M/S.sanmar Speciality Chemicals Ltd v. The Deputy Commissioner Of Income Tax Company Cirlce – Iii(2) Chennai

THE HON'BLE MR.JUSTICE R.SUDHAKARANDTHE HON'BLE MR.JUSTICE R.KARUPPIAH M/s.Sanmar Speciality Chemicals Ltd.9, Cathedral RoadChennai – 600 086... Appellant/RespondentVs.The Deputy Commissioner of Income TaxCompany Cirlce – III(2)Chennai... Respondent/Appellant PRAYER: Appeal under Section 260A of the Income Tax Act, 1961 againstthe order of the Income Tax Appellate Tribunal 'C' Bench, Chennai,dated 31.5.2007 made in I.T.A.No.1092/Mds/2003 for the assessmentyear 2000-2001. Against the order of Commissioner of Income Tax (Appeals)V,Madras-34 made in ITA.215/2002-03 dt.19.3.03 and against the order ofDeputy Commissioner of Income Tax Company Circle VI(I) Chennai, madein PAN/GIR No.SA-119/ dt.30.12.02 for the Assessment Year2000-01. The assessee has filed this appeal challenging the order of theIncome Tax Appellate Tribunal 'C' Bench, Chennai, dated 31.5.2007made in I.T.A.No.1092/Mds/2003 for the assessment year 2000-2001, andthe same was admitted on the following question of law:“Whether, on the facts and in the circumstances of thecase, the Tribunal was right in law in holding thatinterest under Section 234B of the Income Tax Act can belevied for default in payment of advance tax when theincome is computed under Section 115JA of the Act?” https://hcservices.ecourts.gov.in/hcservices/ 2. The learned counsel for the assessee fairly submits that theissue raised in this appeal is no longer res integra in view of thedecision of the Supreme Court in Joint Commissioner of Income Tax v.Rolta India Limited, (2011) 330 ITR 450 (SC), wherein an identicalissue was answered against the assessee and in favour of thedepartment. 3. In Rolta India Limited case, referred supra, the issueconsidered by the Supreme Court is as under:“A short question which arises for determination in thisbatch of cases is whether interest under section 234Bcan be charged on the tax calculated on the book profitsunder section 115JA? In other words, whether advance taxwas at all payable on book profits under section 115JA?” and while answering the said issue, the Supreme Court held as under:“6. At the outset, it may be stated that sections 234Band 234C do not make any reference to section115J/115JA. Section 234B lays down that where advancetax is required to be paid under section 208 and thereis a failure on that if the amount of advance tax paidunder section 210 is less than 90 per cent. of theassessed tax, then, in that case the assessee is liableto pay interest. Section 234C refers to interest fordeferment of advance tax. It says that if the assesseehas to pay advance tax on its current income on orbefore 15th of June and the tax paid is less than 15 percent. of the tax due on the returned income or theamount of the advance tax paid on or before 15th ofSeptember is less than 45 per cent. of the tax due onthe returned income or the amount of such advance taxpaid on or before 15th of December is less than 75 percent. of the tax due on the returned income, then theassessee shall be liable to pay interest at thespecified rate on the amount of the shortfall from 15per cent. or 45 per cent. or 75 per cent., as the casemay be, of the tax due on the returned income. 7. In our view, section 115J/115JA are specialprovisions. Section 207 envisages that tax shall bepayable in advance during any financial year on currentincome in accordance with the scheme provided insections 208 to 219 (both inclusive) in respect of thetotal income of the assessee that would be chargeable totax for the assessment year immediately following thatfinancial year. Section 215(5) of the Act defined whatis "assessed tax", i.e., tax determined on the basis ofregular assessment so far as such tax relates to incomesubject to advance tax. The evaluation of the currentincome and the determination of the assessed income hadto be made in terms of the statutory scheme comprising 7. In our view, section 115J/115JA are specialprovisions. Section 207 envisages that tax shall bepayable in advance during any financial year on currentincome in accordance with the scheme provided insections 208 to 219 (both inclusive) in respect of thetotal income of the assessee that would be chargeable totax for the assessment year immediately following thatfinancial year. Section 215(5) of the Act defined whatis "assessed tax", i.e., tax determined on the basis ofregular assessment so far as such tax relates to incomesubject to advance tax. The evaluation of the currentincome and the determination of the assessed income hadto be made in terms of the statutory scheme comprising section 115J/115JA of the Act. Hence, levying ofinterest was inescapable. The assessee was bound to payadvance tax under the said scheme of the Act. Section115J/115JA of the Act were special provisions whichprovided that where in the case of an assessee, thetotal income as computed under the Act in respect of anyprevious year relevant to the assessment year is lessthan 30 per cent. of the book profit, the total incomeof the assessee shall be deemed to be an amount equal to30 per cent. of such book profit. The object is to taxzero-tax companies. 8. Section 115J was inserted by the Finance Act, 1987with effect from April 1, 1988. This section was inforce from April 1, 1988 to March 31, 1991. After April1, 1991, section 115JA was inserted by the Finance Actof 1996 with effect from April 1, 1997. After insertionof section 115JA, section 115JB was inserted by theFinance Act, 2000 with effect from April 1, 2001. It isclear from reading sections 115JA and 115JB that thequestion whether a company which is liable to pay taxunder either provision does not assume importancebecause specific provision(s) is made in the sectionsaying that all other provisions of the Act shall applyto the MAT company (section 115JA(4) and section 115JB(5)). Similarly, amendments have been made in therelevant Finance Acts providing for payment of advancetax under sections 115JA and 115JB. So far as interestleviable under section 234B is concerned, the section isclear that it applies to all companies. The pre-requisite condition for applicability of section 234B isthat the assessee is liable to pay tax under section 208and the expression "assessed tax" is defined to mean thetax on the total income determined under section 143(1)or under section 143(3) as reduced by the amount of taxdeducted or collected at source. Thus, there is noexclusion of section 115J/115JA in the levy of interestunder section 234B. The expression "assessed tax" isdefined to mean the tax assessed on regular assessmentwhich means the tax determined on the application ofsection 115J/115JA in the regular assessment. 9. The question which remains to be considered iswhether the assessee, which is a MAT company, was not ina position to estimate its profits of the current yearprior to the end of the financial year on 31st March. Inthis connection the assessee placed reliance on thejudgment of the Karnataka High Court in the case ofKwality Biscuits Ltd. v. CIT reported in [2000] 243 ITR519 and, according to the Karnataka High Court, theprofit as computed under the Income-tax Act, 1961 had to 9. The question which remains to be considered iswhether the assessee, which is a MAT company, was not ina position to estimate its profits of the current yearprior to the end of the financial year on 31st March. Inthis connection the assessee placed reliance on thejudgment of the Karnataka High Court in the case ofKwality Biscuits Ltd. v. CIT reported in [2000] 243 ITR519 and, according to the Karnataka High Court, theprofit as computed under the Income-tax Act, 1961 had to be prepared and thereafter the book profit ascontemplated under section 115J of the Act had to bedetermined and then, the liability of the assessee topay tax under section 115J of the Act arose, only if thetotal income as computed under the provisions of the Actwas less than 30 per cent. of the book profit. Accordingto the Karnataka High Court, this entire exercise ofcomputing income or the book profits of the companycould be done only at the end of the financial year andhence the provisions of sections 207, 208, 209 and 210(predecessors of sections 234B and 234C) were notapplicable until and unless the accounts stood auditedand the balance-sheet stood prepared, because till theneven the assessee may not know whether the provisions ofsection 115J would be applied or not. The court,therefore, held that the liability would arise onlyafter the profit is determined in accordance with theprovisions of the Companies Act, 1956 and, therefore,interest under sections 234B and 234C is not leviable incases where section 115J applied. This view of theKarnataka High Court in Kwality Biscuits Ltd. was notshared by the Gauhati High Court in Assam BengalCarriers Ltd. v. CIT reported in [1999] 239 ITR 862 andthe Madhya Pradesh High Court in Itarsi Oil and Flours(P.) Ltd. v. CIT reported in [2001] 250 ITR 686 as alsoby the Bombay High Court in the case of CIT v. KotakMahindra Finance Ltd. reported in [2003] 130 Taxman 730which decided the issue in favour of the Department andagainst the assessee. It appears that none of theassessees challenged the decisions of the Gauhati HighCourt, Madhya Pradesh High Court as well as the BombayHigh Court in the Supreme Court. However, it may benoted that the judgment of the Karnataka High Court inKwality Biscuits Ltd. was confined to section 115J ofthe Act. The order of the Supreme Court dismissing thespecial leave petition in limine filed by the Departmentagainst Kwality Biscuits Ltd. is reported in [2006] 284ITR 434. Thus, the judgment of the Karnataka High Courtin Kwality Biscuits stood affirmed. However, theKarnataka High Court has thereafter in the case ofJindal Thermal Power Co. Ltd. v. Deputy CIT reported in[2006] 154 Taxman 547 distinguished its own decision inthe case of Kwality Biscuits Ltd. (supra) and held thatsection 115JB, with which we are concerned, is a self-contained code pertaining to MAT, which imposedliability for payment of advance tax on MAT companiesand, therefore, where such companies defaulted inpayment of advance tax in respect of tax payable undersection 115JB, it was liable to pay interest undersections 234B and 234C of the Act. Thus, it can beconcluded that interest under sections 234B and 234C shall be payable on failure to pay advance tax inrespect of tax payable under section 115JA/115JB. Forthe aforestated reasons, Circular No. 13 of 2001 datedNovember 9, 2001 issued by the Central Board of DirectTaxes reported in [2001] 252 ITR (St.) 50 has noapplication. Moreover, in any event, para 2 of thatCircular itself indicates that a large number ofcompanies liable to be taxed under the MAT provisions ofsection 115JB were not making advance tax payments. Inthe said circular, it has been clarified that section115JB is a self-contained code and thus, all companieswere liable for payment of advance tax under section115JB and consequently the provisions of sections 234Band 234C imposing interest on default in payment ofadvance tax were also applicable.” 4. In view of the law enunciated in the decision referred supra,we have no hesitation to hold that the Tribunal was right in imposinginterest under Section 234B of the Act for default in payment ofadvance tax. In the result, this appeal is dismissed by answering thequestion of law against the assessee and in favour of the Revenue.No costs. True Copy Sub Assistant Registrar To:1. The Assistant Registrar,Income Tax Appellate Tribunal, Rajaji Bhavan, Besant Nagar, Chennai Bench "C", Chennai. 2. The Commissioner of Income Tax (Appeals)-VChennai-34. 3. The Deputy Commissioner of Income Tax Company Circle VI(1), Chennai. 4. The Deputy Commissioner of Income Tax, Company Circle III (2) Chennai +1 cc to M/s.M.Swaminathan, Advocate,SR.9135. ca(co)krd 10/3 https://hcservices.ecourts.gov.in/hcservices/