The Commissioner Of Income Tax v. M/S Steel Steips Leasing Ltd

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. The Commissioner of Income Tax. Vs. M/s Steel Steips Leasing Ltd. I.T.A. No.176 of 2003 Date of decision: 4.3.2011 -----Appellant. -----Respondent and connected cases being I.T.A. Nos.177 to 181 of 2003 CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE RAJESH BINDAL Present:-Ms. Urvashi Dhugga, Sr. Standing Counselfor the appellant. Mr. Akshay Bhan, Advocatefor the respondent. --- ADARSH KUMAR GOEL, J. 1. This order will dispose of I.T.A. Nos.176 to 181 of2003 as it is stated that all the appeals involve common questionof law. 2. I.T.A. No.176 of 2003 has been preferred by therevenue under Section 260-A of the Income Tax Act, 1961 (forshort, “the Act”) against the order of the Income Tax AppellateTribunal, Chandigarh dated 18.11.2002 in I.T.A. No.81/2001proposing to raise following substantial question of law:- “Whether on the facts and circumstances of the case, the Hon’ble ITAT is right in law in upholding the decision of the C.I.T.(A) that interest under sec.234Band 234C cannot be charged in the cases whereincome of the assessee is computed as perprovisions of Section 115JA of the Income Tax Act,1961?” 2. The Assessing Officer invoked the provisions ofSection 115JA and computed tax on the book profit of theassessee. It was also held that the assessee was liable to payinterest under Sections 234B and 234C of the Act. On appeal,the CIT(A) deleted the demand of interest on the ground thatunder Section 143(1), the Assessing Officer could not createdemand of interest on deemed income under Section 115JA ofthe Act. The Tribunal upheld the said view. 3. We have heard learned counsel for the parties. 4. Learned counsel for the revenue submits that liabilityof interest is statutory and is applicable to liability of tax calculatedon book profits under Section 115JA as held by the Hon’bleSupreme Court inJt. CIT, Mumbaiv. Rolta India Ltd.2011(2)SCC 408. Learned counsel for the assessee is unable todistinguish the applicability of the said judgment to the presentcase. In the said judgment, the Hon’ble Supreme Courtobserved:- 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 schemeprovided in Sections 208 to 219 (both inclusive) in respect of the total income of the assessee that wouldbe 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 bound topay advance tax under the said scheme of the Act.Section 115J/115JA of the Act were special provisionswhich provided that where in the case of an assessee,the total income as computed under the Act in respectof any previous year relevant to the assessment yearis less than 30% of the book profit, the total income ofthe assessee shall be deemed to be an amount equalto 30% of such book profit. The object is to tax zero-tax 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 wasinserted by Finance Act, 2000 w.e.f. 1.4.2001. 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 Section115JB(5)). Similarly, amendments have been made in the relevant Finance Acts providing for payment ofadvance tax under Sections 115JA and 115JB. So faras interest leviable under Section 234B is concerned,the section is clear that it applies to all companies.The pre-requisite condition for applicability of Section234B is that assessee is liable to pay tax underSection 208 and the expression “assessed tax” isdefined to mean the tax on the total incomedetermined under Section 143(1) or under Section143(3) as reduced by the amount of tax deducted orcollected at source. Thus, there is no exclusion ofSection 115J/115JA in the levy of interest underSection 234B. The expression “assessed tax” isdefined to mean the tax assessed on regularassessment which means the tax determined on theapplication of Section 115J/115JA in the regularassessment. 9. The question which remains to be considered iswhether the assessee, which is a MAT Company, wasnot in a position to estimate its profits of the currentyear prior to the end of the financial year on 31stMarch. 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 of theAct had to be determined and then, the liability of theassessee to pay tax under Section 115J of the Actarose, only if the total income as computed under theprovisions of the Act was less than 30% of the bookprofit. 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 provisions ofSection 115J would be applied or not. The Court,therefore, held that the liability would arise only afterthe profit is determined in accordance with theprovisions of the Companies Act, 1956 and, therefore,interest under Sections 234B and 234C is not leviablein cases 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 862and Madhya Pradesh High Court in Itarsi Oil andFlours (P.) Limited v. CIT reported in (2001) 250 ITR686 as also by the Bombay High Court in the case ofCIT v. Kotak Mahindra Finance Ltd. reported in (2003)130 TAXMAN 730 which decided the issue in favourof the Department and against the assessee. Itappears that none of the assesses challenged thedecisions of the Gauhati High Court, Madhya PradeshHigh Court as well as Bombay High Court in theSupreme Court. However, it may be noted that thejudgment of the Karnataka High Court in KwalityBiscuits Ltd. was confined to Section 115J of the Act.The Order of the Supreme Court dismissing theSpecial Leave Petition in limine filed by theDepartment against Kwality Biscuits Ltd. is reported in (2006) 284 ITR 434. Thus, the judgment of KarnatakaHigh Court in Kwality Biscuits stood affirmed.However, the Karnataka High Court has thereafter inthe case of Jindal Thermal Power Company Ltd. v.Dy. CIT reported in (2006) 154 TAXMAN 547distinguished its own decision in case of KwalityBiscuits Ltd. (supra) and held that Section 115JB, withwhich we are concerned, is a self-contained codepertaining to MAT, which imposed liability for paymentof advance tax on MAT companies and, therefore,where such companies defaulted in payment ofadvance tax in respect of tax payable under Section115JB, it was liable to pay interest under Sections234B and 234C of the Act. Thus, it can be concludedthat interest under Sections 234B and 234C shall bepayable on failure to pay advance tax in respect of taxpayable under Section 115JA/115JB. For theaforestated reasons, Circular No. 13/2001 dated9.11.2001 issued by CBDT reported in 252 ITR(St.)50has no application. Moreover, in any event, para 2 ofthat Circular itself indicates that a large number ofcompanies liable to be taxed under MAT provisions ofSection 115JB were not making advance taxpayments. In the said circular, it has been clarifiedthat Section 115JB is a self-contained code and thus, allcompanies were liable for payment of advance taxunder Section 115JB and consequently provisions ofSections 234B and 234C imposing interest on defaultin payment of advance tax were also applicable.” 5.Accordingly, the question raised is answered in favour of the revenue and against the assessee. The appeals are allowed. A photocopy of this order be placed on the file of each connected case. (ADARSH KUMAR GOEL) JUDGE March 04, 2011ashwani ( RAJESH BINDAL ) JUDGE