Income Tax Appellate Tribunal - Ahmedabad
Riddhi Siddhi Gluco Biols Ltd.,, ... vs The Acit, Central Circle-2(4),, ... on 20 June, 2019
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ 'A' अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.(SS)A. No. 27/Ahd/2015 ( नधा रण वष / Assessment Year : 2012-13) Riddhi Siddhi Gluco Biols बनाम/ ACIT Ltd. Vs. Central Circle-2(4), 701, Sakar-I, Ahmedabad.
Opp. Gandhigram Railway Station, Ashram Road Ahmedabad - 380009 थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAB CR3 417 Q (अपीलाथ /Appellant) .. ( यथ / Respondent) अपीलाथ ओर से /Appellant by : P.D. Shah, A.R. यथ क ओर से / Respondent Aparna Agrawal, CIT DR by :
सन ु वाई क तार ख / Date of 09/05/2019 Hearing घोषणा क तार ख /Date of 20/06/2019 Pronouncement आदे श/O R D E R PER PRADIP KUMAR KEDIA - AM:
The captioned appeal has been filed at the instance of the assessee against the order of the CIT(A)-12, Ahmedabad ('CIT(A)' in short), dated 28.11.2014 arising in the assessment order dated 31.03.2014 passed by the Assessing Officer (AO) under s. 143(3) r.w.s I T ( S S ) A N o . 2 7 / Ah d / 2 0 1 5 [ R i d d h i S i d d h i Gl u c o B i o l s Lt d . v s . AC I T ] A . Y . 2 0 1 2 - 1 3 - 2 -
153B(1)(b) of the Income Tax Act, 1961 (the Act) concerning A.Y. 2012-13.
2. The grounds of appeal raised by the assessee reads as under:-
"1. That the learned Commissioner of Income Tax (Appeals) has erred in law and facts by not quashing the order passed by the learned Assessing Officer, as the proceedings under section 153A and order passed by the learned AO is without jurisdiction and bad in law and facts and therefore the learned AO be directed to accept the income tax, interest and all others particulars as per the return of income.
Without prejudice to ground No.1:
2. That proper taxes, surcharge, cess is to be computed and proper credit of pre paid taxes is to be given.
3. That interest charged under section 234B and 234C is against th e facts and law and therefore the learned AO be directed to be delete the interest charged under section 234B and 234C of the Act.
4. That the appellant craves liberty to add, amend, alter and delet e any grounds of appeal before the final hearing."
3. Ground No. 1 and Ground No. 2 was not pressed and therefore dismissed.
4. This essentially leaves us with Ground No. 3 whereby the assessee has denied its liability towards charge of interest under s. 234B and 234C of the Act on capital gains accrued to the assessee.
5. When the matter was called for hearing the Ld. AR for the assessee at the outset submitted that pursuant to scheme demerger with effect from 1 s t October 2011, certain capital gains were accrued to the assessee u/s. 50B of the Act. It was submitted that the capital gains were accounted in the Financial Year (F.Y.) 2011-12 pertaining to Assessment Year (A.Y.) 2012-13 in question with reference to I T ( S S ) A N o . 2 7 / Ah d / 2 0 1 5 [ R i d d h i S i d d h i Gl u c o B i o l s Lt d . v s . AC I T ] A . Y . 2 0 1 2 - 1 3 - 3 -
demerger sanctioned by the Hon'ble Gujarat High Court at the later date. The Ld. AR for the assessee submitted that the Hon'ble Gujarat High Court sanctioned the petition for demerger on 07 t h February, 2012. A certified copy of the order of the Hon'ble Gujarat High Court was requested by the assessee on the next date that is on 08 t h February, 2012. A certified copy was finally ready on 1 s t May, 2012. The assessee filed Form No. 7 along with certified copy of the order of the Hon'ble High Court on 29 t h May, 2012 which resulted in implementation of demerger effective from 1 s t October, 2011. In the light of the chronology events noted above, the Ld. AR for the assessee pointed out that although the demerger was made effective from 1 s t October, 2011, the capital gain on demerger accrued and earned by the assessee only on issuance of sanction order by the Hon'ble High Court and on compliance of subsequent post sanction formalities on 29 t h May, 2012. Therefore, although the capital gain falls for taxation in the Financial Year 2011-12 that is Assessment Year 2012-13, the assessee was in no position to visualize accrual of such income till 29 t h May, 2012. In the circumstances, the liability of interest on non-payment of tax flowing from the capital gains arising from demerger scheme [which stood sanctioned on 29 t h May, 2012 with demerger effective from 1 s t October, 2011] under s. 234C and s. 234B cannot be fastened on the assessee till 29 t h May, 2012. I T ( S S ) A N o . 2 7 / Ah d / 2 0 1 5 [ R i d d h i S i d d h i Gl u c o B i o l s Lt d . v s . AC I T ] A . Y . 2 0 1 2 - 1 3 - 4 -
6. The Ld. AR submitted that notwithstanding mandatory nature of compensatory interest payable under s. 234C and 234B, the law cannot envisage a person to do the impossible. The Ld. AR accordingly submitted that the charge of interest under 234C is totally illegitimate as the accrual of income towards capital gain was not certain and contingent upon the sanction of demerger scheme by the Hon'ble Gujarat High Court which sanction was formalized on 29 t h May, 2012 only. Similarly, the interest liability u/s. 234B cannot be fastened on the assessee till 29 t h May, 2012 as the capital gains stood accrued in the hands of the assessee on that date albeit from a retrospective date of 1 s t October, 2011 as applied for before the Hon'ble Court. The Ld. AR thus submitted that the Revenue was not justified in imposing interest on non-payment of tax on capital gains arising from demerger till 29 t h May, 2012 either u/s. 234C or u/s. 234B of the Act. The Ld. AR thus denied the liability of interest till 29 t h May, 2012 in toto and prayed for a direction from the tribunal for reversal of levy of interest u/s. 234C of the Act. Likewise a similar direction was pleaded for non-levy of interest u/s. 234B till May 2012.
7. The Ld. DR, on the other hand, referred the legislative provision in this regard and submitted that no express stipulations have been made in the Act for exemption from compensatory liability of interest under s. 234B and s. 234C.
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8. We have carefully considered the rival submissions. It is the case of the assessee that liability of interest for non-payment of tax can arise under s. 234C and s. 234B only where the income had actually accrued to the assessee and the assessee has, in the ordinary circumstances, committed default in payment of tax in prescribed period.
8.1 Before we proceed to the core controversy, we notice that Hon'ble Supreme Court in Central Provinces Manganese Ore Co. Ltd. vs. CIT in [1986] 160 ITR 961 (SC) has held that levy of interest is part of assessment and hence assessee can dispute such levy in appeal where he outrightly denies his liability to the levy. We now turn to interest liability for default of payment of advance tax. Section 234C enjoins payment of interest for deferment of tax at the prescribe rate. As per Sec. 211, advance taxes are payable by companies in four installments as a specified in the aforesaid provision and if the assessee fails to pay certain percentage of tax as specified or if the amount paid falls short of specified percentage of amount payable, the assessee would be liable to pay interest at a specified percentage. Section 234C further provides that if the short fall in payment of advance tax is due to failure to inter alia estimate capital gains and the assessee has paid the tax payable with respect to such income in the balance installments due or where no such installments are due by 31 s t March, no interest would payable. Accordingly, if an assessee has I T ( S S ) A N o . 2 7 / Ah d / 2 0 1 5 [ R i d d h i S i d d h i Gl u c o B i o l s Lt d . v s . AC I T ] A . Y . 2 0 1 2 - 1 3 - 6 -
sold a capital asset between 16 t h September and 15 t h December and pays the tax due on capital gains in two installments that is on or before 15 t h December and on or before 15 t h March no interest would be payable on account of short fall in payment of advance tax in first two installments. Thus, the law recognizes concept of actual accrual explicitly in so far as capital gains are concerned. The legislative intent is therefore explicitly clear that assessee is expected to compl y with the provision of law towards payment of advance tax only when the income has legitimately accrued to the assessee and 'right to receive' the income has accrued. In the instant case, the capital gains though deemed to have accrued from the effective date of demerger that is 1 s t October 2011 by virtue of court order, the right to receive the income accrued only when the demerger was eventually sanctioned and all connected legal formalities were duly complied which happened only in the subsequent financial year. Therefore, notwithstanding the fact that the income towards capital gains on demerger was accounted for in the Financial Year 2011-12 owing to formal sanction from a date, effective and falling in the current Financial Year, the legal sanction actually took place in the subsequent year. This being so, the assessee being dependent on the outcome of the court proceedings, was in no position to visualize the tax liability towards capital gains and therefore the default, if any, could be fathomed only after the event date i.e. 29 t h May, 2012. In I T ( S S ) A N o . 2 7 / Ah d / 2 0 1 5 [ R i d d h i S i d d h i Gl u c o B i o l s Lt d . v s . AC I T ] A . Y . 2 0 1 2 - 1 3 - 7 -
this view of the matter, no interest under s. 234C could levied for non- payment of advanced tax in the specified installments. 8.2 Likewise, interest under 234B is payable for non-payment of advance tax or short payment of advance tax in a financial year. Thus, if an assessee either fails to pay the whole of advance tax or where the advance tax paid by him is less than 90 per cent of the assessed tax, he shall be liable to pay interest at a specified percentage from 1 s t April of the assessment year till the date of determination of total income or up to the date of payment of tax under s. 140A of the Act. The assessee herein claims that interest under s. 234B is not chargeable on tax liability arising on capital gains flowing from demerger till the formal completion of sanction for demerger i.e. 29 t h May, 2012 for the same reason noted above citing inability to visualize the charge of tax and consequent default due to near impossibility. For the similarity of reasons noted above, we find considerable force in the plea of the assessee for non-chargeability of interest under s. 234B for the first two months, that is, April and May 2012.
8.3 The Delhi Tribunal in the case of Haryana Warehousing Corporation vs. DCIT 75 ITD 155 (Del) (TM) held that the condition precedent for invoking Sec. 234B is that the assessee must be fastened with liability to pay advance tax u/s. 208 and merely because on the basis of a subsequent decision, assessee becomes liable to pay advance I T ( S S ) A N o . 2 7 / Ah d / 2 0 1 5 [ R i d d h i S i d d h i Gl u c o B i o l s Lt d . v s . AC I T ] A . Y . 2 0 1 2 - 1 3 - 8 -
tax in earlier year, no default u/s. 208 could be said to have committed which would attract interest. In Priyanka Overseas Ltd. vs. DCIT 79 ITD 353, the Delhi Tribunal held that the assessee was not liable to interest under s. 234B and 234C where the assessee did not pay tax on cash compensatory support (CCS) as per law as it then existed and which was amended with retrospective effect by Finance Act, 1990. In Dr. (Mrs.) Devinder Kaur Sekhon vs. ACIT 67 ITD 407 (Del), the assessee received in financial year 1992-93 interest on enhanced compensation for acquisition of land which was spread over A.Ys. 1986-87 to 1992-93. For the reason that the assessee could not have foreseen receipt of interest during earlier years, it was held that no interest could be levied for earlier years. Similar issue also came up before the Hyderabad Tribunal in the case of ACIT vs. Jindal Irrigation Systems Ltd. 56 ITD 164 as to whether a company which commenced business after 31 s t December and makes substantial income would be liable to interest for short fall in payment of advance tax with reference to earlier installments. The Coordinate Bench applied the doctrine of 'lex non cogit ad impossibilia' and held that the law cannot envisage a person to do something impossible. Where the company commenced business after 31 s t December, it could not have estimated income for payment of advance tax in the first three installments. Hence, it was held that no interest u/s. 234C could be I T ( S S ) A N o . 2 7 / Ah d / 2 0 1 5 [ R i d d h i S i d d h i Gl u c o B i o l s Lt d . v s . AC I T ] A . Y . 2 0 1 2 - 1 3 - 9 -
levied for non-payment of advance tax in first three installments in the absence of any default committer per se.
8.4 The crux of all these judicial precedents is that an obligation gets discharged due to impossibility of performance. The law of impossibility of performance does not necessarily require absolute impossibility but also encompasses the concept of severe impossibility. In the instant case, the advance tax or self assessment tax cannot be paid due to uncontrollable circumstances. The impossibility of performance releases the assessee from its obligation to pay advance tax/self assessment tax. A default occurs only when an obligation is not performed. When the assessee is released from the obligations, it cannot be said that he is in default. Thus, when the assessee is prevented from estimating the liability towards capital gains tax depending on approval from court of law, the question of his not performing the obligation under law does not arise and thus he cannot be held a defaulter. The assessee cannot be expected to pa y interest on tax arising from income in cases where impossibility of compliance is manifest. The assessee cannot be imputed with clairvoyance in the instant case and hence no liability towards interest under s. 234C/234B can be fastened.
9. In the light the above aforesaid discussion, we find considerable merit in the plea raised on behalf of the assessee for denial of liabilit y I T ( S S ) A N o . 2 7 / Ah d / 2 0 1 5 [ R i d d h i S i d d h i Gl u c o B i o l s Lt d . v s . AC I T ] A . Y . 2 0 1 2 - 1 3 - 10 -
towards interest u/s. 234C in toto and denial of liability u/s. 234B for the initial two months that is April and May 2012.
10. In the result, Ground No. 3 of the assessee is allowed in terms of observations noted in the preceding paras.
11. In the result, appeal of the assessee is partly allowed.
This Order pronounced in Open Court on 20/06/2019
Sd/- Sd/-
(RAJPAL YADAV) (PRADIP KUMAR KEDIA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad: Dated 20/06/2019
TANMAY True Copy
आदे श क त!ल"प अ#े"षत / Copy of Order Forwarded to:-
1. राज व / Revenue
2. आवेदक / Assessee
3. संबं*धत आयकर आयु,त / Concerned CIT
4. आयकर आयु,त- अपील / CIT (A)
5. 0वभागीय 3त3न*ध, आयकर अपील य अ*धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड9 फाइल / Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपील य अ*धकरण, अहमदाबाद ।