IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE :: 22..06..2010 CORAM : THE HON'BLE MR. JUSTICE F.M. IBRAHIM KALIFULLA AND THE HON'BLE MR. JUSTICE M.M. SUNDRESH TAX CASE (APPEAL) NOS: 396 AND 398 OF 2010 The Commissioner of Income Tax Circle X, Chennai. ... Appellant in both the appeals/Appellant -vs- M/s. Abdul Wahid and Company, 26, Vepery High Road, Periamet, ... Respondent in both the Chennai – 600 003. appeals/Respondent Tax Case Appeals under Section 260 – A of the Income Tax Act 1961 against the order of the Income Tax Appellate Tribunal, "B" Bench, Chennai, dated 21.08.2009 passed in I.T.A. Nos: 541 and 543/Mds/2009 for the assessment years 1998 – 1999 and 1999 - 2000 against office of the Commissioner of Income Tax (Appeals)-IV Chennai dated 29.12.2008 and made in Appeal no CIT(A)-IV, Chennai 25 & 26 of 2008-2009 against the Proceedings of the Assistant Commissioner of Income Tax Circle-X Chennai-6, dated 28.3.2008 and PA. No.AAAFT 0482 R Assesment year 1998-99, 1999-2000 For appellant : Mr. Patty B. Jeganathan Standing counsel for I.T. Dept. J U D G M E N T ( JUDGMENT OF THE COURT WAS DELIVERED BY F.M. IBRAHIM KALIFULLA, J. ) The revenue has come forward with these appeals raising the following substantial questions of law : https://hcservices.ecourts.gov.in/hcservices/ " 1. Whether on the facts and circumstances of the case, the Tribunal is right in holding that the additional tax liability due to the amendment cannot give rise to a levy of interest under Section 234-B of the Income Tax Act ? " 2. The additional tax liability on the assessee for the relevant assessment years namely 1998-1999 and 1999-2000 came to be imposed by the order of assessment dated 28.03.2006. The issue is concerned with interest leviable under Section 234 B of the Income Tax Act on the belated payment of additional tax for the relevant years. It is not in dispute that the assessee was liable to pay such additional tax by virtue of the non availability of 90% of profit on DEPB credits by way of deduction under Section 80 HHC due to the insertion of Section 80 HHC (3) retrospectively from 01.04.1998 by the Amendment Act of 2005. By virtue of the said statutory amendment, the assessing officer found that the assessee failed to furnish the details for satisfying the two conditions enumerated in the Proviso to Section 80 HHC (3) and consequently, the liability for payment of additional tax was created. In such circumstances, the question for consideration was whether such liability to payment of additional tax would also create a further liability of payment of interest under Section 234 (B) of the Act on the ground that such additional tax payable with effect from 01.04.1998 for the assessment years 1998-1999 and 1999-2000 was not paid in time. It is in that respect, the Commissioner (Appeals) as well as the Tribunal held that such a liability of payment of interest under Section 234 (B) cannot be fastened on the assessee. The Tribunal, in its order, while dealing with the said issue has held that, " From the decision of the Hon'ble Jurisdictional High Court as well as the Tribunal and also in the order of the Delhi Benches of this Tribunal in case of Haryana Warehousing Corporation vs. Deputy Commissioner of Income Tax reported in 75 I.T.D. 155, it is clear that the assessee cannot be made liable for the interest under Section 234 B of the Income Tax Act, 1961 when at the time of payment of advance tax the liability was not foreseeable. In the present case, the liability has arisen only due to the subsequent amendment in the year 2005 with retrospective effect. The additional tax liability due to the subsequent amendment cannot give rise to a levy of interest under Section 234 B because at the time of payment of the advance tax under no means, the assessee could foresee the said additional tax liability. Accordingly, by following the above noted decisions / orders, we decide this issue in favour of the assessee and against the Revenue. The order of the Commissioner of Income Tax (Appeals) is upheld." https://hcservices.ecourts.gov.in/hcservices/ 3. We are in full agreement with the principles stated by the Tribunal while upholding the order of the Commissioner (Appeals). When the liability for payment of additional tax itself was created for the first time, based on the subsequent amendment, in the year 2005, with retrospective effect from 01.04.1998, it would be incongruent to expect the assessee to have satisfied the requirement of payment of advance tax as prescribed under Section 234 (B) of the Income Tax Act. Therefore, while the liability for additional tax by virtue of the amendment was found to be satisfied by the respondent / assessee, the payment of interest under Section 234 (B) for failure to pay advance tax in anticipation of such liability created on a future year, based on an amendment, cannot be made. We are, therefore, convinced that the conclusion arrived at by the C.I.T. (Appeals) as well as that of the Tribunal cannot be found fault with. We therefore do not find any scope to entertain these appeals. The substantial question of law raised in these tax case appeals are answered in favour of the assessee. Connected miscellaneous petition is closed. gp Sd/- Asst.Registrar /True Copy/ Sub.Asst.Registrar To 1. The Income Tax Appellate Tribunal, " B " Bench, Rajaji Bhavan, Besant Nagar, Chennai.90. 2.The Commissioner of Income Tax Appeals (IV), 121 Mahatma Gandhi Road Nungambakkam, Chennai-34. 3. The Assistant Commissioner of Income Tax Circle X, Kannammai Buildings, 611 Anna salai Chennai.-6. T.C. (A) Nos: 396 and 398 of 2010 RSM(CO) EU 15.07.2010. https://hcservices.ecourts.gov.in/hcservices/