M/S.sakthi Finance Ltd., Dr.nanjappa Road, Coimbatore – 641 018 v. The Chief Commissioner Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 03.01.2020 CORAM THE HONOURABLE MR.JUSTICE C.SARAVANAN M/s.Sakthi Finance Ltd.,Dr.Nanjappa Road,Coimbatore – 641 018.... Petitioner in all W.Ps.Vs. 1.The chief Commissioner of Income Tax, 63, Race Course Road, Coimbatore – 641 018. 2.The Assistant Commissioner of Income Tax, Company Circle I, Coimbatore.... Respondents in all W.Ps. Common Prayer: Writ Petitions filed under Article 226 ofConstitution of India, to issue a Writ of CertiorarifiedMandamus, to call for the records of the petitioner on thefiles of the first respondent in C.No.CCIT/CBE/1433(241)/CBEand quash the impugned order dated 24.07.2009 for theAssessment Years 1992-93, 1993-94, 1994-95, 1995-96, 1996-97,1997-98 & 1998-99 and consequently direct the first respondentto grant waiver of interest by exercising his discreation inaccordance with law. For Petitioner : Mr.Vengat Narayanan in all W.Ps. For M/s.Subbaraya Aiyar By this common order all the 7 writ petitions are beingdisposed. 2.In these writ petitions, the petitioner has challengedthe impugned orders dated 24.07.2009 passed by the 1[st]respondent in C.No.CCIT/CBE/1433(241)/CBE for the AssessmentYears 1992-93, 1993-94, 1994-95, 1995-96, 1996-97, 1997-98 &https://hcservices.ecourts.gov.in/hcservices/1998-99. 3.By the impugned orders dated 24.07.2009, applicationsfiled by the petitioner for waiver of interest under Section12-A of the Interest Tax Act, 1974 has been rejected by the 1[st]respondent on the ground that the petitioner has not met withthe conditions specified in Central Board of Direct TaxesDirect Circular No. 400/129/2002-IT (B) dated 26.06.2006. 4.The petitioner had earlier taken a stand that it wasnot liable to pay tax under the provisions of the Interest TaxAct, 1974 on the finance charges received on loans andadvances made by it to its customers. By assessment orders forthe respective assessment years 1992-93 to 1998-99, thecontention of the petitioner was accepted. However, onrevision, it was concluded that the petitioner was liable topay tax on interest under the provisions of the Interest TaxAct 1974. The petitioner challenged these ordersunsuccessfully before the Commissioner of Income Tax (Appeals)and thereafter before the Income Tax Appellate Tribunal,Chennai. 5.The petitioner has accepted the verdict and has paidthe tax for these Assessment Years. Under these circumstances,the petitioner filed a petition before the 1[st] respondent forwaiver of interest for the respective Assessment Years on05.12.2002. It was the contention of the petitioner thatCentral Board of Direct Taxes Direct Circular No.1425 bearingreference F-No. 275/9/80-ITB dated 16.11.1981 had instructedthat tax need not be deducted on high purchase finance chargesas they are not to be treated as interest. According to thepetitioner, this led to a bona fide belief that financecharges collected by the petitioner are not to be treated asinterest for the purpose of payment of interest tax under theprovisions of the Interest Tax Act, 1974. 6.It was further submitted that in the originalassessment, hire purchase finance charges were not includedand therefore no tax was paid and only during the course ofreassessment proceedings, the petitioner has been made liableto pay tax on such finance charges. It is submitted that itwas clarified by CBDT Circular No.738 dated 25.03.1996 thatfinance charges were liable to tax under the provisions of theaforesaid Act. The learned counsel for the petitioner submitsthat further clarification was given by the Central Board ofDirect Taxes Direct Circular No.760 dated 13.01.1998 andtherefore till 1998 there was no clarity as to whether financecharges in the hire purchase transactions were liable to taxor not. 6.It was further submitted that in the originalassessment, hire purchase finance charges were not includedand therefore no tax was paid and only during the course ofreassessment proceedings, the petitioner has been made liableto pay tax on such finance charges. It is submitted that itwas clarified by CBDT Circular No.738 dated 25.03.1996 thatfinance charges were liable to tax under the provisions of theaforesaid Act. The learned counsel for the petitioner submitsthat further clarification was given by the Central Board ofDirect Taxes Direct Circular No.760 dated 13.01.1998 andtherefore till 1998 there was no clarity as to whether financecharges in the hire purchase transactions were liable to taxor not. 7.The learned counsel for the petitioner relied on thedecision of this Court in R.Anandakumar Vs. The ChiefCommissioner of Income Tax, 2016 SCC OnLine Mad 24456,wherein, in paragraphs No.5 & 6, it was observed as follows:- https://hcservices.ecourts.gov.in/hcservices/5. After noting the factual circumstances in the said case, it was pointed out that if thecircumstances have been considered to beunavoidable circumstances for the purpose ofwaiver of interest under section 234A, in thefacts of the case, the same would have to beconsidered as unavoidable circumstances forthe purpose of reduction/waiver of interestunder sections 234B and 234C as well.Accordingly, whatever waiver granted undersection 234A, shall also be extended withregard to waiver of interest under sections234B and 234C of the Act. 6. As noticed above, the respondent wassatisfied with the fact that the petitionerhas made out a case for waiver of interestunder section 234A of the Act and therespondent recorded that it is a reasonablecause for delay in filing the return ofincome. Applying the reasons assigned by theHon'ble Division Bench of the Gujarat HighCourt, this Court is of the view that the samereasoning should be adopted while consideringthe claim of waiver of interest under sections234B and 234C of the Act. 8.The petitioner therefore prayed for waiver of interestunder section 12-A of the Interest Tax Act, 1974 before the 1[st]respondent in terms of Central Board of Direct Taxes DirectCircular No.400/129/2002-IT (B) dated 26.06.2006 which hasbeen rejected by the impugned orders of the 1[st] respondent. 9.I have heard the learned counsel for the petitioner andthe respondents. Short point that arises for consideration iswhether the 1[st] respondent was justified in rejecting therequest of the petitioner for waiver of interest on interesttax paid belatedly by the petitioner in the light of theCentral Board of Direct Taxes Direct Circular No.400/129/2002-IT (B) dated 26.06.2006. 10.I have considered the provisions of the Interest TaxAct, 1974. Certain provisions of the Income Tax Act, 1961 havebeen made applicable to the provisions of the Interest TaxAct, 1974. Central Board of Direct Taxes Direct CircularNo.400/129/2002-IT (B) dated 26.06.2006 has been issued in theexercise of power conferred by the Central Board of DirectTaxes under Section 119(2) of the Income Tax Act, 1961. 11.Among various provisions of Income Tax Act, 1961 whichhave been made applicable to provisions of Interest Tax Act,1974 in Section 21 of the Interest Tax Act, 1974, Section 119of the Income Tax, 1961 has not been made applicable toInterest Tax Act, 1974. The power to grant waiver from paymentof interest under the Income Tax Act, 1961 stems from sub-clause (2) (a) to section 119. The Central Board of Directhttps://hcservices.ecourts.gov.in/hcservices/Taxes has also delegated such powers in certain cases up to particular amount with the Principal/Chief Commissioner ofIncome Tax. 11.Among various provisions of Income Tax Act, 1961 whichhave been made applicable to provisions of Interest Tax Act,1974 in Section 21 of the Interest Tax Act, 1974, Section 119of the Income Tax, 1961 has not been made applicable toInterest Tax Act, 1974. The power to grant waiver from paymentof interest under the Income Tax Act, 1961 stems from sub-clause (2) (a) to section 119. The Central Board of Directhttps://hcservices.ecourts.gov.in/hcservices/Taxes has also delegated such powers in certain cases up to particular amount with the Principal/Chief Commissioner ofIncome Tax. 12.Since Section 119 of the Income Tax Act has not beenincorporated in Section 21 of the Interest Tax Act, 1954, thepetitioner cannot claim the benefit of the above circular forwaiver of interest. Therefore, in absence of any power togrant waiver of interest under the provisions of the InterestTax Act, 1974, the 1[st] respondent cannot grant waiver to anassessee under the provisions of the said Act. That apart, theauthority has also decided that the petitioner was notentitled for waiver under the said circular since Finance ActNo.2 of 1991 had extended the scope of interest tax to cover“credit institutions” and thus financial companies carrying onhigh purchase transactions were brought within the ambit ofthe Interest Tax Act, 1974. The petitioner also filed returnsbut failed to pay tax on such interest. 13.Though, the 1[st] respondent has denied the benefit ofthe above circular on merits, it is evident that the saidcircular cannot be made applicable to waiver of interest underthe provisions of the Interest Tax Act, 1974 in absence of anystatutory backup. 14.In the light of the above discussion, I find no meritsin the present Writ Petitions. Accordingly, the present WritPetitions are dismissed. No cost. Consequently, connectedMiscellaneous Petitions are closed. Sd/-Assistant Registrar (CS-III)//True Copy// jen Sub Assistant Registrar To 1.The chief Commissioner of Income Tax, 63, Race Course Road, Coimbatore – 641 018. 2.The Assistant Commissioner of Income Tax, Company Circle I, Coimbatore. +1cc to Mr.Subbaraya Aiyar, Advocate, S.R.No. 1467 SSD(CO) GN(04/03/2020)https://hcservices.ecourts.gov.in/hcservices/ W.P.Nos.11160 to 11166 of 2011and M.P.Nos.1, 1, 1, 1, 1 & 1 of 2011