessee whichwould be chargeable to tax for the assessment yearimmediately following that financial year, suchincome being hereafter in this Chapter referred toas "current income".208. Advance tax shall be payable during afinancial year in every case where the amount ofsuch tax payable by the assessee during that year,as computed in accordance with the provisions ofthis Chapter, is five thousand rupees or more.". On the facts and circumstances of the case, a Hon'ble DivisionBench of this Court, at Paragraph 7, held as follows:https://hcservices.ecourts.gov.in/hcservices/ “7. A combined reading of the above provisionsmakes it clear that the assessee has to pay taxes inadvance in respect of the total income of theassessee, which would be chargeable in a particularassessment year. Now before the introduction ofSection 35DDA, the legal dictum was very clear thatthe assessee could claim expenditure incurred onaccount of payment made for VRS by the assessee inview of the binding decisions of the Hon'blejurisdictional High Court in the case of CIT v.George Oakes Ltd., [(1992) 197 ITR 288 (Mad.)] andCIT v. Simpson & Company Ltd., [(1998) 230 ITR 794(Mad.)]. In both the decisions, it was clearly laiddown by the Hon'ble jurisdictional High Court thatpayments to employees under VRS were in the natureof business expenditure and was deductible underSection 37. Therefore, till the introduction of newprovisions under Section 35DDA, the assessee couldhave estimated the income legitimately afterreducing the expenditure incurred on VRS. It is acommon knowledge that Finance Bill is introduced on28th February and the same is made into the Actafter passing the bills in both the Houses ofParliament and receiving the consent of Hon'blePresident of India some where in May or June, whichmeans till that date no assessee can visualize thata new liability would be fastened to him. Normally,new provisions are introduced with effect from nextassessment year, but this provision under Section35DDA was introduced by the Parliament in its wisdomwith effect from 01.04.2001 i.e. the same year andthat is why difficult has arisen for visualizing theliability and the assessee could not deduct suchexpenditure. In fact in almost identicalcircumstances in the 3rd Member decision by theDelhi Bench in the case of Haryana WarehousingCorporation v. DCIT (75 ITD 155) it was held that insuch situations the legal dictum "LEX NON COGIT ADIMPOSSIBILIA" would be attracted. The simple meaningof this dictum is that "law cannot compel you to dothe impossible". In the case before us also, theassessee could not have visualize till the lastinstalment of advance tax i.e. 15.03.2001 that hewould not be entitled to deduct VRS payments.Therefore, the assessee could not have done anythingother than to estimate the liability to pay advancetax on the basis of existing provisions. We are ofthe considered opinion that in such situation, itcannot be said that the assessee was liable to payadvance tax. Once we come to the conclusion that theassessee was not liable to pay advance tax, there isno question of charging tax under Section 234B and234C. In similar circumstances in the case ofPriyanka Overseas Ltd. v. DCIT, where the assessee https://hcservices.ecourts.gov.in/hcservices/ https://hcservices.ecourts.gov.in/hcservices/ had treated the receipt of cash assistance ascapital receipts, which was subsequently amended tobe business receipt by the Finance Act, 1990, it washeld that in such cases interest under Sections 234Band 234C was not chargeable. In these circumstances,we think that the assessee was not liable to payadvance tax and therefore levy of interest underSections 234B and 234C is not justified. Further, itis pertinent to note that the assessee by way ofabundant caution deposited a sum of Rs.90,00,000/-on 06.08.2001 i.e. much before the due date offiling of return, which also prove the bonafidecredentials of the assessee. In these circumstances,we set aside the order of the ld. CIT(A) and deletethe levy of interest under Sections 234B and 234C." 22.Legal dictum "lex non cogit ad impossibilia" means,"law cannot compel you to do the impossible". In the instantcase, it is the contention that, the assessee could notvisualize the decision rendered by the Hon'ble Supreme Court,in favour of the assessee and thus, computed the income, forpayment of advance tax, in the quarterly installments, upto 2[nd]installments and therefore, levy of interest under Sections234(B) and 234(C), has to be set aside. Whereas, it is thecase of the Revenue that retrospective operation of the Act,from 01.04.2001, in the reported judgment, for the assessmentyear 2001-02, was the consideration and therefore, the saiddecision is not applicable. Question in the reported case was,whether, assessee therein has to pay advance tax or not.Whereas, in the case on hand, assessee has paid the advancetax, upto 2[nd] installment, and the contention is that assesseecould not anticipate the event of a judgment, rendered in itsfavour and thus, there is no fault, in computation of incomeand consequently payment of advance tax. 23.In Prime Securities Ltd., v. Assistant Commissionerof Income-Tax (Investigation) reported in 2011 (333) ITR 464,the assessee filed a return of income for the year 1991-92,declaring the total income of Rs.16,62,730/- on 31[st] December,1991. There were certain defects in submitting the returns,which were rectified. But there was no default in payment ofadvance tax. After considering a decision of the Hon'ble ApexCourt in CIT v. Anjum M.H.Ghaswala reported in (2001) 252 ITR1 (SC), on the aspect of charging interest, under Section 234(B) of the Income-Tax Act, a Hon'ble Division Bench of theBombay High Court held as follows: “In our opinion, as in the present case, it isnobody's case that the appellant has committed adefault in payment of advance tax; when it actuallypaid it, the appellant cannot be held liable to payinterest under s.234B. Insofar as the observationsin the order of the Tribunal, that the appellanthttps://hcservices.ecourts.gov.in/hcservices/should have anticipated the events that took place in March, 1992 are concerned, in our opinion, theyhave no substance. In our opinion, it is rightlysubmitted that it was not possible for the appellantto anticipate the events that were to take place inthe next financial year and pay advance tax on thebasis of those anticipated events.” 24.In Central Provinces Manganese Ore Co. Ltd., v.Commissioner of Income-Tax reported in 1986 (160) ITR 961, thecourt at Paragraph 7, held that, in March, 1992 are concerned, in our opinion, theyhave no substance. In our opinion, it is rightlysubmitted that it was not possible for the appellantto anticipate the events that were to take place inthe next financial year and pay advance tax on thebasis of those anticipated events.” 24.In Central Provinces Manganese Ore Co. Ltd., v.Commissioner of Income-Tax reported in 1986 (160) ITR 961, thecourt at Paragraph 7, held that, “7.Now the question is whether orders levyinginterest under sub-s. (8) of s. 139 and under s. 215are appealable under s. 246 of the Income-tax Act.Cl. (c) of s. 246 provides an appeal against anorder where the assessee denies his liability to beassessed under the Act or against any assessmentorder under sub-s. (3) of s. 143 or s. 144 , wherethe assessee objects to the amount of incomeassessed or to the amount of tax determined or tothe amount of loss computed or to the status underwhich he is assessed. Inasmuch as the levy ofinterest is a part of the process of assessment, itis open to an assessee to dispute the levy in appealprovided he limits himself to the ground that he isnot liable to the levy at all. In this connection wemay usefully refer to the decision of the KarnatakaHigh Court where in a judgment in National Productsv. Commissioner of Income-tax, Mysore, [1977] 108ITR 935. Govind Bhat, C.J., explained the positionin regard to the levy of interest under s. 139 andunder s. 215. After referring to the earlier caseson the point he observed: "All decided cases except one have uniformlytaken the view that levy of interests under section18A(6) or section 18A(8) of the 1922 Act or levy ofinterest under section 215 of the Act is notappealable but in the appeal against a regularassessment, it is open to the assessee to take everycontention which, if accepted, must result in theIncome-tax Officer holding that there was noliability to pay advance tax and, therefore, therewas no liability to pay penal interest. In otherwords, it is open to an assessee to contend in theappeal against an order of assessment that he is notliable to pay any advance tax at all or the amountof advance tax determined as payable by the Income-tax Officer is not correct; but if the assesee doesnot dispute the amount of advance tax determined aspayable by the Income-tax Officer, he merely cannotobject to the levy of penal interest or question itsquantum. https://hcservices.ecourts.gov.in/hcservices/ https://hcservices.ecourts.gov.in/hcservices/ The levy of penal interest under section 139 orsection 215 is made in the regular assessment order;the demand issued pursuant to the assessment orderis for the total amount of liability imposedinclusive of tax and interest. While levy of penalinterest under section 18A of the 1922 Act up to 1stApril 1952, was automatic as was noticed by Chagla,C.J. in Ramnath's case [1955] 27 ITR 192 (Bom.),under the Act such levy is not automatic; discretionis vested in the Inco me-tax Officer to waive orreduce penal interest in the cases and circumstancesmentioned in rule 117A and rule 40 of the Income-taxRules, 1962. If the case of the assessee fallswithin the scope of the said Rules, the Income-taxOfficer is bound in law to consider whether theassessee was entitled to waiver or reduction ofinterest. It is, therefore, clear that levy of penalinterest under sections 1 39 and 215 is part ofassessment. When such penal interest is levied theassessee is "assessed", meaning thereby, he issubjected to the procedure for ascertaining andimposing liability on him. If the assessee denieshis liability to be assessed under the Act, he has aright of appeal to the Appellate AssistantCommissioner against the order of assessment. Wherepenal interest is levied under section 215 by theorder or assessment, the assessee may altogetherdeny his liability to pay such interest on theground that he was not liable to pay advance tax atall or that the amount of advance tax determined bythe Income-tax Officer as payable ought to bereduced. In either case he denies his liability,wholly or partially, to be assessed. Similarly,where interest is levied under section 139 of theAct, the assessee may deny his liability to pay suchinterest on the ground that the return was notbelated or that the penal provision was notattracted at all to his case. In such a case also hedenies his liability to be assessed to interest." 8. The decision was noted with approval by theGujarat High Court in Bhikhoobhai N. Shah v.Commissioner of Income-tax, Gujarat-V, [1978] 114ITR 197. The only dissent expressed in the matter bythe Gujarat High Court arose on the question whetherthe assessee could challenge in appeal his partialliability to be assessed to interest. In this areaof dissent we need not enter. But we have nohesitation in endorsing the legal position which hascommonly found favour with the two High Courts. Wehold that the question whether a case is made outfor waiver or reduction of the interest levied undersub-s. (8) of s. 139 or under s. 215 cannot be thesubject of an appeal under clause (c) of s. 246 ofhttps://hcservices.ecourts.gov.in/hcservices/the Income-tax Act. That is a matter which can more appropriately be dealt with by the Commissioner ofIncome-tax in the exercise of his revisionaljurisdiction. appropriately be dealt with by the Commissioner ofIncome-tax in the exercise of his revisionaljurisdiction. But before the revisional jurisdiction of theCommissioner of Income-tax c an be invoked in such acase, it is obviously necessary for the assessee todemonstrate before the Income-tax Officer that thereis a case for waiving or reducing the levy ofinterest. We do not find from the record before usthat any such attempt was made by the assessee.Since the statute provides for the waiver orreduction of interest it is open to the Income-taxOfficer before imposing a levy under sub-s. (8) ofs. 139 and to the Inspecting Assistant Commissionerbefore doing so under s. 215 to issue notice to theassessee and hear him in the matter. In cases wherethe jurisdictional fact attracting the levy cannotbe disputed, for example that the return has beenfurnished under s. 139 with delay, it will be aquest ion merely of satisfying the relevantauthority that there are circumstances calling for areduction or waiver of the interest. If anopportunity to do so has not been made available tothe assessee before the order levying interest ismade, it will be open to the assessee to apply tothe Income-tax Officer after such order has beenmade to show that a reduction or waiver of interestis justified. We have been referred to the judgmentby one of us (Sabyasachi Mukharji, J.) in PremchandSitanath Roy v. Addl. Commissioner of Income-tax,West Bengal-III, [1977] 109 ITR 751. In that casethe question was a very different one. The questionwas whether a right of appeal was available inregard to the improper exercise of discretion undersub-s. (8) of s. 139. We think that in holding thatno right of appeal lay in such a case the High Courtwas plainly right. As the assessee has made no application to theIncome- tax Officer for reduction or waiver of theinterest under sub- s. (8) of s. 139 or under s. 215no question arises of the relevant authority havingdenied improperly a reduction or waiver of theinterest and that being so, no revision petition canbe maintained in that regard by the assessee beforethe Commissioner of Income-tax. 9. In the result we affirm the orders of theCommissioner of Income-tax rejecting the revisionpetitions but on grounds different from thoseadopted by the Commissioner. We leave it open to theassessee to apply to the Income-tax Officer forwaiver or reduction of interest under sub-s. (8) ofs. 139 and under s. 215 of the Income Tax Act. Ifhttps://hcservices.ecourts.gov.in/hcservices/the assessee does so within six weeks from today, the Income-tax Officer will dispose of theapplications on the merits expeditiously. Subject tothe aforesaid observations the appeals aredismissed. In the circumstances there is no order asto costs.” 25.In Commissioner of Income-Tax, Delhi v. BhagatConstruction Co. (P) Ltd., reported in 2015 (60) TAXMANN 334(SC), the Hon'ble Supreme Court considered, an issue, as towhether, Section 234B applies the moment, an assessee, liableto pay advance tax, has failed to pay such tax or there is anyshortfall in payment of tax, and after referring toExplanation 1 to Section 234B of the Act, held as follows: the Income-tax Officer will dispose of theapplications on the merits expeditiously. Subject tothe aforesaid observations the appeals aredismissed. In the circumstances there is no order asto costs.” 25.In Commissioner of Income-Tax, Delhi v. BhagatConstruction Co. (P) Ltd., reported in 2015 (60) TAXMANN 334(SC), the Hon'ble Supreme Court considered, an issue, as towhether, Section 234B applies the moment, an assessee, liableto pay advance tax, has failed to pay such tax or there is anyshortfall in payment of tax, and after referring toExplanation 1 to Section 234B of the Act, held as follows: “It will be seen that under the provisions ofSection 234B, the moment an assessee who is liableto pay advance tax has failed to pay such tax orwhere the advance tax paid by such an assessee isless than 90 per cent of the assessed tax, theassessee becomes liable to pay simple interest atthe rate of one per cent for every month or partof the month. The levy of such interest isautomatic when the conditions of Section 234B aremet. [Para 8]The facts of the present case are squarelycovered by the decision contained in KalyankumarRay v. CIT [(1991) 191 ITR 634 (SC)] inasmuch asit is undisputed that Form I.T.N.S. 150 containeda calculation of interest payable on the taxassessed. This being the case, it is clear that asper the said judgment, this Form must be treatedas part of the assessment order in the wider sensein which the expression has to be understood inthe context of Section 143, which is referred toin Explanation 1 to Section 234B. [Para 9]” 26.As per the provisions of the Income Tax Act, 1961,advance tax has to be paid in installments, on the specifieddates, and during the financial year. As per the provisions,in the case of deferment, in payment of installment of advancetax i.e. failure to pay the amount of advance tax orshortfall, as stipulated in Section 211 of the Income Tax Act,1961, interest, is attracted under Section 234C of the Act.Going through the provisions, it could be seen Sections 234A,234B and 234C have been inserted in the Act to provide for amandatory charging of interest. If there is default ordeferment of payment of advance tax as required under Sections208 to 211, interest under Section 234C is chargeable.I