M/S.smr Cotton Mills Pvt.ltd., Rasipuram v. The Commissioner Of Income Tax, Salem

In the High Court of Judicature at Madras Coram : The Honourable Mr.Justice T.S.SIVAGNANAM The Honourable Mrs.Justice V.BHAVANI SUBBAROYAN Tax Case Appeal No.12 of 2009 M/s.SMR Cotton Mills Pvt.Ltd., Rasipuram...Appellant Vs The Commissioner of Income Tax, Salem....Respondent APPEAL under Section 260A of the Income Tax Act, 1961against the order dated 29.4.2008 in ITA No.92/Mds/2005 onthe file of the Income Tax Appellate Tribunal Chennai 'D'Bench for the assessment year 2002-03 against the orderpassed by the commissioner of Income Tax (Appeals) salem inITA NO.26/04-05 Dated.07.12.2004. ORDER Judgment was delivered by T.S.SIVAGNANAM,J We have heard the learned counsel on either side. 2. The Revenue preferred this appeal challenging theorder passed by the Income Tax Appellate Tribunal dated29.4.2008 in ITA.No.92/Mds/2005 for the assessment year2002-03. 3. The above appeal has been admitted on 19.2.2009 onthe following substantial questions of law :“i. Whether, on the facts and inthe circumstances of the case, theTribunal was justified in law inupholding the levy of interests underSections 234B and 234C while computingthe MAT under the deeming provisions ofSection 115JB of the Act ? https://hcservices.ecourts.gov.in/hcservices/ ii. Whether the Tribunal wascorrect in law in upholding the levy ofinterests when the provisions relatingto advance tax in Sections 207 to 211are not applicable to the computationunder Chapter XII B? Andiii. Whether the Tribunal wasjustified in law in upholding the levyof interest under Section 234B whenthere is no mandate in law either toestimate the book profit or for paymentof advance tax on book profits andhence, as there is no mandate to treatthe book profits as total income underthe provisions of Section 211 ?” 4. The learned counsel for the assessee fairly submitsthat substantial question of law Nos.2 and 3 are alsointegral part of substantial question of law No.1 and thattherefore, it is sufficient to answer the first substantialquestion of law alone. 5. The said submission is placed on record and thisCourt will answer the first substantial question of lawalone. 6. The learned counsel for the assessee again fairlysubmits that the legal issue, which arises forconsideration before this Court in so far as the firstsubstantial question of law, has been decided against theassessee by the Hon'ble Supreme Court in the case of JCITVs. Rolta India Limited [reported in (2011) 330 ITR 0470]. 7. The operative portion of the decision in RoltaIndia Limited reads as follows : “9. The question which remains tobe considered is whether the assessee,which is a MAT Company, was not in aposition to estimate its profits of thecurrent year prior to the end of thefinancial year on 31st March. In thisconnection the assessee placed relianceon the judgment of the Karnataka HighCourt in the case of Kwality BiscuitsLtd. v. CIT reported in (2000) 243 ITR519 and, according to the KarnatakaHigh Court, the profit as computed https://hcservices.ecourts.gov.in/hcservices/ 7. The operative portion of the decision in RoltaIndia Limited reads as follows : “9. The question which remains tobe considered is whether the assessee,which is a MAT Company, was not in aposition to estimate its profits of thecurrent year prior to the end of thefinancial year on 31st March. In thisconnection the assessee placed relianceon the judgment of the Karnataka HighCourt in the case of Kwality BiscuitsLtd. v. CIT reported in (2000) 243 ITR519 and, according to the KarnatakaHigh Court, the profit as computed https://hcservices.ecourts.gov.in/hcservices/ under the Income Tax Act, 1961 had tobe prepared and thereafter the bookprofit as contemplated under Section115J of the Act had to be determinedand then, the liability of the assesseeto pay tax under Section 115J of theAct arose, only if the total income ascomputed under the provisions of theAct was less than 30% of the bookprofit. According to the Karnataka HighCourt, this entire exercise ofcomputing income or the book profits ofthe company could be done only at theend of the financial year and hence theprovisions of Sections 207, 208, 209and 210 (predecessors of Sections 234Band 234C) were not applicable until andunless the accounts stood audited andthe balance sheet stood prepared,because till then even the assessee maynot know whether the provisions ofSection 115J would be applied or not.The Court, therefore, held that theliability would arise only after theprofit is determined in accordance withthe provisions of the Companies Act,1956 and, therefore, interest underSections 234B and 234C is not leviablein cases where Section 115J applied.This view of the Karnataka High Courtin Kwality Biscuits Ltd. was not sharedby the Gauhati High Court in AssamBengal Carriers Ltd. v. CIT reported in(1999) 239 ITR 862 and Madhya PradeshHigh Court in Itarsi Oil and Flours(P.) Limited v. CIT reported in (2001)250 ITR 686 as also by the Bombay HighCourt in the case of CIT v. KotakMahindra Finance Ltd. reported in(2003) 130 TAXMAN 730 which decided theissue in favour of the Department andagainst the assessee. It appears thatnone of the assessees challenged thedecisions of the Gauhati High Court,Madhya Pradesh High Court as well asBombay High Court in the Supreme Court.However, it may be noted that thejudgment of the Karnataka High Court inKwality Biscuits Ltd. was confined toSection 115J of the Act. The Order ofthe Supreme Court dismissing the Special Leave Petition in limine filedby the Department against KwalityBiscuits Ltd. is reported in (2006) 284ITR 434. Thus, the judgment ofKarnataka High Court in KwalityBiscuits stood affirmed. However, theKarnataka High Court has thereafter inthe case of Jindal Thermal PowerCompany Ltd. v. Dy. CIT reported in(2006) 154 TAXMAN 547 distinguished itsown decision in case of KwalityBiscuits Ltd. (supra) and held thatSection 115JB, with which we areconcerned, is a self-contained codepertaining to MAT, which imposedliability for payment of advance tax onMAT companies and, therefore, wheresuch companies defaulted in payment ofadvance tax in respect of tax payableunder Section 115JB, it was liable topay interest under Sections 234B and234C of the Act. Thus, it can beconcluded that interest under Sections234B and 234C shall be payable onfailure to pay advance tax in respectoftaxpayableunderSection115JA/115JB.Fortheaforestatedreasons, Circular No. 13/2001 dated9.11.2001 issued by CBDT reported in252 ITR(St.)50 has no application.Moreover, in any event, para 2 of thatCircular itself indicates that a largenumber of companies liable to be taxedunder MAT provisions of Section 115JBwere not making advance tax payments.In the said circular, it has beenclarified that Section 115JB is a self-contained code and thus, all companieswere liable for payment of advance taxunderSection 115JB and consequentlyprovisions of Sections 234B and 234Cimposing interest on default in paymentof advance tax were also applicable." 8. The above decision was followed by this Court inthe case of M/s. Tamilnadu Magnesite Limited Vs. JCIT[TCA.No.874 of 2008 dated 09.4.2018], to which, one of us(TSSJ) was a party. https://hcservices.ecourts.gov.in/hcservices/ 9. In the light of the decision in the case of RoltaIndia Limited, the first substantial question of law isanswered against the assessee and in favour of the Revenue.Accordingly, the above tax case appeal is dismissed. Nocosts. Sd/-RS Assistant Registrar(CS VI) //True Copy// Sub Assistant Registrar To1.The Income Tax Appellate Tribunal Chennai,'D' BenchChennai. . 2. The Commissioner of Income Tax ,Salem. 3.The Commissioner of Income Tax (Appeals),Salem 4.The Assistant Registrar,Income Tax Appellant Tribunal,Rajaji Bhavan,Besant Nagar,Chennai. +1cc to Mr.T.R.Senthil Kumar , Advocate SR.No. 69515TCA.No.12 of 2009 ASK(01/11/2018)