Karnataka High Court
The Commr Of Income Tax vs M/S Deccan Creations Pvt Ltd on 31 January, 2011
Bench: N.Kumar, Ravi Malimath
IN THE HIGH com? OF KARNATAKA AT BA¥'§.'g3.*$.{;§}:._E§4Ej' '
amm "mzg THE 315? my 05 3ANU£¥.R,'§f%_:2Q':L.i'* T' '
PRE§EN?:
THE HQNELE MR.r3.L}STICE"E'*§.%<iJ§v3.!?{--:4'i': "
Atxéty.
TH E HOE'€'BLE' Ju§T1:rfE :.§§_ii.;§}"1..i'fEALI!'?3HA*f;H
ITA.'O=.4 (3}:"' ;
;T,£s..1afx:2M'e.'és7Tt:3{i 'OF: 2006, 1TA.Nt;.1.:534 OF 2006
"=§'>;fif_T/ix;:f=3.Q_;l4%313'-«O¥?_20C}6
BETWEEN: . * %
1., The C:"C§f}'1f}'1viS$i_Ol;1'€Pi"'Sf:§nCOme~taX
Centrai C.i_;icie,f "
.. +::.R;*Bu;:dsnga,. _ é
A %____QuEéenVSzROadf .. ..... ..
" ~ _jBa..:§gai'0_r"e~:.. __
'-Ti'heV ';5gé,$iS%:éf3t Commissicmer of Incomeiax
=.__CEr_c:{e _-4'-4j'..%;:;1.(_2},
C...R,§i,iiEQ§Rg,_
Queens Read,
' ' Eangalore. ._APF"ELLANTS
i»<Z,\f.Aravir:é for SE"? M.V.§eshacha§a, Advacates}
'V "HAND:
Wsfleccan Cmatiens Wt. LE3,
'wr-
Geetha Mansion, 1 Fioorg,
Nofié, 5"' Mile; Tumkur' Roaé,
Yeehwaethpurg,
aangazore - 560 022. .',RES-E§i3'E'»ji§§fi§"T *
>i<>?<>§<
This ITA fified under' S€3C'3LiOi"3;:'26¢}_'f'a'3£:. of
praying to formulate the substa"otia_! "Que:-;--1:_E o:?aa _of_j"'«!.aw..
etated therein, ailow the ap_pe4_aE ai'3'd_ Set asidefghe order
passed by the ITAT Bar:ga!o:'e__ ITAINQE3.234/Ba'fi'gg'2OO4 "
dated 09.06.2006 confirming"'~V.o_tE:e ord-ereof 'appellate
Commissioner & confirm thee--orderfiassed"by..the Asst.
Commissioner of Incorn,e'Tax.; Ci§.r;E'e:"1.1_'(*2A), Bangalore,
ITA.NQ.8QO/Z006:
BETWEEN: A '
1. The~'Co'mm"iissioféer o'f.,I"ncom'é'--=tax
Cehtra! Cir'(:E"+3# \ A I - '
C.R§BuiI.dmg, '
Queens Roach» V'
Bangafore. "
2, .f'fE*;~e ;A:ssi.stantV"Co-earnissioner of 1n<:ome--ta><
% «._<:2rc":aj «~_1-2(2),
T e,R'.au:actea;gg,,
._ "-'_Que'e.r"?3_ Road ,
A '_E5ang_al0'r.e.e" ...APPELLA!\3TS
'r__(By Sri K';.V.Aravind for Sri M.V.Seshac%2ala, Advocates)
._ 3%'
M?/s.Reson§e Laboratories Ra."
~~-<;;:~13, KSSIDC Industrial Area,
Yeiahaoka,
Baegaiore --- 560 064. _.,RE:'3¥fiC}NDEf\3T
E
(By Sr; Sfiarthasarathi, Advocate)
This rm med under section 260~A 0f__I";'T,.AC?_I:';~ i§}61--f
praying to fcsrmulate the substantia_i q:jes'€1'Grfi§s "<3f'?.iVaw
stated therein, ailow the appeal garad 5&1; 'asi-ide._tE:g._o'rdVer7
passed by the ITAT Bangalere in IT(S_S}A 2TO.6"7,{E5AN,?'L2.Q€314:
dated 2311:2005 conférmirpg the V-.Qr'd-..er pafiseti ''by'; the
appeliate Commissioner & c:onfi':*m thev-order T'pasg;es::;i..%3;>' the 2 '
Deputy Commissiener of Incoi*'n¢"*T"a><, CZ-a--'::f§'te*a'E-I Ci;j<:|e~2(2),
Barzgaiore.
_Ii_i'£'A.NO.;_l_.____:l_._34/;0O6:
BETWEEN: "
1. The CommiS§i«;jé'er
Centa'a!_E2i'rvr;!e',l.V_V.5;. " _: "
C.R.BuE!;iir'.-g_g;_,. " " '
Queen"s-A RA}:-ad::fiA: "
Ba'ng&_§r3re'.' * '
2. The Assistant'v.C6'm:nissiGh@r of In<:ome--tax
Circle -!~12'(:2,),-_ '
c;;R.Buiiding,_
Road,' .....
'E1ari'g a§Qre_. ..,i3\PPELLAE\3TS
far Sri M.V.SeshachaEa, Advocates)
AND: % %
R Mfg. Sfrasan Finance Ltd,
R.00'm n0.€>1--Lf
"'._85a"ri;0n Centre,
$310.84, MG Road,
" "'£'3ar:ga%ore «» 560 03:' ...REsPo:\:[3Em"
..,_4.,.
1?HsITA flma undersecuon 260~A ofxsnacgjigég
praying to formulate the substantiai questio'r2.::."_Qf__"éésw
s;tated therein, anew the appeai and set a:;id.eithAe"*r§%'de'r~--.?
passed by the ITAT Bangafore in ETA.No.2Q24;{Bfi.E$3y'20€)'4-« _
dated 2134,2006 confirming tE":e_...2>r_der _'pasSer:f b"y tVhe,_V V'
appeflate Commissioner 8: ccmfirmivthe o?d.e'r_pas--:2e<.E.VE;1,x,{':lf)e '
Asst: Commissioner of Eiécoryissg 1 Ta;~:;s<, '~.C'Er§:'le¢--1~2'{2);11
Bangafore.
ITA.No.1403[ 2006:
BETWEEN:
1', The Commissioner of"'Ir%1c--9mg~€:r_¥a.x
CLRJBuHwng, -_ j" : ~ "
Queens R<:>ad_,* _ " .
Baregaiore." '
2. The A$STis,.tAa't1;t C6f::':"1-m'i'§$'ioner"é:)'f"Ihcc>me-t:ax
Circie ---g 12('3.§,..,V_ '
C;LBunmng,*Cv.'
Queeris._Road,"V. A ,
Bangaiofa. * V ...APPELLANTS
Ej<_T.:V.§_\rav'ifidvfe-r"Sri M.V.Seshachala, Advocates)
;ANfifif~Ju'
M/s;"Uniq_'i1e-Creations (Bang) Ltd.,
__?_28,:n&us:na:suburb,2""stage,
A _Yesh_.war1'thpur,
"«.E"3?3'nge3_.Iore2 W 560 022, "RESPONDENT
(Egg Sri S.Part:hasarat:hi, Advocate) \\ This rm filed under section 260-A er x.mc:.]reta5i praying to formulate the substantial questi'erisA ef.j"'-.§a"e:T ~ stated therein, allow the appeal and set aside t'hfe~ elder. _A V' passed by the tree" Bangalore in __ETA_._l\io.2;9?9'/rrt§an'g,/V2004 dated 02.6.2006 confirming the ortle: "passed-_hy"tVhe'« appellate Cemmissioner & corrfirm'=the_r::rdervpass'ed tfy-..t't§e:
Asst. Commissioner of Income-.A 'Tax,_,.'<;fi!ft;le~12{'3),'-.,L Bartgalere.
These ETAS coming (}Ifl..fl'i""Ql'"--.§idlTllS"S§.(f}fl this day, KUMAR 3., delivered the*~folio_wiri_g:'-~___ ' 'A These {oe'rj§;jT..}'fi'ppeais§ are "E3?t'lie.._..tevenue challenging the order holding that MAT credit should' be .r_;l;AiA\)l'he.'i§iV,1jefore:'t:h_ar.gl_'rrg of interest under Section 2348 a'm:1_ i?.34C';s. appeals pertain to very same ass4esse.e antl"»ih_V respect of four assessment orders. As the qoestioes _i:m._olved in these appeals are the same, they are .ta-l'<_e.rz"'t§'i}..,,lV_to{i;;'et'her for consideration and disposed off by this Cc-.rra'm an order.
2. The assessee is carrying on business in the tnaaiifaetere of leather garments. The assessee has filed a return ei' income for each assessment year within the time stipulated. The Assessing Offieer ievieti the interest under § ..,. 6 ..
Seetion 2348 and 234C of the Income Tax Act (fQfT"$_hQ_?i hereinafter referred to as the 'Act') witheut _ MAT under Sectien :15:JAA of i:he_ACt Zfzfiéi"=§BS'$'€3;G"_f:h§%;§4 assessment orders. Aggzieved i;'¥ae.:'$'4é3iiE.d1 Qreiers, the asssessee QF<§f_E'KfEd Commissioner of Incoree Tax The Appeliate COi"¥'3i'"3'1iSSi0n1E§'i;...Vi"|€3id'~V,?;hi§3Ei the provisions of Sectien 1§,S}AAi..'i\/'ii¥i" ciiiieei.tjjshVo.g:':iq befere ievy of interest. of the Act.
.auooeai. Aggrieved by the same, an appeal to the appeilate triI:)3;:;nai,.. TVhe.,jVti'il'junai on rewappreciation of the entire :'r*naiieria3:on: "record and aiso taking note of its earner order 'o§.i'V:M;*5. UNIQUE CREATIONS (BANG) LTD., held that MA'T'cre<:iit should be given before charging of interest under Section 23453 and 234C of the Act. Accordingly, it dVViS'f!'1:ESSed the appeei. Aggréeveo by the same; the " "'-revenue is in appeai. £7 The Eeierrneci Couasei fer the revenue eer1té_e:3_';§eir;i'e:fi3a'tV. the eresem: explanatiorz te Sectiee 234$ _ ' eubstituted by Finance Act, S1,04u2GQ7 and thereforefifer tee':"essese'n~_:eAi:':"
anterior to the said eeriod, tr'"reV:"'§aidV.exfiia'n$:.=tie'rMfiVee no application. As in theifrrstant'Vee'Se:;;firre-._esseéSéi'1*aeVrrt orders are prior to i\.'z.:_ t1AA#:jer__'r.no eppiicatien. Therefore, the 'e:;3VL;§eiia:i__e ;2es'Q.*£ho'rr':t:'r'Lei§>-fiqéfrarrwitted a serious error in ex{"en<§-i'r:__gr'V".t f~'a--e.eaiifda,"be.r§eriétv_toythe assessee for the Deriod Iprier. {<5 __ The Sup:'eme"~C0u_rter-.ha.d an occasion to Consider thie aspect in 'Erie 'case. Cemmrssrozvee OF" INCOME TAX, s/5. TUf;S'fAN NEC ;'_"}'"D., IN CIVIL APPEAL .2010 disposed off on 16"' December 290r:__'ii2A,' Ar:'c'-}%--i.v'r}rbtic:ng Section 115-3/Ix (1) and Section 115» '<._3AA, it {fife ag under:
A "The entire scheme of Sections _I15]A(1) szrm' Iifijxiifla shows that if an assessee is entitled 50 a tax erecfiz" as a ceneequerzce ef the 3 _. W8"
assessee making payment of tax under Section; 115JA(1) in the year one, then, the set__{5ff'Qf--...:_'i. such tax credit fei/ows as a matter ef""ee.ursfe ence the conditiens menitiehe-id Sedition 115]/AA are fuifliled and the s'u:;i7:"es.t,,,.V':"tA credit is not dependent' upon 'deV_terminea'tit;hhy the Assessing Officer saiieiand eXc'e,e't*athat°~theV ultimate amountrof. tax'..e'ree'i_i'-- he a/ie'wed~tAIi'// be dependent ugzioriethefingaiéfldetekmination of the total i'i7COmevAf9.i7:.ti'1eflifsit ahssesshient year. There is 'prdyisiohg '~vSe.etion 115]/1A which the assessee to Ze/aim. 'the~...determinati'on of the total intseme byV.'the_'Assessing Officer in the first _ assess.ment 'v.yea_i:' ' Entit/emen t/right to Claim » set Oi? . V is different from the euantifica tion of that right.
..'?.Vn'titi'e:n?.e't:t of MAT credit is not dependent Lipenilahy action taken by the Department. ..i%ie«Vwe4i/er, quantum of tax Credit wili depend tipen the assessment framed by the Assessing Officer. Thus, the right to set off arises as a resuit of the payment of tax under Section 2;£5],4(.Z) although quantifit:ati'oh at that right depends upon the uitimate deterrnihatien of M9,, totei ineeme fer the first assessment Further, en essessee has a right to te!<e;'_"ie'te_~v--...j:_5 account the set eff even whiie estinseti;e.g its i fiebiiity Se pay advance te,;;"'i:>r;--«tf3e' ";::it;9e;"?t:
income" in eccerdenee with:":.ti7e'_";3i*eL?k::'fet?;s' Chapter X!/II-C. Airbag-gig semen 2ee§*;:«;s§e} j'; 'A does not make any s,ee'eifiC prei%is_i:ir::.'-ieitigeriii before or after the...emeAn'{fr;§ents'»carried'But"
the Finance Act, that an assessee is entitiefifite flex Credit that wot:lo"is;;f;§-e eizaiieeiie etermis of Section 115}/:LZ\'(;_f}. the quantum of e;fve_.n.eeVi'i'tey:._that'«.is~..t¢;:«be paid it must foi/ow thee an assessee'*~..z§?t3«:*i'd be entitled to do so ettzerwise §€fV';f€,:'3£_1ii'S~--"buiI? absurdity, viz, that an Qassesseeli t1eys___ee'vence tax on the footing that ftaisf r?e"t.._ver2titiea' (when in fact it is so entitled) tQf't:!f?.e Viereitfit and thereafter claims a refund of sueij' 'eidfente tax paid as a consequence of the " tse'te'fé'.. Mereever, when an Assessing Officer A. m'a}<es an intimation under Seetien 143(1) he _..'.-'accepts the return fffed by the essessee to which the Assessing Officer may make an edjustment end ceeseeuentiy makes e demand er refund Sectien 243(1) prevides that wivere ....1_{;...
a return is made under Section 139 and tax or interest is found due on the Such return after adjustrnenf»~ef_any'_';iiC§S;r.-'jan.};2' advance tax, any tax paid an s_eifjeaeeieeisifienfi'-ae.___ and any amount paid Ve'therwi's'e by way-'V~i.ofV"tax "
or interest, then, W'ifl7'Ouf ,z'2;rf;eij'adi-::eéV"1.» fa provisions of sub,=-§e<::tion~--{ an i"htirnatiion_.ixviii be sent to the as:;e'ssees;ee'eii§iing'~the amount to payable and__§'ur.;h"ii:i'i§»tirhafioh_..eshali be deemed fo_:Vj'be ea .VVde:rn'and under SectiehthVe*.."p}é;;visions ef the Act shaiia;;,i§'i'V'V«1i"{7eié,te;:"'vi~'!hieyseeiion itself makes it i:iea__r. xx thje Assessing Officer"
de.rei'mi'he5"rfhei'"£'a5<»».eayabie he has to give _credi:"fforV a.iiAI{:a><ee paid either by way of dedueti'ori~._._at 'Vsource, advance tax, self aaaeasnjent tax or tax paid otherwise W/'NC/'2 V"i'{?:'(;;}rUd€ or which cannot exclude tax z:re.c:iiei.'j__r_.rhder Section 115JAA(.z). E , 7?} answer, we need to understand Section 2348:
1} Under that section», "assessed tax A' means the tax en the total income determined under Section Z43{1} or on reguiar 3SS€SSi??€!?i' Lieder Section 143(3) .33 reduced by the ?
22 «~ 11 --~ amount? of fax deducted or collected at source in accordance with the provisions of Cha«pz§"er"-:""--. XVII on any income which is subject :"
deducrtion or Collection and which is « account in Computing such ifoEai:'ii;eo'me;A definition, thus, at the reieva,n_t}fi;rne efiejiuded V' n MAT credit for arriving"iiaf-..assesseo" tax.' /ed to immense h3i"dShi'Di:*.?ff?eV pos'ii':'on' "which emerged was 5/'i;c:?f.." n--:o.m'ission one hand MAT credit 412%/as ' avafileibie: off for five years esnvder .SeL':'i'ion. 'fhe same was not3._':av:eiiabie'- 'for "set_4'off'"'i~)rii'ie calculating a:dvanee'i'E*ax.,_V3'«.This:"diehoiomy was more spelt outbecause';€e'etio'n_TLi«15JAA did not provide for payrneet of ini9eVres.-5' on the MAT credit. To .«};ai./oid ihi's-.. _Si'fi.i:3fi0i7, Parliament amended E>§}§iana«fion 1 to Section 2348 by Finance Act, ~ effect from 1.4.2007 to provide tax deducted or collected at source, eredit under Section ZISJAA also to be .. exeioded while Calculating assessed tax. From the above, it is evident that any tax paid in advance,/}ore~assessed tax paid can be taken into accoonz': in cornpufing {the taxi m--l2uw payable subject to ene caveat, vise, that the asaessee an the baeis of self comp:itatier?"r:"' unilaterally claims aet off er....MAT §;ree'it;ftheV''.V '4 assesssee does se at its rlak assfh 'ease ultimately found that the amt>.urit:. of talxtretlit it availed was not la wfully'-a}?aeilable,w._the._a;<;sesfVsVee would be exposed to Ayleyy.__otT._»interest_Huni§2'er Section 2348 on _st;9_ort;"all"in».the payment of advance tax. We Cannot accept easeilof because it would'.%2ea?hi.that:_e_ye;j2_ if."thIe assessee does not have 'vto7,r3a_y' arlvanee. the Current year, 'beC_au1se'..~»of_V:'his=.,:brQugh't forward MAT credit balance,'heAilfur::§it1lr3l";eevertheless be required to _ payadvaht:e ta_>{,'«end if he fails, interest under Seetioninl "Z3315 _woulc:l be chargeable. The eoi:.sVe'auenCe of adopting the case of the or would mean that MAT credit would lapsej_a'fter five succeeding assessment years %%a;2dalr Section 1151A/4(3); that no interest would be payable on such credit by the Eleverhment under the browse to Section Z15"JAA(2 ) and that the assessee would be liable to pay interest under Seetiens 234.8 and C.' an the ahertfali in the eaymeht ef advance 2 ..§_3_.,.
tax despite existence of MAT credit standing_yvto; the account of the assessee. Thus, d_es'pi£?e~ MAT credit stanofing to the account__ '% assesses, the /iebi/fry of fire' ~a.ssef;se_,e'§efs increased instead of it getting: regdociedff In View of the aforesaid 'discuss,io"n and"th;e.c_,l_ewy.lEaid down by the Apex Court, it from,V:i_1Ef'><pii»ianation--I which was amended wi:hfeffe_ct;irorn_'Qi;~0_§1.2007, as there was no sgaecific.words'-»--ex'cIudi'ii.g credit, the positio:Vn"yiiesi't.i§i»e beiceiose of the stand taken by the Depart-mVei:tVV."in'._'ii*efij"s«i.n'g to give that credit, the eariianiieni: *:o..s'ceg:i. inend has expressly provided what ini:.énLi"ed"ito be a proviso. Therefore, when once ...t§%is."bejjiefi:"'is.:V¢onriimed from o1.o4.2oo7, when Section 11A§.§AA ,Lve_s:3'..--ih'troduced, the iegat position is the same and E5.(;3§_giE'3E!'EiOH introduced by Finance Act, 2006, which into effect from 0134,2007, is oniy ciarificatory, __T_herefore, the condition is not applicabie for the assessee for the eeriod prior to G1iO4,20{)7 and it is rightiy rejected 3; / , / 2 ,/ /"'4 ._3_4...
by bath the appellate authoritieg, In that View of maicter, we de net 398 my gxbstantiai que$tior1_.r.;-f.,._E«ifw\;V invctved in these appeals. Accordingly, an Zigheifaéfi é:1--m§é;;a'%s are dismigaed, firs