The Commissioner Of Income Tax-I, Chandigarh v. M/S Rana Sugars Ltd

ITA No. 250 of 2004 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 250 of 2004 Date of Decision: 5.9.2011 The Commissioner of Income tax-I, Chandigarh Versus M/s Rana Sugars Ltd. ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL,ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Senior Standing Counsel,for the appellant. AJAY KUMAR MITTAL, J. 1.This order shall dispose of ITA Nos. 250 of 2004 and 111 of2005 as, according to the learned counsel, identical question of law isinvolved therein. For brevity, the facts are being extracted from ITA No.250 of 2004. 2.This appeal has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order dated 13.2.2004 passed by the Income Tax AppellateTribunal, Chandigarh Bench “B”, Chandigarh (hereinafter referred to as“the Tribunal”) in ITA No. 333/CHANDI/99, for the assessment year1997-98, raising the following substantial question of law:- “Whether on the facts and circumstances of the case,the Hon'ble ITAT was right in law in upholding the decision of the CIT(A) that interest u/s 234B & 234Ccannot be charged in cases where income of theassessee is computed as per provisions of section115JA of the Income Tax Act, 1961?” 3.Briefly stated, the facts necessary for adjudication asnarrated in the appeal are that the assessee filed its return on30.11.1997 for the assessment year 1997-98 declaring loss ofRs.85,76,500/-. However, an income of Rs.60,44810/- was computedunder Section 115JA of the Act. The tax due from the assessee wascalculated to be Rs.26,17,917/- including the additional tax underSection 143(1A) of Rs.18,648/-. The assessee had not paid anyadvance tax except TDS of Rs.1,19,130/-. However, the assessee hadpaid Rs.25,99,269/- under Section 140-A of the Act on 29.11.1997under self assessment scheme. The case was processed underSection 143(1)(a) of the Act on 29.6.1998 and demand of Rs.4,14,976/-under Section 234B of the Act and Rs.1,78,958/- under Section 234C ofthe Act was created on account of interest. The assessee filed anapplication under Section 154 of the Act on 27.7.1998 for rectificationon the issue of charge of interest along with other issues. The prayerfor rectification on the issue of charging of interest was declinedwhereas relief was allowed on other issue. Accordingly, the interestcharged under Sections 234B and 234C of the Act was reduced. Thecase was taken up for scrutiny and the assessment was completedunder Section 143(3) of the Act on the same income. Feelingaggrieved, the assessee filed an appeal before the Commissioner ofIncome Tax (Appeals) [in short “the CIT(A)”]. The CIT(A) vide order dated 17.2.1998 allowed the appeal and deleted the interest underSections 234B and 234C of the Act holding that the assessee was notliable to pay advance tax on deemed income. Feeling dissatisfied, thedepartment filed an appeal before the Tribunal who vide order dated13.2.2004 upheld the order of the CIT(A) following the earlier decisionof the Tribunal dated 18.11.2002 in ITA Nos. 284 and285/Chandi/2000 (DCIT v. Upper India Steel Ltd., Ludhiana). Hence, the present appeal by the revenue. 4.We have heard learned counsel for the revenue. dated 17.2.1998 allowed the appeal and deleted the interest underSections 234B and 234C of the Act holding that the assessee was notliable to pay advance tax on deemed income. Feeling dissatisfied, thedepartment filed an appeal before the Tribunal who vide order dated13.2.2004 upheld the order of the CIT(A) following the earlier decisionof the Tribunal dated 18.11.2002 in ITA Nos. 284 and285/Chandi/2000 (DCIT v. Upper India Steel Ltd., Ludhiana). Hence, the present appeal by the revenue. 4.We have heard learned counsel for the revenue. 5.The Tribunal while adjudicating the issue had followed theearlier decision of the Tribunal dated 18.11.2002 in Upper India SteelLtd., Ludhiana's case (supra) against which appeals under Section260A of the Act were filed in this Court bearing ITA Nos. 172 and 173 of2004. This Court while reversing the decision of the Tribunaladjudicated the issue in favour of the revenue. Against the decision ofthe High Court, Civil Appeal No. 459 of 2006 had been filed which washeard by the Hon'ble Supreme Court along with the case of JointCommissioner of Income Tax v. Rolta India Ltd. [2011] 330 ITR 470(SC) and the view taken by this Court was affirmed, as has beennoticed therein. 6.The Apex Court in Rolta India Ltd's case (supra) hadrecorded as under:- “7. In our view, Section 115J/115JA are specialprovisions. Section 207 envisages that tax shall bepayable in advance during any financial year oncurrent income in accordance with the scheme provided in Sections 208 to 219 (both inclusive) inrespect of the total income of the assessee thatwould be chargeable to tax for the assessment yearimmediately following that financial year. Section 215(5) of the Act defined what is “assessed tax”, i.e., taxdetermined on the basis of regular assessment so faras such tax relates to income subject to advance tax.The evaluation of the current income and thedetermination of the assessed income had to bemade in terms of the statutory scheme comprisingSection 115J/115JA of the Act. Hence, levying ofinterest was inescapable. The assessee was boundto pay advance tax under the said scheme of the Act.Section 115J/115JA of the Act were specialprovisions which provided that where in the case ofan assessee, the total income as computed underthe Act in respect of any previous year relevant to theassessment year is less than 30% of the book profit,the total income of the assessee shall be deemed tobe an amount equal to 30% of such book profit. Theobject is to tax zerotax companies. 8. Section 115J was inserted by Finance Act, 1987w.e.f. 1.4.1988. This section was in force from1.4.1988 to 31.3.1991. After 1.4.1991, Section 115JAwas inserted by Finance Act of 1996 w.e.f. 1.4.1997.After insertion of Section 115JA, Section 115JB was 8. Section 115J was inserted by Finance Act, 1987w.e.f. 1.4.1988. This section was in force from1.4.1988 to 31.3.1991. After 1.4.1991, Section 115JAwas inserted by Finance Act of 1996 w.e.f. 1.4.1997.After insertion of Section 115JA, Section 115JB was inserted by Finance Act, 2000 w.e.f. 1.4.2001. It isclear from reading Sections 115JA and 115JB thatthe question whether a company which is liable topay tax under either provision does not assumeimportance because specific provision(s) is made inthe section saying that all other provisions of the Actshall apply to the MAT Company (Section 115JA(4)and Section 115JB(5)). Similarly, amendments havebeen made in the relevant Finance Acts providing forpayment of advance tax under Sections 115JA and115JB. So far as interest leviable under Section 234Bis concerned, the section is clear that it applies to allcompanies. The pre-requisite condition forapplicability of Section 234B is that assessee is liableto pay tax under Section 208 and the expression“assessed tax” is defined to mean the tax on the totalincome determined under Section 143(1) or underSection 143(3) as reduced by the amount of taxdeducted or collected at source. Thus, there is noexclusion of Section 115J/115JA in the levy ofinterest under Section 234B. The expression“assessed tax” is defined to mean the tax assessedon regular assessment which means the taxdetermined on the application of Section 115J/115JAin the regular assessment. 9. The question which remains to be considered is whether the assessee, which is a MAT Company,was not in a position to estimate its profits of thecurrent year prior to the end of the financial year on31[st] March. In this connection the assessee placedreliance on the judgment of the Karnataka High Courtin the case of Kwality Biscuits Ltd. v. CIT reported in(2000) 243 ITR 519 and, according to the KarnatakaHigh Court, the profit as computed under the IncomeTax Act, 1961 had to be prepared and thereafter thebook profit as contemplated under Section 115J ofthe Act had to be determined and then, the liability ofthe assessee to pay tax under Section 115J of theAct arose, only if the total income as computed underthe provisions of the Act was less than 30% of thebook profit. According to the Karnataka High Court,this entire exercise of computing income or the bookprofits of the company could be done only at the endof the financial year and hence the provisions ofSections 207, 208, 209 and 210 (predecessors ofSections 234B and 234C) were not applicable untiland unless the accounts stood audited and thebalance sheet stood prepared, because till then eventhe assessee may not know whether the provisionsof Section 115J would be applied or not. The Court,therefore, held that the liability would arise only afterthe profit is determined in accordance with the provisions of the Companies Act, 1956 and,therefore, interest under Sections 234B and 234C isnot leviable in cases where Section 115J applied.This view of the Karnataka High Court in KwalityBiscuits Ltd. case was not shared by the GauhatiHigh Court in Assam Bengal Carriers Ltd. v. CITreported in (1999) 239 ITR 862 and Madhya PradeshHigh Court in Itarsi Oil and Flours (P.) Limited v. CITreported in (2001) 250 ITR 686 as also by theBombay High Court in the case of CIT v. KotakMahindra Finance Ltd. reported in (2003) 130TAXMAN 730 which decided the issue in favour ofthe Department and against the assessee. It appearsthat none of the assesses challenged the decisionsof the Gauhati High Court, Madhya Pradesh HighCourt as well as Bombay High Court in the SupremeCourt. However, it may be noted that the judgment ofthe Karnataka High Court in Kwality Biscuits Ltd. wasconfined to Section 115J of the Act. The Order of theSupreme Court dismissing the Special Leave Petitionin limine filed by the Department against KwalityBiscuits Ltd. is reported in (2006) 284 ITR 434. Thus,the judgment of Karnataka High Court in KwalityBiscuits stood affirmed. However, the Karnataka HighCourt has thereafter in the case of Jindal ThermalPower Company Ltd. v. Dy. CIT reported in (2006) 154 TAXMAN 547 distinguished its own decision incase of Kwality Biscuits Ltd. (supra) and held thatSection 115JB, with which we are concerned, is aself-contained code pertaining to MAT, whichimposed liability for payment of advance tax on MATcompanies and, therefore, where such companiesdefaulted in payment of advance tax in respect of taxpayable under Section 115JB, it was liable to payinterest under Sections 234B and 234C of the Act.Thus, it can be concluded that interest underSections 234B and 234C shall be payable on failureto pay advance tax in respect of tax payable underSection 115JA/115JB. For the aforestated reasons,Circular No. 13/2001 dated 9.11.2001 issued byCBDT reported in 252 ITR(St.)50 has no application.Moreover, in any event, para 2 of that Circular itselfindicates that a large number of companies liable tobe taxed under MAT provisions of Section 115JBwere not making advance tax payments. In the saidcircular, it has been clarified that Section 115JB is aself-contained code and thus, all companies wereliable for payment of advance tax under Section115JB and consequently provisions of Sections 234Band 234C imposing interest on default in payment ofadvance tax were also applicable.” In view of the above, the order of the Tribunal cannot be ITA No. 250 of 2004 sustained. Accordingly, the substantial question of law is answered in favour of the revenue and against the assessee. 8.The appeals stand allowed. (AJAY KUMAR MITTAL) JUDGE September 5, 2011gbs (ADARSH KUMAR GOEL)ACTING CHIEF JUSTICE -10- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 111 of 2005 Date of Decision: 5.9.2011 The Commissioner of Income Tax-I, Chandigarh Versus M/s Rana Sugars Ltd. ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL,ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Senior Standing Counsel,for the appellant. AJAY KUMAR MITTAL, J. For orders, see ITA No. 250 of 2004 (The Commissioner of Income Tax-I, Chandigarh v. M/s Rana Sugars Ltd). (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE