Document Fragment View

Matching Fragments

"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. vs. CIT (supra) and, according to the Karnataka High Court, the profit as computed under the IT Act, 1961 had to be prepared and thereafter the book profit as contemplated under s. 115J of the Act had to be determined and then, the liability of the assessee to pay tax under s. 115J of the Act arose, only if the total income as computed under the provisions of the Act was less than 30 per cent 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 ss. 207, 208, 209 and 210 (predecessors of ss. 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 s. 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 ss. 234B and 234C is not leviable in cases where s. 115J applied. This view of the Karnataka High Court in Kwality Biscuits Ltd. (supra) was not shared by the Gauhati High Court in Assam Bengal Carriers Ltd. vs. CIT (2000) 162 CTR (Gau) 170 : (1999) 239 ITR 862 (Gau) and Madhya Pradesh High Court in Itarsi Oils & Flours (P) Ltd. vs. CIT (2001) 170 CTR (MP) 158 : (2001) 250 ITR 686 (MP) as also by the Bombay High Court in the case of CIT vs. Kotak Mahindra Finance Ltd. (2003) 183 CTR (Bom) 491 : (2003) 130 Taxman 730 (Bom) which decided the issue in favour of the Department and against the assessee. It appears that none of the assessees 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. (supra) was confined to s. 115J of the Act. The order of the Supreme Court dismissing the Special Leave Petition in limine filed by the Department against M/s. Garware Polyester Ltd.
34
Kwality Biscuits Ltd. (supra) is reported in CIT vs. Kwality Biscuits Ltd. (2006) 205 CTR (SC) 122 : (2006) 284 ITR 434 (SC). Thus, the judgment of Karnataka High Court in Kwality Biscuits (supra) stood affirmed. However, the Karnataka High Court has thereafter in the case of Jindal Thermal Power Co. Ltd. vs. Dy. CIT (2006) 203 CTR (Kar) 381 : (2006) 154 Taxman 547 (Kar) distinguished its own decision in case of Kwality Biscuits Ltd. (supra) and held that s. 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 s. 115JB, it was liable to pay interest under ss. 234B and 234C of the Act. Thus, it can be concluded that interest under ss. 234B and 234C shall be payable on failure to pay advance tax in respect of tax payable under s. 115JA/115JB. For the aforestated reasons, Circular No. 13 of 2001, dt. 9th Nov., 2001 issued by CBDT reported in (2001) 171 CTR (St) 45 : (2001) 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 s. 115JB were not making advance tax payments. In the said circular, it has been clarified that s. 115JB is a self-contained code and thus, all companies were liable for payment of advance tax under s. 115JB and consequently provisions of ss. 234B and 234C imposing interest on default in payment of advance tax were also applicable.