The Commissioner Of Income Tax, Dehradun And Another v. Reading & Bates Exploration Co

Assessment Year 1991-92 IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL Income Tax Appeal No. 17 of 2003 The Commissioner of Income Tax, Dehradun and another ............. Appellants Versus Reading & Bates Exploration Co.,C/o Arthur Anderson & Co.,426, World Trade Centre, Barakhamba Lane, New Delhi ...............Respondent Mr. S.K. Posti, learned counsel for the Tax Department.Ms. Krishi Shukla, learned counsel for the respondent. Date: 20.07.2004 Hon'ble P.C. Verma, A.C.J.Hon'ble P.C. Pant, J. 1.This is an appeal under section 260A of the Income TaxAct, 1961 filed by the Revenue against the judgment and orderdated 06.09.2001 passed by the Income Tax Appellate Tribunal,New Delhi in I.T.A. Nos. 7146/Del/1994. 2.Respondent is a non-resident foreigncompany namely, Reading and BatesExploration Company which, in the year under consideration,executed contracts in India. During the year under consideration,respondent derivedincome from the contracts executed in India. 3.The question raised before us is as follows:- QUESTION: 1.Whether on the facts and in the circumstances of the case, the Ld. ITAT was not legally justified in directing the A.O. to charge interest u/s 234B of the I.T. Act on the tax on total income declared in the return, whereas this interest is chargeable on assessed tax as defined by Explanation I below section 234-B which also stands amended by the Finance Act, 2001 with retrospective effect from 01.04.1989?” 4. Heard learned counsel for the parties and perused therecord. 5.As this Court has discussed in Income Tax Act Appeal No.57 of 2002; The Commissioner of Income Tax, Dehradun &anther V/s SEDCO Forex International Drilling Co. Ltd., decided on 9[th] Oct. 2003 the reasoning regarding aforesaid question isgiven in the following paragraph: 57 of 2002; The Commissioner of Income Tax, Dehradun &anther V/s SEDCO Forex International Drilling Co. Ltd., decided on 9[th] Oct. 2003 the reasoning regarding aforesaid question isgiven in the following paragraph: 6.The reasoning regarding the question is as under: It is important to note that section 234B imposesinterest, which is compensatory in nature and not as a penalty(See Union Home Products Vs Union of India reported in 215-ITR-758 at page 766). Secondly, although section 191 of theAct is not over-ridden by section 192, 208 & 209(1)(a)(d) ofthe Act, the scheme of sections 208 & 209 of the Act indicatesthat in order to compute advance tax the assessee has tointeralia estimate his current income and calculate the tax onsuch income by applying the rates in force. That u/s 209(1)(d)the income-tax calculated is to be reduced by the amount of taxwhich would be deductible at source or collectible at source, which in this case has not been done by the employer company according to the law prevailing for which the assessee cannot befaulted. As stated above at the relevant time there wereconflicting decisions of the Tribunal. A bonafide dispute waspending. The assessee had to estimate his current income. Thewords used u/s 209(1)(a) makes the Assessee estimate hiscurrent income and since a bonafide dispute was pending,imposition of interest u/s 234B was not justified without hearing and without reasons. Accordingly, we answer this question in the affirmative i.e. in favour of the assessee and against thedepartment. 7.For the reasons aforesaid, we answer the above mentioned question intheaffirmative i.e. in favour of the assessee and against thedepartment. question intheaffirmative i.e. in favour of the assessee and against thedepartment. 8.Appeal is disposed of accordingly. No order as to costs. (P.C. Pant, J.) (P.C. Verma, A.C.J.) H.Negi