Income Tax Appellate Tribunal - Chandigarh
Dy. Cit vs Haryana Warehousing Corpn. on 15 September, 2004
Equivalent citations: [2005]1SOT257(CHD)
ORDER
M.A. Bakshi, VP We find it convenient to dispose of these two appeals of the revenue for assessment years 1995-96 and 1996-97 by this, consolidated order.
2. Parties have been heard and record perused.
3. The common issue involved in these appeals is relating to computation of deduction under section 80G of the Income Tax Act, 1961. The assessee is a Co-operative Society engaged in the activities of marketing and agricultural produce. It derives income which is partly taxable and partly enjoys deduction under section 80P of the Income Tax Act, 1961. The assessee had claimed deduction under section 80G at the rate of 100 per cent. Since there is no dispute about the eligibility of the assessee for deduction under section 80G, the assessing officer allowed the same but restricted the deduction proportionately vis-a-vis the taxable income and non-taxable income. The CIT (A) had decided the issue in favour of the assessee. It is the case of the revenue that since the contribution /donation was debited to the Profit & Loss account, the CIT (A) was not justified in allowing the deduction under section 80G in full as claimed by the assessee. It was contended that since income of the assessee is partly taxable and partly non-taxable, the expenditure is proportionately to be apportioned as settled by the Hon'ble Supreme Court in the case of Sabarkantha Zilla Kharid V Sangh Ltd. v. CIT ( 1993) 203 ITR 1027 and in the case of CIT v. United General Trust Ltd. (1993) 200 ITR 488. Since the assessee has made the donation out of the entire income (taxable as well as non-taxable), the deduction is also to be allowed in proportion to the taxable income. It was accordingly pleaded that the order of the learned CIT (A) may be set aside and that of the assessing officer restored.
4. The learned counsel for the assessee, on the other hand, contended that section 80G provides for grant of deduction out of taxable income and since the assessee was having taxable income and the amount had been paid qualifying the deduction under section 80G, there was no justification for the assessing officer to allow the deduction partially contrary to the provisions of the Act. According to the learned authorised representative, the decision of the CIT(A) is thus in order. It was accordingly, pleaded that the appeal of the revenue may be dismissed.
5. In regard to the levy of interest under section 234B, the learned departmental Representative contended that the assessee had failed to pay the advance tax in accordance with the provisions of the Act and, therefore, the interest under section 234B was rightly imposed by the assessing officer. It was further contended that the levy of interest under section 234B has been held to be mandatory by the Hon'ble Supreme Court in the case of CIT v. Anju M.H. Ghaswala (2001) 282 ITR 1 (SC) Reliance was also placed on the decision of Bombay High Court in the case of CIT v. Kotak Mahindra Finance Ltd. (2004) 265 ITR 119 (Bom), wherein it has been held that the levy of interest under sections 234B & 234C is compensatory in nature and the assessing officer has no jurisdiction not to impose the interest. The learned Departmental Representative further pointed out that the Rajasthan High Court vide order dated 1-12-1993 in the case of CIT v. Rajasthan State Warehousing Corpn. (1994) 210 ITR 906 (Raj.) had decided the taxability of the income of the assessee and the said decision has been affirmed by the Supreme Court in the case of Orissa State Warehousing Corpn. v. CIT (1999) 237 ITR 589 (SC). It was, therefore, obligatory upon the assessee to pay advance tax in the financial years 1994-95 and 1995-96. According to the learned Departmental Representative, there was no decision of the Jurisdictional High Court or that of the Supreme Court in favour of the assessee and that though the Hon'ble Supreme Court took the view about the taxability of the income of the assessee on 1-4-1999 Orissa State Warehousing Corpn. (supra), yet it had decided the issue on the basis of the law as it existed during the relevant financial years. There was thus default on the part of the assessee in payments of advance tax for which interest was rightly levied under section 234B, it was contended.
6. The learned counsel for the assessee. on the other hand, contended that the assessee was claiming exemption in regard to portion of the income and the department had not questioned the claim of the assessee till assessment year 1994-95. During the financial years. relevant assessment years 1995-96 and 1996-97, the assessee had not to pay advance tax on the basis of the stand accepted by the department. Though the decision of the Rajasthan High Court was against the assessee, yet there were other decisions of Allahabad/Uttranchal High Court in favour of the assessee on the basis of which exemption was granted to the assessee. The learned counsel pointed out that under section 208, the assessee was required to pay advance tax on the current income and section 209 of the Act provides that the assessee shall first estimate his current income and income-tax thereon shall be calculated at the rate in force in the financial year. The assessee had made a fair estimate of the advance tax payable on the basis of accepted claim of the assessee by the department and, therefore, there was no default committed by the assessee, that attracted provisions of section 234B. The learned counsel for the assessee pointed out that the issue relating to the taxability of the income has been recommended to be referred to a larger Bench by the Supreme Court in the case of CIT v. Gujarat State Warehousing Corpn. Ltd. (2000) 245 ITR 1. Reliance was also placed on the decision of Uttaranchal High Court in the case of CIT v. Sedco Forex International Drilling Co. Ltd. (2003) 264 ITR 320 (Uttar) wherein it has been held that in view of the conflicting opinion about the taxability of income, the assessee was justified in estimating the current income in the light of favourable decision and that interest under section 234B was not chargeable. It was accordingly, pleaded that the learned CIT (A) was justified in deleting the levy of interest under section 234B.
6.1 It was further pointed that the department had not issued any notice under section 210 and, therefore, the assessee was required to pay advance tax on the estimated income. There was thus, no default attracting the provisions of section 234B. It was accordingly pleaded that the appeal of the revenue may be dismissed.
7. We have given careful consideration to the rival contentions. We first deal with the issue relating to deduction under section 80G. It is not disputed that the assessee was having taxable as well as non-taxable income in the relevant year under appeal. There was a controversy in regard to disallowance of proportionate expenses incurred by the taxpayers having taxable and non-taxable income. The legislature has introduced section 14A to put at rest the aforementioned controversy. The section 14A reads as under :-' "For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act."
8. Section 14A is attracted in respect of expenditure incurred by the assessee which does not form part of the total income of the assessee. However, in this case, the issue does not relate to disallowance of any expenditure but donation made qualifying deduction under section 80G. It should, therefore, be relevant to quote section 80G "(1) In computing the total income of an assessee there shall be deducted, in accordance with and subject to the provisions of this section,"
9. In this case, assessee has taxable income. The assessee has also made donations falling in the category specified under section 80G. There is no other requirement for qualifying deduction in respect of the donation made by the assessee. We are of the view that assessee is entitled to deduction under section 80G out of the taxable income and there is no justification for partial disallowance on the ground that part of the income of the assessee is not liable to tax. As already pointed out, deduction under section 80G is permissible while computing the taxable income of the assessee and there is no warrant justifying the view that deduction under the said section is to be restricted when assessee is having taxable as well as non-taxable income. We, therefore, do not find any infirmity in the order of the CIT (A) in this regard. This ground of appeal raised by the revenue is accordingly dismissed.
10. The only other issue involved in this appeal is relating to cancellation of interest by the CIT (A), which was levied by the assessing officer under section 234B. Their Lordships of the Supreme Court in the case of Anjum M.H. Ghaswala (supra), have held the provisions of section 234B as mandatory. While computing the income, the assessing officer found that the advance tax paid by the assessee was less than the amount required to be paid in advance tax. Interest was accordingly levied under section 234B. The CIT (A) has deleted the same. On consideration of the rival contentions, we are of the view that whereas the assessee may have reasonable cause for not paying the advance tax, since provisions of section 234B 'are mandatory, the assessing officer has no option but to levy the same. The issue as to whether the past history of the case and various decisions of High Courts justified the assessee not to pay advance tax could be relevant for waiver of interest for the purpose of which the assessee may take appropriate steps if so advised. So, however, while framing the assessment, the assessing officer has no jurisdiction to consider as to whether there was reasonable cause for non-payment of advance tax or not. In case of non-payment of advance tax or short payment of advance tax, provisions of section 234B get attracted. The assessing officer was, therefore, justified in levying the interest and the CIT (A), in our view, was not right in law to delete the same. It may be pertinent to mention here that the Bombay High Court in the case of Kotak Mahindra Finance Ltd. (supra) has explained that provisions of section 234B in the light of the decision of the Supreme Court in the case of Anjum M.H. Ghaswala (supra), on the basis of which it is evident that assessee is liable to interest under section 234B. We may further place reliance on the decisions of Supreme Court in the cases of CIT v. Sant Ram Mangat Ram Jewellers (2003) 264 ITR 564 (SC) and Kotak Mahindra Finance Ltd. (supra). We, therefore, set aside the order of the CIT (A) in regard to this issue and restore that of the assessing officer. Consequential relief shall, however, be allowed to the assessee. The assessee shall be at liberty to take appropriate steps for waiver of interest, if permissible and if so advised.
11. For statistical purposes, appeals of the revenue are partly allowed.