Wp(C)/12242/2008 Of M/S. Union Air Products (P) Ltd.cochin v. Asst.commissioner Of Income Tax, Ekm

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR FRIDAY, THE 16TH DAY OF JANUARY 2015/26TH POUSHA, 1936 WP(C).No. 12242 of 2008 (G) ---------------------------- PETITIONER(S): ------------- M/S.UNION AIR PRODUCTS PVT.LTD., REPRESENTED BY ITS MANAGING DIRECTOR, MR.A.G.NAIR UNION AIR HOUSE, VALANJAMBALAM, COCHIN-16. BY ADV. SRI.P.GOPINATH MENON. RESPONDENT(S): ---------------- 1. ASSISTANT COMMISSIONER OF INCOMETAX CIRCLE-1(3), RANGE-1, ERNAKULAM 2. CHIEF COMMISSIONER OF INCOMETAX KOCHI. R1 & 2 BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 16-01-2015,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No. 12242 of 2008 (G) A P P E N D I X PETITIONER'S EXHIBITS : EXT.P1A : TRUE COPY OF THE ORDER OF THE DISTRICT INDUSTRIES CENTRE, ERNAKULAMDECLARING THE PETITIONER COMPANY AS A SICK UNIT. EXT.P2A : TRUE COPY OF THE INTIMATION UNDER SECTION 143(1) OF THE INCOME TAXACT. EXT.P3A : TRUE COPY OF THE LETTER ADDRESSED BY THE PETITIONER BEFORE THE FIRSTRESPONDENT. EXT.P4A : TRUE COPY OF THE PETITION FILED BY THE PETITIONER BEFORE THE SECONDRESPONDENT. EXT.P5A : TRUE COPY OF THE ORDER PASSED BY THE SECOND RESPONDENT. EXT.P6 : A TRUE COPY OF THE LETTER DT. 25.1.2003 FROM THE KERALA STATECOOPERATIVE BANK TO THE PETITIONER. ANNEXURE A : TRUE COPY OF THE PETITION. ANNEXURE B : TRUE COPY OF THE RELEVANT PAGE. ANNEXURE C : TRUE COPY OF THE RELEVANT PAGE OF PROFIT AND LOSS ACCOUNT FOR THEYEAR ENDED 31.3.2001. ANNEXURE D : TRUE COPY OF THE RELEVANT PAGE OF COMPUTATION STATEMENT. RESPONDENTS' EXHIBITS : EXT.R2A: TRUE COPY OF THE PETITION. EXT.R2B : TRUE COPY OF THE RELEVANT PAGE OF THE PROFIT & LOSS ACCOUNT. EXT.R2C : TRUE COPY OF THE RELEVANT PAGE OF PROFIT AND LOSS ACCOUNT FOR THEYEAR ENDED 31.3.2001. EXT.R2D : TRUE COPY OF THE RELEVANT PAGE OF COMPUTATION STATEMENT. P.B.SURESH KUMAR, J. ----------------------------------------------- W.P. (C) No.12242 of 2008 ----------------------------------------------- Dated 16[th] January, 2015. J U D G M E N T Ext.P5 order passed by the second respondent inexercise of the powers conferred on him by the Central Boardof Direct Taxes under Clause (a) of Sub Section 2 of Section119 of the Income Tax Act,1961, hereinafter referred to as `theAct' for short, is under challenge in this writ petition. 2.The petitioner is a company incorporatedunder the Companies Act. It is an assessee under the Act onthe file of the first respondent. The petitioner had availed afew term loans from the Kerala State Industrial DevelopmentCorporation and the State Co-operative Bank for setting up itsindustrial unit. According to them, on account of the increasein the cost of production, it had incurred recurring losses andultimately its unit became a sick industry. It is stated thatconsequently, the financial institutions referred to above havewaived the interest charged in its term loan accounts and onreceipt of confirmation from the financial institutions, theexcess debit of interest amounting to Rs.89,49,503/- was 2.The petitioner is a company incorporatedunder the Companies Act. It is an assessee under the Act onthe file of the first respondent. The petitioner had availed afew term loans from the Kerala State Industrial DevelopmentCorporation and the State Co-operative Bank for setting up itsindustrial unit. According to them, on account of the increasein the cost of production, it had incurred recurring losses andultimately its unit became a sick industry. It is stated thatconsequently, the financial institutions referred to above havewaived the interest charged in its term loan accounts and onreceipt of confirmation from the financial institutions, theexcess debit of interest amounting to Rs.89,49,503/- was written back in the profit and loss account of the petitioner forthe year 2000-2001 as an extra-ordinary item. On account ofthe inclusion of the said extraordinary item, the net profit ofthe petitioner for the assessment year 2001-02 increased fromRs.3,72,400/- to Rs.64,22,169/- and consequently, thepetitioner had to pay book profit tax as provided for underSection 115JB of the Act. However, in the intimation issued tothem by the first respondent under Section 143(1) of the Act,the petitioner was directed to pay a sum of Rs.1,22,244/-towards interest under Section 234B of the Act and a sum ofRs.39,003/- towards interest under Section 234C of the Actalso. Since the profit reflected in the books of accounts of thepetitioner for the said year was solely on account of thereversal of interest charged by the financial institutions on theterm loans availed by them, they had preferred arepresentation to the second respondent seeking waiver of theinterest charged on them under Sections 234B and 234C of theAct. Ext.P4 is the representation submitted by the petitionerbefore the second respondent in this connection, invoking thepower of the second respondent under Section 119 (2) (a) ofthe Act. Ext.P4 representation was rejected by the secondrespondent as per Ext.P5 order, holding that he is authorised to WPC 12242 of 2008 waive interest only in the class of cases and incomes specifiedin the circulars issued for that purpose by the Central Board ofDirect Taxes and that the case of the petitioner does not comeunder the specified class of incomes and cases specified in thecirculars in this connection by the Central Board of DirectTaxes. As stated above, it is aggrieved by the said decision ofthe second respondent, this writ petition is filed. 3. Heard Adv.P.Gopinath Menon, the learnedcounsel for the petitioner and Adv.Jose Joseph, the learnedStanding Counsel for the respondents. 4. The learned counsel for the petitionerstrenuously contended that the confirmation of waiver ofinterest was received from the financial institutions concernedonly after the time stipulated for payment of advance tax andtherefore, the second respondent ought to have allowed thewaiver of interest claimed by the petitioner. He has alsocontended, relying on the decision of the Karnataka High Courtin Kwality Biscuits Ltd. v. Commissioner of Income Tax[2000 Vol.243 ITR 519] that the book profit can be determinedonly after the end of the relevant assessment year andtherefore, the assessee has no liability to pay interest underSections 234B and 234C of the Act for non-payment of advance tax on the book profit. In the alternative, the learned counselalso pointed out that the unit of the petitioner has still notrevived from its sickness and therefore, prayed for anopportunity to pay the interest dues in instalments, if thecontentions are not acceptable. 5. Section 119 (1) and 119(2)(a) of the Act reads thus : tax on the book profit. In the alternative, the learned counselalso pointed out that the unit of the petitioner has still notrevived from its sickness and therefore, prayed for anopportunity to pay the interest dues in instalments, if thecontentions are not acceptable. 5. Section 119 (1) and 119(2)(a) of the Act reads thus : “119. (1) The Board may, from time to time, issue such orders,instructions and directions to other income-tax authorities as itmay deem fit for the proper administration of this Act, and suchauthorities and all other persons employed in the execution ofthis Act shall observe and follow such orders, instructions anddirections of the Board: Provided that no such orders, instructions or directions shall beissued - (a) so as to require any income-tax authority to make aparticular assessment or to dispose of a particular case in aparticular manner; or (b) so as to interfere with the discretion of the Commissioner(Appeals) in the exercise of his appellate functions. (2) Without prejudice to the generality of the foregoing power,- (a) the Board may, if it considers it necessary or expedient so todo, for the purpose of proper and efficient management of thework of assessment and collection of revenue, issue, from timeto time (whether by way of relaxation of any of the provisions ofsections [115P, 115S], [115WD, 115WE, 115WF, 115WG,115WH, 115WJ, 115 WK,] [139], 143, 144, 147, 148, 154, 155,[158BFA] [sub-section (1A) of section 201, sections 210, 211,[234A, 234B], 234C], 271 and 273 or otherwise), general or special orders in respect of any class of incomes [or fringebenefits] or class of cases, setting forth directions orinstructions (not being prejudicial to assessees) as to theguidelines, principles or procedures to be followed by otherincome-tax authorities in the work relating to assessment orcollection of revenue or the initiation of proceedings for theimposition of penalties and any such order may, if the Board isof opinion that it is necessary in the public interest so to do, bepublished and circulated in the prescribed manner for generalinformation;” It is clear from Section 119(1) and 119(2)(a) of the Act that thestatute had conferred authority to waive interest payable underSections 234A, 234B and 234C of the Act only on the CentralBoard of Direct Taxes and it is based on the general or specialorders issued by the Board, the other income tax authoritiesare exercising the power of waiver. It is also clear from theaforesaid Sections that the income tax authorities other thanthe Board are empowered and authorised to waive interest onlyin accordance with the guidelines, principles and proceduresspecified by the Board in general or special orders issued bythe Board. The classes of incomes and cases in which theChief Commissioner of Income Tax is authorised to waiveinterest under Sections 234A, 234B and 234C of the Act as perthe circulars issued by the Central Board of Direct Taxes asindicated in Ext.P5 order, read thus: “(a) Where, during in the course of search and seizure operations,books of account etc. were seized and the CCIT/DGIT concerned issatisfied on the facts and circumstances of the case, that the delayin furnishing return was for reasons beyond the control of theassessee, and is not attributable to him. (b) Where any income chargeable to tax under any head ofincome other than “Capital gains” which was received or accruedafter the date of first or subsequent instalment of advance tax,which was neither anticipated nor contemplated by the tax payerand on which advance tax was paid by the tax payer after thereceipt of such income and the DGIT or CCIT is satisfied that this isa fit case for waiver of interest chargeable u/s.234C; “(a) Where, during in the course of search and seizure operations,books of account etc. were seized and the CCIT/DGIT concerned issatisfied on the facts and circumstances of the case, that the delayin furnishing return was for reasons beyond the control of theassessee, and is not attributable to him. (b) Where any income chargeable to tax under any head ofincome other than “Capital gains” which was received or accruedafter the date of first or subsequent instalment of advance tax,which was neither anticipated nor contemplated by the tax payerand on which advance tax was paid by the tax payer after thereceipt of such income and the DGIT or CCIT is satisfied that this isa fit case for waiver of interest chargeable u/s.234C; (c) Where, as a result of any retrospective amendment of law orthe decision of the Supreme Court after the end of the relevantprevious year, certain receipts which were hitherto treated asexempt, become taxable. Since no advance tax would normally bepaid in respect of such receipts during the relevant financial year,penal interest is levied for the default in payment of advance tax” As stated above, the second respondent is empowered andauthorised to waive interest payable by the petitioner underSections 234B and 234C of the Act only if the case of thepetitioner falls under any of the three classes of cases referredto above. Going by the averments in the writ petition, the caseof the petitioner would not come under classes (a) and (c).Coming to class (b), there is nothing on record show as to whenthe financial institutions have intimated to the petitioner theirdecision to waive the interest charged on the petitioner. In the absence of any material as to the time at which the petitionerreceived intimation concerning the waiver of interest grantedby the financial institutions, I am unable to consider thequestion as to whether the case of the petitioner would fallunder class (b) referred to above. The contention raised by thelearned counsel for the petitioner that since the book profitcannot be determined before the end of the relevantassessment year, the assessees are not obliged to pay interestunder Sections 234B and 234C of the Act for non-payment ofadvance tax on the book profit also cannot be accepted, for,the question whether the petitioner is liable to pay interestunder Sections 234B and 234C of the Act is not the issue inthis case. As noticed above, the issue in this case is as towhether the second respondent is justified in declining therequest made by the petitioner for waiver of interest inexercise of his authority under Section 119 of the Act. Thedecision relied on by the learned counsel for the petitioner isalso not a decision rendered in the context of the authority ofthe income tax officers to waive interest under section 119 theAct. In the aforesaid circumstances, Ext.P5 order of the secondrespondent is perfectly in order. 6. Coming to the request made by the petitioner for WPC 12242 of 2008 payment of the balance amount due by way of interest ininstalments, it is noticed that the petitioner had alreadyremitted the tax levied on them. In the said circumstances, Iam of the view that the petitioner can be permitted to pay thebalance amount due, less the interest already paid by them insix monthly installments commencing from 1[st] of February,2015. Since the matter is pending before this Court from8.4.2008, I am of the view that the petitioner shall be absolvedfrom the liability to pay interest for the period during which thewrit petition was pending before this Court, and it is orderedaccordingly. The writ petition is disposed as above. Sd/- P.B.SURESH KUMAR, JUDGE. tgs