Income Tax Appellate Tribunal - Ahmedabad
Kansara Popatlal Tribhovandas Metal ... vs Assessee on 6 November, 2006
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "B"
(BEFORE S/SHRI MAHAVIR SINGH,JM AND A N P AHUJA, AM)
ITA No.800/Ahd/2007
W ITH
C O No.91/Ahd/2007
(Assessment Year:- 2003-04)
The Income-tax Officer, V/s Kansara Popatlal
W ard-4(3), Ahmedabad Tribhovandas Metal Pvt.
Ltd., 7, Kamal Nayan
Apartment, Sardar Patel
Nagar, Navrangpura,
Ahmedabad
[PAN:AABCK2339N]
[Appellant] [Respondent]
Revenue by :- Smt. Neeta Shah, DR
Assessee by:- Shri S N Soparkar and
Ms. Urvashi Shodhan,ARs
O R D E R
A N Pahuja : This appeal by the Revenue and cross objection[CO] by the assessee against an order dated 06-11-2006 of the ld. CIT(A)-VII,Ahmedabad, raise the following grounds:
ITA No.800/ Ahd/2007" 1. The Ld. CIT(A) erred in law and on the facts of the case in directing to delete the interest charged u/s 234B & 234C of the I.T. Act on the income assessed u/s 115JB of the I.T. Act ignoring the fact that the Hon'ble Supreme Court judgment relied upon in the case of CIT vs. Kwality Biscuits Ltd. 284 ITR 434 (SC), related to Section 115J and not section 115JA of the Act."
2. On the facts and circumstances of the case, the Ld.CIT(A) ought to have upheld the order of the Assessing Officer.
3. It is, therefore, prayed that the order of the Ld.CIT(A) may be cancelled and that of the Assessing Officer be restored to the above effect."
ITA No . 8 00 / Ah d /2 0 07 2 &C O N o. 9 1/ A hd / 20 0 7 C O No.91/ Ahd/2007
1. The ld. CIT(A) has erred in law and on facts in confirming the action of ld. AO in assessing the total income of the appellant at Rs.77,68,721/- u/s 115JB of the Act.
2. The ld. CIT(A) has erred in law and on facts in confirming the action of ld. AO in not allowing set off of unabsorbed depreciation as well as brought forward business losses against the book profit of the current year.
3. Both the lower authorities have erred in law and on facts in not properly appreciating and considering various submissions, evidences and supporting placed on record during the course of assessment proceedings and not properly appreciating various facts and law in its proper perspective and further erred in passing orders in gross violation of principles of natural justice.
4. Learned CIT(A) has erred in law and on facts in not adjudicating upon the ground challenging the action of AO in initiating penalty u/s 271(1)(c) of the Act without recording mandatory satisfaction as contemplated under the Act The appellant craves leave to add, amend, edit, delete,change or modify all or any of the ground before or at the time of hearing."
2 Adverting first to the ground no.1 in the appeal of the Revenue, the Assessing Officer [AO in short] at the time of completing the assessment u/s 143(3) of the Income-tax Act,1961[hereinafter referred to as the 'Act'],inter alia, charged interest u/s 234B & 234C of the Act while determining book profits in terms of provisions of sec. 115JB of the Act. On appeal, the ld. Commissioner of Income Tax(Appeals) while relying upon the decision of the Hon'ble Supreme Court on the case of CIT Vs. Kwality Biscuits Ltd.,284 ITR 434(SC) concluded that interest is not chargeable u/s 234B & 234C of the Act.
3. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(Appeals). Both the parties agreed that issue is squarely covered by the decision of ITAT Special Bench in the case of ACIT v Ashima Syntex Ltd 2 ITA No . 8 00 / Ah d /2 0 07 3 &C O N o. 9 1/ A hd / 20 0 7 (2009) 117 lTD 1 (Ahd) (SB) as also decision of the 3rd Member in the case of M/s. Kanel Oil and Export Industries Limited Vs. JCIT, 2009-TIOL-646 ITAT- Ahd- TM.
4. We have heard both the parties and gone through the facts of the case as also the decisions relied upon .We find the Hon'ble TM in the case of Kanel Oil and Export Industries Limited(supra) while relying upon the decision in the case of Ashima Syntex Limited.(supra) concluded that interest under Section 234B and 234C of the Act is chargeable while determining book profits in terms of provisions of the section 115JA of the Act. Here we may have a look at the relevant provisions of sec. 115JB(5) of the Act , which read as under:
" 115JB. Special provision for payment of tax by certain companies.
(5) Save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company, mentioned in this section. "
4.1 The relevant circular issued by the CBDT in the context of levy of interest u/s 234B & 234C on the income determined in terms of provisions of the sec. 115JB of the Act reads as under:
"Subject: Liability for payment of advance tax under new MAT provisions of section 115JB of the Income-tax Act.
Circular No. 13 of 2001, dated 9th November, 2001.
The Finance Act, 2000, inserted section 115JB of the Income-tax Act, 1961, with effect from 1-4-2001, i,e., from the assessment year 2001-02 providing for levy of Minimum Alternate Tax on companies. Section 115JB conceptually differs from erstwhile section 115JA, which provided for MAT on companies, so far as it does not deem any part or the whole of book profit as total income. However, the new provision of section 115JB provides that if tax payable on total income is less than 7.5% of book profit, the tax payable under this provision shall be 7.5% of book profit.
2. Instances have come to the notice of the Board that a large number of companies liable to tax under the new MAT provisions of section 115JB, are not making advance tax payments. It may be emphasised that the new provision of section 115JB is a self-contained code. Sub-section (1) lays down the manner in 3 ITA No . 8 00 / Ah d /2 0 07 4 &C O N o. 9 1/ A hd / 20 0 7 which income-tax payable is to be computed. Sub-section (2) provides for computation of "book profit". Sub-section (5) specifies that save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company mentioned in that section. In other words, except for substitution of tax payable under the provision and the manner of computation of book profits, all the provisions of the tax including the provision relating to charge, definitions, recoveries, payment, assessment, etc., would apply in respect of the provisions of this section.
3. The scheme of the Income-tax Act also needs to be referred to. Section 4 of the Income-tax Act charges to tax the income at any rate or rates which may be prescribed by the Finance Act every year. Section 207 deals with the liability for payment of advance tax, and section 209 deals with its computation based on the rates in force for the financial year, as are contained in the Finance Act. The rates of tax are provided in the Finance Act. The first proviso to section 2(8) of the Finance Act, 2001, reads as under:
"Provided that in cases to which the provisions of Chapter XII or Chapter XII-A or section 115JB or sub-section (1A) of section 161 or section 164A or section 167B of the Income-tax Act apply, 'advance tax' shall be computed with reference to the rates imposed by this sub-section or the rates as specified in that Chapter or section, as the case may be:"
The third proviso to section 2(8) of the Finance Act, 2001, further provides that the tax payable by way of advance tax in respect of income chargeable under section 115JB, shall be increased by a surcharge of 2%. The Finance Act, 2000, also contained similar provisions.
4. It is, thus, abundantly clear that all companies are liable for payment of advance tax having regard to the provisions contained in new section 115JB. Consequently, the provisions of sections 234B and 234C for interest on defaults in payment of advance tax and deferment of advance tax would also be applicable where facts of the case warrant.
5. This may be brought to the notice of all officers working in your region.
(Sd.) SupriyoDe, Under Secretary to the Government of India.
[F. No. 153/216/2001-TPL] "
4.2 As is evident from the provisions of sec. 207 to 209 of the Act, every assessee has to pay advance tax on his 'current income' if liability for such tax exceeds Rs. 5,000.'Current Income' has to be determined in accordance with provisions of sec 209 of the Act. The provisions of sec 209 (1) of the Act stipulate 4 ITA No . 8 00 / Ah d /2 0 07 5 &C O N o. 9 1/ A hd / 20 0 7 that the assessee shall estimate his current income for the relevant financial year . In terms of provisions of sec. 209(2) of the Act , such current income can be last assessed income or returned income, whichever is higher. In terms of these provisions, for determining the liability on account of advance tax, first step is that current income has to be estimated. Sec. 209 deals with the computation of advance tax based on rates in force for the financial year, as contained in the Finance Act. The provisions of sec. 207 to 209 contemplate estimation of current income and on the basis of such estimation, the assessee is required to pay advance tax. There is nothing in these provisions that advance tax is not payable on the current income if the current income is computed under section 115JB or any other provision of the Act. That means, the expression "current income", on which advance tax is payable under the provisions of section 207 of the Act, does not exclude the income computed under the provisions of section 115JB of the Act. In the event an assessee defaults in payment of advance tax on his current income, levy of interest u/s 234B & 234C of the Act is mandatory. Such levy is automatic without any notice to the assessee as held by the Hon'ble Karnataka High Court in Union Home Products Ltd. v. Union of India [1995] 215 ITR 758. The Hon'ble High Court held :
"In the first place, the very purpose behind the introduction of sections 234A, 234B and 234C is to take away from the authorities concerned the discretion of reducing or waiving the levy of interest which was earlier exercisable by them. In other words, the impugned provisions do not envisage the grant of any hearing or the grant of any relief to the assessees concerned in so far as the levy of interest is concerned. The levy is automatic the moment it is proved that the assessee has committed a default within the comprehension of any one of the provisions in question. That being so it is difficult to accept the argument that the authorities must grant such a hearing and exercise the power to grant relief, the legislative intent to the contrary notwithstanding. The principles of natural justice upon which the petitioners rely do not supplant the law, they simply supplement it. These principles have no application where a statute either by express words or by necessary implication excludes the grant of a hearing to the assessee concerned. The provisions of sections 234A, 234B and 234C are in my opinion incapable of being interpreted to mean that the assessee concerned has a right of being heard against the levy which is otherwise automatic in nature."5
ITA No . 8 00 / Ah d /2 0 07 6 &C O N o. 9 1/ A hd / 20 0 7 4.3 As is apparent from the aforesaid provisions of sec. 115JB of the Act, the legislature while introducing these provisions intended that provisions of advance tax are applicable while determining the liability in terms of provisions of sec 115JB of the Act. The aforesaid circular no. 13 is sufficient reflection of the intent behind provisions of sec. 115JB(5) of the Act. We are of the opinion that in view of the decision of the Hon'ble Supreme Court in the case of CIT v. Anjum M. H. Ghaswala And Others. 252 ITR 1 (SC), affirmed by Hon'ble Apex Court in the case of CIT v. Hindustan Bulk Carriers [2003] 259 ITR 449(SC) and in the case of CIT v. Sant Ram Mangat Ram Jewellers [2003] 264 ITR 564(SC), levy of interest under sections 234B and 234C is mandatory even while determining book profits u/s 115JB of the Act and especially in view of specific provisions of section 115JB(5) of the Act . This view of ours is fortified by the decision of Hon'ble Karnataka High Court in the case of Jindal Thermal Power Company Ltd. Vs. DCIT & Another,286 ITR 182(Kar), wherein after considering their own decision in the case of Kwality Biscuits Ltd. v. CIT [2000] 243 ITR 519,Hon'ble High Court held in the context of levy of interest u/s 234B & 234C of the Act while computing income in terms of provisions of sec. 115JB of the Act that "The Central Board of Direct Taxes Circular No. 13/2001 was issued on 18 November 9, 2001, regarding the liability for payment of advance tax under the new MAT provisions of section 115JB of the Act and it is abundantly made clear in the said circular that the new provision of the section 115JB as introduced by the Finance Act, 2000 is a self-contained code. Sub-section (1) lays down the manner in which income-tax payable is to be computed. Sub-section (2) provides for computation of "book profit". Sub-section (5) specifies that save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company mentioned in that section. In other words, except for substitution of tax payable under the provision and the manner of computation of book profits, all the provisions of the tax including the provision relating to charge, definitions, recoveries, payment, assessment, etc., would apply in respect of the provisions of this section and in view of the scheme of the Income-tax Act. Section 4 of the Act charges to tax the income at any rate or rates which may be prescribed by the Finance Act every year and section 207 deals with liability for payment of advance tax and section 209 deals with its computation based on the rates in force for the financial year, as are contained in the Finance Act and the first proviso to section 2(8) of the Finance Act, 2001, provides that the tax payable by way of advance tax in respect of income chargeable under section 115JB as introduced by the Finance Act, 2000, and consequently the provisions of sections 234B and 234C for interest on defaults in payment of advance 6 ITA No . 8 00 / Ah d /2 0 07 7 &C O N o. 9 1/ A hd / 20 0 7 tax and deferment of advance tax would also be applicable where the facts of the case warrant."
4.4 In CIT Vs. Geetha Ramakrishna Mills P .Ltd., 288 ITR 489(Mad).,Hon'ble Madras High Court ,inter alia, observed that "That apart, in view of the introduction of sections 115JA and 115JB of the Act with effect from April 1, 1997 by the Finance (No.2) Act, 1996, the question whether a company which is liable to pay tax under either of the provisions should pay advance tax does not assume much importance as specific provisions have been made in the section providing that all provisions of the Act shall apply to the assessee being a company mentioned in the said section and therefore, section 115J of the Act is no more available for the assessee for delaying the payment of advance tax in view of the insertion of sections 115JA and 115JB of the Act. "
4.5 In the case of Ashima Syntax Ltd.(supra) in the context of levy of interest u/s 234C of the Act while determining book profits u/s 115JA of the Act, the Special Bench analysed the provisions of advance tax and provisions of sec. 115J & 115JA of the Act in detail as also the decision of the Hon'ble Karnataka High Court in the case of Kwality Biscuits Ltd. [2000] 243 ITR 519, in the context of provisions of sec. 115J of the Act, later affirmed by the Hon'ble Supreme Court in CIT v. Kwality Biscuits Ltd. 284 ITR 434 (SC) and concluded that interest u/s 234B & 234C of the Act is leviable while computing income in terms of provisions of sec. 115JA of the Act. A similar view has been taken in the case of . M/s. Kanel Oil and Export Industries Limited (supra) as also in a recent decision by the Hon'ble Karnataka High Court in the case of CIT Vs. Brindavan beverages Ltd.,321 ITR 197(Kar.)
5. In view of the foregoing, especially in view of direct decisions of Hon'ble Karnataka High Court in the case of Jindal Thermal Power Company Ltd.(supra) and Hon'ble Madras High Court in the case of Geetha Ramakrishna Mills P .Ltd.(supra), we hold that the total income computed under the provisions of sec. 115JB of the Act, is liable to advance tax and in the event of default in relevant provisions of payment of advance tax, levy of interest u/s 234B & 234C of the Act is mandatory. In this view of the matter, the findings of ld. CIT(A) are reversed 7 ITA No . 8 00 / Ah d /2 0 07 8 &C O N o. 9 1/ A hd / 20 0 7 and the order of the AO is restored. Therefore, ground no.1 in the appeal of the Revenue is allowed.
6. Now adverting to ground nos. 1 to 3 in the cross objection filed by the assessee, the AO found that the assessee company disclosed net profit of Rs.77,68,721/-. However, the returned income was computed at Nil after adjustment of brought forward losses while the assessee did not submit computation of book profits in Form No.29B as required under the relevant provisions of the Act and the IT Rules,1962. In response to a show cause notice , the assessee submitted that the provisions of section 115JB of the Act were not applicable to them, the company having carried forward loss of Rs.1,36,516/- as per the return filed for the AY 2001-02 and Rs.64,28,318/- in the return for AY the 2002-03 besides depreciation of Rs.83,88,797/-.However, the AO rejected the aforesaid contentions of the assessee on the ground that book profits have to be determined in accordance with profit and loss account prepared in terms of provisions of Part-II & III of the schedule to VI of the Companies Act,1956 while the assessee was having nil brought forward unabsorbed loss in the AY 2001-02 & 2002-03 besides brought forward unabsorbed depreciation of Rs. 31,83,909 in the AY 2002-03 and in terms of clause (iii) of the explanation to sub-section 2 to sec. 115JB of the Act, lower of unabsorbed depreciation and brought forward loss is required to be reduced.Accordingly, the AO determined book profits of Rs. 77,68,721/- u/s 115JB of the Act.
7 On appeal, the ld. CIT(Appeals) concluded as under:-
"6 I have considered the above submissions. The decision cited by ld. AR are not applicable to Sec. 115JB as these decisions are rendered in the context of section 115JA. Clause (iii) of Explanation to sub-section (2) of section 115JB w.e.f. 1.4.2001 provides as under:-
8
ITA No . 8 00 / Ah d /2 0 07 9
&C O N o. 9 1/ A hd / 20 0 7
Explanation (1) xxxx
(i) Xxxx
(ii)
(iii) the amount of loss bought forward or unabsorbed depreciation, whichever is less as per books of account.
Explanation - For the purposes of this clause -
(a) the loss shall not include depreciation;
(b) the provisions of this clause shall not apply if the amount of loss
brought forward or unabsorbed depreciation, is nil;"
As per book of account of the appellant company brought forward business loss is NIL for AY 2001-02 and 2002-03 and brought forward depreciation for AY 2001-02 is Nil and brought forward depreciation for 2002-03 is Rs.31,83,909/-. Thus, as per clause (iii) (b) no amount can be reduced from book profit. The AO is justified in not reducing book profit of Rs.77,68,721/-. In view of the clear provisions of law I don't find any merit in the contention of the ld. AR regarding set off of brought forward loss or unabsorbed depreciation. The computation of income u/s 115JB made by the AO is, therefore, confirmed. The appellant fails on this ground."
8. The assessee in their cross-objection have now disputed the aforesaid findings of the ld. CIT(A). At the outset, both the parties agreed that issue needs to be adjudicated against the assessee in terms of explanation below clause (iii) of the explanation to sub- section 2 to sec. 115JB of the Act.
9. W e have heard both the parties and gone through the facts of the case . Since in the instant case, provisions of clause
(iii) of the explanation below sub-section (2) of the sec. 115JB of the Act are not applicable in view of explanation (b) below the aforesaid clause(iii) , there is no merit in the grounds raised by the assessee. Therefore, ground nos. 1 to 3 in the CO are dismissed.
10 As regards ground no.4 in the CO relating to non-adjudication of the ground challenging the action of the AO in initiating penalty u/s 271(1)(c) of the Act without recording mandatory satisfaction as contemplated under the Act, since no appeal lies against mere initiation of 9 ITA No . 8 00 / Ah d /2 0 07 10 &C O N o. 9 1/ A hd / 20 0 7 penalty proceedings nor any submissions have been made before us on the issue raised in this ground , accordingly, the said ground is dismissed.
11. Ground nos. 2 & 3 in the appeal of the Revenue being general in nature, do not require any separate adjudication while no additional ground having been raised in terms of residuary ground in the CO, all these grounds are dismissed.
12. In the result, both the appeal of the Revenue and CO filed by the assessee are dismissed.
Order pronounced in the open court today on 16-03-2010 Sd/- Sd/-
(MAHAVIR SINGH) (A N P AHUJ A) JUDICI AL MEMBER ACCOUNTANT MEMBER Date : 16 -03-2010 Copy of the order forwarded to :
1. Kansana Popatlal Tribhovandas Metal Pvt. Ltd., 7, Kamal Nayan Apartment, Sardar Patel Nagar, Navrangpura, Ahmedabad
2. The ITO, W ard-4(3), Ahmedabad
3. CIT concerned
4. CIT(A)-VII, Ahmedabad
5. The DR, ITAT, Ahmedabad
6. Guard File BY ORDER Deputy Registrar Assistant Registrar ITAT, AHMEDABAD 10