The Commissioner Of Income Tax (Central), Ludhiana v. M/S Hero Cycles (P) Limited

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. ITR No.2 of 1996 Date of decision: 16.7.2010 The Commissioner of Income Tax (Central), Ludhiana -----Petitioner Vs. M/s Hero Cycles (P) Limited ----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE ALOK SINGH Present:-Mr. Krishan Kumar Mehta, Advocate for the revenue.Mr. Akshay Bhan, Advocate for the respondent. Adarsh Kumar Goel,J. 1.The Income Tax Appellate Tribunal, Chandigarh Bench,Chandigarh has referred for opinion of this Court following question oflaw in pursuance of order passed by this Court dated 29.11.1995 inITC No.180 of 1994:- “Whether, on the facts and in the circumstancesof the case, the ITAT was right in law in holding thatin this case, no interest is chargeable under section 7Cof the Companies (Profit) Surtax Act, 1964?” 2.The assessee company was liable to pay surtax under theprovisions of the Companies (Profits) Surtax Act, 1964 (for short, ‘theAct’) and also to pay advance tax under the said provisions. Section 7Cof the Act provided that if the advance surtax paid on its own estimatewas below the specified percentage of the tax finally assessed, theassessee was liable to pay interest. The Assessing Officer found that surtax liable to be determined was much higher than the advance taxpaid and accordingly demand for interest was raised under section 7Cof the Act. The said view was upheld by the appellate authority. Onfurther appeal to the Tribunal, it was held that bonafide failure of theassessee to anticipate the tax which may be assessed will be ground fornot levying interest under section 7C of the Act. It was furtherobserved that difference in the amount returned and the amountassessed was on account of retrospective amendment introduced tosections 224 and 228 of the Act w.e.f 1.4.1962 vide Finance Act, 1990which related to the import entitlement, taxability of which was subjectmatter of different interpretation on account of divergence of judicialopinion. Similarly, second issue was relating to claim for depreciationwhich was finally disallowed but the view of the assessee in makingclaim was bonafide. The Tribunal held :- “We have considered the rival contentions and we findthat the assessee had filed return claiming certaindeductions and expenditure, some of which wereaccepted and some disallowed. As we have already seen,the question relating to receipt on sale of importentitlements was a complex and contentious issue and itwas for that reason that the Government brought anamendment in the year 1990 with retrospective effect.We, therefore, find force in the argument that the claimmade by the assessee was genuine, bona fide andlegitimate, though it ultimately came to be disallowedwith the help of retrospective amendment of law. Thisamendment came as late as in the year 1990. Therefore,we find that this case where the assessee could not bepenalized for not filing a true statement of income and a correct estimate of advance surtax. We see a genuineclaim of the assessee in the matter. We have also seenthat certain claims relating to deductions andexpenditures have been allowed by the Tribunal also.These reliefs also go to suggest that the assessed incomewas not acceptable by the assessee for certain legitimatereasons. On accounts of the reliefs given by the Tribunal,we again come to the conclusion that the returned incomecould not be said to be totally incorrect or unfounded.The assessee was given substantial relief regardingweighted deduction and depreciation. He did not presshis claim for rectification charges, which involvedsubstantial amount, because the assessee had receivedrelief either in enxt assessment year or in case of anotherconcern of the same group. Therefore, it again goes toestablish that the assessee’s claim was bonafide andbased on sound footing.” 4.We have heard learned counsel for the parties and perusedthe record. 4.We have heard learned counsel for the parties and perusedthe record. 5.Learned counsel for the revenue submits that in view ofclear language of Section 7C of the Act and having regard to the factthat the levy of interest was compensatory, even if the view of theassessee in self assessment of the advance tax was bonafide, liability topay interest will stand. He places reliance on judgment of the Hon’ble Supreme Court inCIT v. Anjum M.H.Ghaswala and others, (2001)252 ITR 1, wherein interpreting provisions of Section 234C of theIncome Tax Act, 1961 which are in pari materia with section 7C, itwas held that the interest would be leviable in such situation. He alsoplaces reliance on judgment of this Court inCIT v. Upper India Steel Mfg. and Engg. Co. Limited,(2005) 279 ITR 123 and judgment of Delhi High Court in CIT v. Jindal Exports Limited and others,(2009) 314 ITR 137. 6.Learned counsel for the assessee on the other hand hasrelied upon judgment of the Allahabad High Court inAmrit Banaspati Co. Limited v. CIT and another, (2002) 255 ITR 111 dealing withinterpretation of section 7C of the Act. The said judgment is prior toAnjum M.H.Ghaswala and cannot be preferred to view expressed bythe Hon’ble Supreme Court. 7.In view of judgment of the Hon’ble Supreme Court inAnjum M.H.Ghaswala, the question referred has to be answered infavour of the revenue and against the assessee. We order accordingly.8.The reference is disposed of. (Adarsh Kumar Goel) Judge July 16, 2010‘gs’ ( Alok Singh) Judge