Income Tax Appellate Tribunal - Hyderabad
Assistant Commissioner Of Income-Tax vs Jindal Irrigation Systems Ltd. on 22 August, 1995
Equivalent citations: [1996]56ITD164(HYD)
ORDER
R.P. Garg, Accountant Member
1. These appeals by the revenue and the cross objection by the assessee are disposed of by this common order for the sake of convenience. The appeal by the revenue is against the order of the Commissioner of Income-tax (Appeals) for assessment year 1989-90.
2. This is a unique case where the Assessing Officer accused the assessee of default in a duty which possibly it could not have performed, "lex non cogit ad impossibilia" is the principle which is fully applicable in this case. This means that the law does not compel a man to do that which he possibly perform. This is what the Assessing Officer wanted the assessee to do.
3. The assessee is a limited company. It commenced its business after incorporation on 1-9-1988, i.e. just 15 days before the first instalment of advance tax was due. Looking to the smallness of the turnover on the due date of payments of advance tax under Section 210 read with Section 211 on 15-9-1988 being the first instalment and 15-12-1988 begin the second instalment there was no income nor could it have been anticipated because of heavy expenditure on fixed overheads. It was because of a sudden spurt after the second instalment was due that the turnover of the assessee increased by 9 times and it resulted in a profit liable to tax. It was just impossible for the assessee to anticipate such a spurt in the sales and consequently the resultant income. Can it in these circumstances be said that the assessee committed a default of deferment of advance tax and was liable to pay interest under Section 234C of the IT Act?
4. Section 234C as it stood at the relevant time reads as under :
234C. Interest for deferment of advance-tax. -
(1) Where in any financial year, the assessee who is liable to pay advance tax under Section 208 has failed to pay such tax or the advance tax paid by the assessee on his current income on or before the 15th day of September is less than twenty per cent of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than fifty per cent of the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of one and one-half per cent per month of the shortfall from for a period of three months on the amount of the shortfall from twenty per cent or, as the case may be, fifty per cent of the tax due on the returned income ...
In the original section, the words "the assessee who is liable to pay advance tax under Section 208 has failed to pay such tax or" were not there. These were inserted by Finance (No. 2) Act, 1991, with retrospective effect from 1-4-1989. It signifies that the section which could have been understood to be absolute was made applicable where an assessee was required to pay advance tax as per the provisions of Section 208 and he failed to do so.
5. Section 208 provides liability if the tax, as per the computation in accordance with the provisions of Chapter XVII, is or exceeds Rs. 1,500. The liability for payment of advance tax is on the total income, called 'current income', that would be chargeable to tax for the assessment year. Section 209 provides for the computation of advance tax and Clause (a) of Sub-section (1) thereof requires an assessee to estimate his current income and the tax thereon where the calculation is to be made as per Sub-section (1) or Sub-section (2) or Sub-section (5) or Sub-section (6) of Section 210. We are concerned in this case with Sub-section (1) of Section 210 which provides payment of appropriate percentage of tax of own accord on or before each of the due dates specified in Section 211 on his estimated current income under Section 209. Section 211 stipulates the amount payable at not less than 20%, 50% and 100% on or before 15th September, 15th December and 15th March respectively. The liability to pay advance tax on the income chargeable to tax in an assessment year is not absolute on that income but is made dependent on the estimate to be made by the assessee. Estimate is not a quest or prediction. It has to be based on the material available on the record and the facts and circumstances prevailing on the stipulated due dates.
6. When the law creates a duty or charge and the party is disabled to perform it, without there being any default on his part, and there is no remedy for him, the law will in general excuse him. When the obligation is one implied by law, impossibility of performance is a good excuse, say,. impotentia excusat legern.
7. Even under the Contract Act, dealing with private rights and obligations of a party to the agreement, the contract is deemed to be void on account of impossibility of performance (Section 56). The law regards the order and course of nature and will not force a man to demand that which he cannot recover. The law will not itself attempt to do an act which would be vain - lex nil frustra facit - nor enforce one which would be frivolous - lex neminem cogit ad vana sen inutilia - the law will not force any one to do a thing vain and fruitless.
8. When the assessee had not yet started earning income, how can the law expect him to estimate the advance tax liability and pay tax and consequently levy interest for failure to do so? On the facts and in the circumstances of the case, in our opinion, no interest can, therefore, be levied on the assessee in this case. The CIT (Appeals) was justified in deleting the same and we accordingly uphold his order.
9. The learned departmental representative submitted that no appeal is maintainable against charge of interest under Section 234C. We do not find any force in this contention in view of the decision of the Supreme Court in the case of Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961, as the assessee denies its liability and also since the interest charged under Section 23 4C is a part of the assessment.
10. The cross objection is filed late by 146 days. No petition for condonation thereof has been filed by the assessee. Even otherwise, it was filed only to support the order of the CIT (Appeals). In these circumstances, the cross objection is rejected.
11. In the result, the appeal and the cross objection are dismissed.