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Income Tax Appellate Tribunal - Delhi

Asahi India Glass Ltd,, New Delhi vs Department Of Income Tax

              IN THE INCOME TAX APPELLATE TRIBUNAL
                   DELHI BENCH : A : NEW DELHI

             BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER
                                AND
              SHRI K.G. BANSAL, ACCOUNTANT MEMBER

                      ITA Nos.3364 & 3365/Del/2010
                   Assessment Years : 2006-07 & 07-08

DCIT,                              Vs.   Asahi India Glass Ltd.,
Circle 2 (1),                            12, Basant Lok, Vasant Vihar,
Room No.398D, CR Bldg.,                  New Delhi.
New Delhi.
                                         PAN : AADCA7706R

     (Appellant)                            (Respondent)

             Assessee by       :    Shri O.P. Sapra, Advocate
             Revenue by        :    Mrs. Anusha Khurana, Sr.DR


                                   ORDER

PER I.P. BANSAL, JUDICIAL MEMBER

Both these appeals are filed by the revenue. They are directed against the consolidated order passed by the CIT (A) dated 12th April, 2010 in respect of assessment years 2006-07 and 2007-08. The facts relating to each year are as under:-

Assessment Year 2006-07

2. The assessee has been held liable for taxation u/s 115JB and book profit has been computed at ` 6,48,01,869/- vide intimation framed u/s 143 (1) of the Act which is dated 3rd January, 2008. Copy of this intimation is filed at page 2 of the paper book. In the said intimation, the assessee was charged for an amount of ` 22,23,497/- being interest payable u/s 234C of the Act. The assessee being of the view that interest u/s 234 could not be levied had filed an application of rectification before the Assessing Officer which was filed on 4th 2 ITA Nos.3364 & 3365/Del/2010 September, 2009 (copy is filed at page 3 of the paper book). In the said application, it was claimed that the ITAT in assessee's own case for Assessment Year 2004-05, relying upon the decision of Hon'ble Supreme Court in the case of Kwality Biscuits Ltd. 284 ITR 434 (SC), has held that interest is not chargeable u/s 234C on the income computed u/s 115JB, therefore, no interest at all should be levied. In response thereof the Assessing Officer passed impugned order u/s 154 vide which interest payable u/s 234C was reduced from ` 22,23,497/- to ` 16,07,373/-. The assessee being aggrieved filed an appeal before the CIT (A) challenging the levy of interest on the ground that the same cannot be levied following the aforementioned decision of ITAT in assessee's own case for Assessment Year 2004-05. Alternatively, it was claimed that the Assessing Officer had no right to make adjustment in the order passed u/s 143 (1)(a) and charge interest u/s 234C. For this purpose, the reliance was placed on the decision of Bombay High Court in the case of CIT vs. Hindustan Hotels Ltd. 226 CTR 454 (Bom). Learned CIT (A) after considering these submissions has held that such interest could not be charged in view of the decision of Hon'ble Supreme Court in the case of Kwality Biscuits (supra) and also in view of the decision of ITAT in assessee's own case for Assessment Year 2004-05. In this manner, levy of interest u/s 234C has been deleted by the CIT (A). The revenue is aggrieved and has raised the following grounds of appeal:-

"1. The learned CIT (A) has erred in law and on facts in deleting interest of Rs.16,07,373/- charged u/s 234C of the Act. Learned CIT (A) has failed to appreciate the facts of the case and provisions of sub-section 5 of section 115JB of the IT Act which clearly provides that in a case where tax is payable under special provisions of the Act all the provisions of the Act shall apply to every assessee being a company mentioned in section 115JB of the Act.

2. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal."

Assessment Year 2007-08

3. The return of income was processed by an intimation passed u/s 143(1) of the At which is dated 24th February, 2009 copy of which is placed at page 2 of the paper book in which the interest u/s 234A was charged at ` 50,17,520/-. Aggrieved with the levy of interest u/s 234A the assessee filed an application of rectification before the Assessing Officer on 5th November, 2009. Copy of the said application is filed at page 3 of the paper book. Accordingly, the Assessing Officer passed order of rectification dated 12th November, 2009 copy of which is placed at page 4 of the paper book. The Assessing Officer has deleted the interest levied u/s 234A in pursuance of application filed by the assessee. However, he levied interest u/s 234C amounting to ` 3,12,360/-. Aggrieved by the levy of interest u/s 234C, the assessee filed an appeal before the CIT (A). Similar grounds were raised by the assessee before the CIT (A) as were raised for Assessment Year 2006- 07 and which have been discussed in earlier part of this order and, following the aforementioned decisions, learned CIT (A) has deleted the interest. The revenue is aggrieved with this deletion and, hence, has filed the following grounds of appeal:-

"1. The learned CIT (A) has erred in law and on facts in deleting interest of Rs.3,12,360/- charged u/s 234C of the Act. Learned CIT (A) has failed to appreciate the facts of the case and provisions of sub-section 5 of section 115JB of the IT Act which clearly provides that in a case where tax is payable under special provisions of the Act all the provisions of the Act shall apply to every assessee being a company mentioned in section 115JB of the Act.

3. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal."

4. At the outset, it was submitted by the learned DR that the issue regarding levy of interest u/s 234B and 234C on the book profit computed u/s 115JB has now been set at rest by Hon'ble Supreme Court by the decision in the case of JCIT vs. Rolta India Ltd. 330 ITR 470 (SC) wherein their Lordships have held that 115JB is self-contained code and, thus, all companies were liable for payment of advance tax u/s 115JB and consequently the provisions of Section 234B and 234C for making default in payment of advance tax is also applicable. While holding so, their lordships have also considered earlier decision in the case of Kwality Biscuits Ltd. (supra). She submitted that this decision of Hon'ble Supreme Court is rendered by Hon'ble three judges, therefore, the Assessing Officer was right in levying the interest and the levy of interest has wrongly been deleted by the CIT (A). She submitted that the decision of the Tribunal in the case of the assessee for Assessment Year 2004-05 is no more a good law in view of the aforementioned decision of Hon'ble Supreme Court. She further pleaded that it cannot be the case of the assessee that such interest cannot be levied u/s 154 as it was the assessee only who has filed application for both the years to get rectification of such interest and, therefore, the assessee cannot breath hot and cold at the same time to contend that such interest cannot be levied under the provisions of Section 154 of the Act.

5. On the other hand, relying upon the decision of the Tribunal in assessee's own case for Assessment Year 2004-05 and also the decision of Hon'ble Supreme Court in the case of Kwality Biscuits Ltd. vs. CIT (supra), it is the case of the learned AR that learned CIT (A) has rightly deleted the interest levied u/s 234C. He also submitted that such levy is not possible by way of rectification order passed by the Assessing Officer as per aforementioned decision of Hon'ble Bombay High Court in the case of CIT vs. Hindustan Hotels Ltd. (supra).

6. We have carefully considered the rival submissions in the light of the material placed before us. So as it relates to levy of interest u/s 234B and 234C, it may be mentioned that this issue has now been set at rest by the Hon'ble Supreme Court in the aforementioned decision of JCIT vs. Rolta India Ltd. (supra) which has been rendered by the Bench of three Hon'ble judges. The relevant observations of their lordships from the said decision are reproduced below:-

"7. In our view, Section 115J/115JA are special provisions. Section 207 envisages that tax shall be payable in advance during any financial year on current income in accordance with the scheme provided in Sections 208 to 219(both inclusive) in respect of the total income of the assessee that would be chargeable to tax for the assessment year immediately following that financial year. Section 215(5) of the Act defined what is "assessed tax", i.e., tax determined on the basis of regular assessment so far as such tax relates to income subject to advance tax. The evaluation of the current income and the determination of the assessed income had to be made in terms of the statutory scheme comprising Section115J/115JA of the Act. Hence, levying of interest was inescapable. The assessee was bound to pay advance tax under the said scheme of the Act. Section 115J/115JA of the Act were special provisions which provided that where in the case of an assessee, the total income as computed under the Act in respect of any previous year relevant to the assessment year is less than 30% of the book profit, the total income of the assessee shall be deemed to be an amount equal to 30% of such book profit. The object is to tax zero-tax companies.

8. Section 115J was inserted by Finance Act, 1987 w.e.f.1.4.1988. This section was in force from 1.4.1988 to31.3.1991. After 1.4.1991, Section 115JA was inserted by Finance Act of 1996 w.e.f. 1.4.1997. After insertion of Section115JA, Section 115JB was inserted by Finance Act, 2000w.e.f. 1.4.2001. It is clear from reading Sections 115JA and115JB that the question whether a company which is liable to pay tax under either provision does not assume importance because specific provision(s) is made in the section saying that all other provisions of the Act shall apply to the MAT Company(Section 115JA(4) and Section 115JB(5)). Similarly, amendments have been made in the relevant Finance Acts providing for payment of advance tax under Sections 115JAand 115JB. So far as interest leviable under Section 234B is concerned, the section is clear that it applies to all companies.

The pre-requisite condition for applicability of Section 234B is that assessee is liable to pay tax under Section 208 and the expression "assessed tax" is defined to mean the tax on the total income determined under Section 143(1) or under Section 143(3) as reduced by the amount of tax deducted or collected at source. Thus, there is no exclusion of Section115J/115JA in the levy of interest under Section 234B. The expression "assessed tax" is defined to mean the tax assessed on regular assessment which means the tax determined on the application of Section 115J/115JA in the regular assessment.

9. The question which remains to be considered is whether the assessee, which is a MAT Company, was not in a position to estimate its profits of the current year prior to the end of the financial year on 31st March. In this connection the assessee placed reliance on the judgment of the Karnataka High Court in the case of Kwality Biscuits Ltd. v. CIT reported in (2000) 243 ITR 519 and, according to the Karnataka High Court, the profit as computed under the Income Tax Act, 1961had to be prepared and thereafter the book profit as contemplated under Section 115J of the Act had to be determined and then, the liability of the assessee to pay tax under Section 115J of the Act arose, only if the total income as computed under the provisions of the Act was less than 30%of the book profit. According to the Karnataka High Court, this entire exercise of computing income or the book profits of the company could be done only at the end of the financial year and hence the provisions of Sections 207, 208, 209 and 210(predecessors of Sections 234B and 234C) were not applicable until and unless the accounts stood audited and the balance sheet stood prepared, because till then even the assessee may not know whether the provisions of Section 115J would be applied or not. The Court, therefore, held that the liability would arise only after the profit is determined in accordance with the provisions of the Companies Act, 1956 and, therefore, interest under Sections 234B and 234C is not leviable in cases where Section 115J applied. This view of the Karnataka High Court in Kwality Biscuits Ltd. was not shared by the Gauhati High Court in Assam Bengal Carriers Ltd. v. CIT reported in(1999) 239 ITR 862 and Madhya Pradesh High Court in Itarsi Oil and Flours (P.) Limited v. CIT reported in (2001) 250 ITR686 as also by the Bombay High Court in the case of CIT v. Kotak Mahindra Finance Ltd. reported in (2003) 130 TAXMAN730 which decided the issue in favour of the Department and against the assessee. It appears that none of the assesses challenged the decisions of the Gauhati High Court, Madhya Pradesh High Court as well as Bombay High Court in the Supreme Court. However, it may be noted that the judgment of the Karnataka High Court in Kwality Biscuits Ltd. Was confined to Section 115J of the Act. The Order of the Supreme Court dismissing the Special Leave Petition in limine filed by the Department against Kwality Biscuits Ltd. is reported in(2006) 284 ITR 434. Thus, the 7 ITA Nos.3364 & 3365/Del/2010 judgment of Karnataka High Court in Kwality Biscuits stood affirmed. However, the Karnataka High Court has thereafter in the case of Jindal Thermal Power Company Ltd. v. Dy. CIT reported in (2006)154 TAXMAN 547 distinguished its own decision in case of Kwality Biscuits Ltd. (supra) and held that Section 115JB,with which we are concerned, is a self-contained code pertaining to MAT, which imposed liability for payment of advance tax on MAT companies and, therefore, where such companies defaulted in payment of advance tax in respect of tax payable under Section 115JB, it was liable to pay interest under Sections 234B and 234C of the Act. Thus, it can be concluded that interest under Sections 234B and 234C shall be payable on failure to pay advance tax in respect of tax payable under Section 115JA/115JB. For the foretasted reasons, Circular No. 13/2001 dated 9.11.2001 issued by CBDT reported in 252 ITR(St.)50 has no application. Moreover, in any event, para 2 of that Circular itself indicates that a large number of companies liable to be taxed under MAT provisions of Section 115JB were not making advance tax payments. In the said circular, it has been clarified that Section 115JB is a self-contained code and thus, all companies were liable for payment of advance tax under Section 115JB and consequently provisions of Sections 234 Band 234C imposing interest on default in payment of advance tax were also applicable.

10. For the a fore stated reasons CIT succeeds in the civil appeal arising out of S.L.P. (C) No. 25746 of 2009 (Jt. CIT v. Rolta India Ltd.) as also in the civil appeal arising out of S.L.P.(C) No. 18367 of 2010 (CIT-3 v. Export Credit Guarantee Corporation of India Ltd.). Consequently, Civil Appeal No. 459of 2006 (Nahar Exports v. CIT) and Civil Appeal No. 7429 of2008 (Lakshmi Precision Screws Ltd. v. CIT) stand dismissed with no order as to costs."

7. Therefore, it has to be held that even in a case where the assessment has been framed u/s 115JB, levy of interest u/s 234B and 234C is proper. Now, coming to the second contention of the assessee that such demand cannot be raised by way of rectification u/s 154, we see fallacy in such claim of the assessee as it was the assessee who has filed application for rectification for both the years on the basis of which it has got substantial relief on the levy of interest. If the contention of the assessee is to be accepted that such interest cannot be rectified by way of an order u/s 154, then, the assessee could not have the benefit of reduction of interest which was levied upon it u/s 234A to the extent of ` 50,17,520/- for Assessment Year 2007-08 and it 8 ITA Nos.3364 & 3365/Del/2010 could not have the reduction of interest which was earlier levied u/s 234C of ` 22,23,497/- and was reduced to ` 16,07,373/-. The levy of interest u/s 234B and 234C has been held to be mandatory and automatic. It depend upon the payment of advance tax and TDS by a particular assessee and it is a matter of calculation only. Therefore, we find no force in such contention of the learned AR.

8. The order of CIT (A) being contrary to the decision rendered by Hon'ble Supreme Court in the case of JCIT vs. Rolta India Ltd. (supra) has to be reversed for both the years and, therefore, the relief granted by learned CIT (A) is reversed and the appeals filed by the revenue are allowed in the manner aforesaid.

9. In the result, both the appeals filed by the revenue are allowed.

The order pronounced in the open court on 14.10.2011.

                Sd/-                                   Sd/-
         [K.G. BANSAL]                          [I.P. BANSAL]
      ACCOUNTANT MEMBER                       JUDICIAL MEMBER

Dated, 14.10.2011.

dk

Copy forwarded to: -

1.    Appellant
2.    Respondent
3.    CIT
4.    CIT(A)
5.    DR, ITAT

                                                               By Order,


                                                        Deputy Registrar,
                                                      ITAT, Delhi Benches