Income Tax Appeal No. 258 of 2005 =1= IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH --- Income-tax Appeal No. 258 of 2005 Date of decision: Haryana Warehousing Corporation Panchkula --- Appellant Versus Deputy Commissioner of Income-tax Special Range, Panchkula --- Respondent CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present: Mr. Rajesh Garg, Advocate for the appellant. --- AJAY KUMAR MITTAL, J. This order will dispose of Income-tax Appeal Nos. 258 and 259 of 2005 as common question is involved in both appeals. Income Tax Appeal No. 258 of 2005 =2= These appeals, under Section 260A of the Income-tax Act, 1961 (for short “the Act’”), have been filed by the assessee against the order dated 15.9.2004, of the Income Tax Appellate Tribunal, Chandigarh Bench “B” Chandigarh, (in short “the Tribunal”), for the assessment years 1995-96 and 1996-97. The facts have been taken from ITA No. 258 of 2005. Briefly, the facts of the case as narrated in the appeal are that Haryana Warehousing Corporation constituted under the Warehousing Corporation Act, 1962, filed return on 30.11.1995 showing nil income as according to it, its entire income was exempt under Section 10(29) of the Act. It has been further averred in the appeal that total exemption from tax was available up to the assessment year 1991-92 in view of judgment of the Jurisdictional High Court in appellant’s own case reported in Commissioner of Income-tax, Patiala-II v. Haryana Warehousing Corporation (1978)112 ITR 374 and judgments in U.P. State Warehousing Corporation v. ITO, (1974) 94 ITR 129 (Allahabad), Union of India and another v. U.P. State Warehousing Corporation (1991) 187 ITR 54 (Supreme Court) and Commissioner of Income- Tax v. U.P. State Warehousing Corporation (1992)195 ITR 273 (Allahabad). But the Supreme Court, for the first time, in its judgment rendered on 1.4.1999 in Orissa State Warehousing Corporation and Rajasthan State Warehousing Corporation v. Commissioner of Income-Tax, (1999) 237 ITR 589 held in the cases of Orissa Warehousing Corporation and Rajasthan Warehousing Corporation that only the income from rent of god- Income Tax Appeal No. 258 of 2005 =3= owns and warehouses was exempt from tax under Section 10(29) of the Act and all other income was taxable. Further more, the Supreme Court in its another judgment in the case of U.P. State Warehousing Corporation held that interest on refund received by the assessee-Corporation from the Income-tax Department was also exempt from tax under Section 10(29) of the Act. The assessing officer framed assessment in the case of the appellant- Corporation under Section 143(3) of the Act by order dated 17.2.1998 allowing exemption to income from rent of god-owns and warehouses and taxed the other income. The assessing officer also charged interest under Sections 234B and 234C of the Act, amounting to Rs. 2,91,03,000/-. The Commissioner of Income-tax (Appeals), [in short “the CIT(A)”] quashed the interest charged, holding that the appellant was not liable to pay advance tax as on 31.3.1995 and accordingly further held that interest was not payable. On Revenue’s appeal, the Tribunal, vide order dated 15.9.2004 reversed the order of the CIT(A) holding that charging of interest under Sections 234B and 234C of the Act was mandatory as held by the Supreme Court in Commissioner of Income-tax v. Anjum H.M. Ghaswala, (2001) 252 ITR 1. This is how the assessee is in appeal before us. Before we embark upon the controversy in the appeal, we feel appropriate to note down the following three questions which according to the appellant are the substantial questions of law and arise in this appeal for determination by this Court: Income Tax Appeal No. 258 of 2005 =4= 1- Whether the Income-tax Appellate Tribunal was right in law in holding that interest under Section 234B and 234C is mandatory and it cannot be quashed even though the appellant was not liable to pay advance tax during the year? 2- Whether the Tribunal was justified in law in not quashing the interest charged under Section 234B and 234C even though the appellant was not liable to pay advance tax “the liability to pay the advance tax having arisen only after the Supreme Court judgment dated 1.4.1999? 3- Whether the Tribunal was justified in law in not following the order of a Co-ordinate Bench of the Tribunal?” We have heard learned counsel for the appellant and perused the record. Learned counsel for the appellant contested the issue of charging of interest under Sections 234B and 234C of the Act as assessed by the Assessing Officer, which though was quashed by the CIT (A), but confirmed by the Tribunal in appeal at the instance of the Revenue. The counsel submitted that the Tribunal in the case of the appellant itself, pertaining to the assessment years 1992-93 and 1993-94 had quashed interest on the ground that the appellant was not liable to pay advance tax and as such the same could not be charged and, thus, the Income Tax Appeal No. 258 of 2005 =5= Tribunal ought to have followed the ratio of that judgment and accepted the plea of the appellant. We are unable to accept the plea of the assessee regarding chargeability of interest under Section 234B of the Act for the reasons enumerated hereinafter. The assessee had neither raised any such plea with respect to decision of the Co-ordinate Bench before the Tribunal as is evident from the perusal of the order of the Tribunal nor had produced any order of the Tribunal for those years before this Court along with the appeal. Further, the apex Court in Ghaswala’s case (supra) had categorically held that levy of interest under Section 234B of the Act was mandatory in character. Still further, the learned counsel for the assessee was unable to justify on merits that no interest was exigible under Section 234B of the Act. Adverting to the merits of the controversy, this Court had the occasion to consider the scope of chargeability of interest under Sections 234B and 234C of the Act in Income-tax Appeal No. 149 of 2003 (Commissioner of Income-tax (Central) Ludhiana v. Arun Kapoor) decided on 22.7.2010. It was held that interest under Section 234B of the Act is payable on the income assessed and not on the income declared by the assessee. It was further held that interest for deferment of advance tax under Section 234C of the Act is chargeable on the income returned by the assessee. The relevant observations recorded therein read as under: Income Tax Appeal No. 258 of 2005 =6= “6. The chargeability of interest under Section 234B of the Act came up for consideration in a recent judgment dated 20.7.2010 passed in ITA No. 851 of 2008 (M/s Jacob Export House v. Commissioner of Income Tax) wherein it was held as under:- “7. The matter is no longer res integra. This Court in Parkash Agro’s case (supra), while considering the effect of amendment to Explanation-I retrospectively w.e.f. 1.4.1989 had held that an assessee is liable to pay interest under Section 234B of the Act on the income assessed under Section 143 (1) or143(3) of the Act and not on the basis of income declared in the return by the assessee. The relevant observations read as under:- “9. It is no doubt true that prior to the amendment brought by Finance Act, 2001, which has been made effective retrospectively from 1.4.1989, the interest under section 234B of the Act was chargeable with reference to the total income as had been declared by the assessee in its return and not on the assessed income. Explanation 1 to section 234B of the Act was amended by Finance Act, 2001. It reads thus:- “Explanation 1. – In this Section, ‘assessed tax’ means the tax on the total income determined under sub-section (1) of section 143 or on regular assessment as reduced by the amount of tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income. Income Tax Appeal No. 258 of 2005 =7= (b) in sub-section (3), for the words ‘one half per cent’, the words ‘one and one-fourth per cent’ shall be substituted with effect from 1.6.2001.” 10. The said Explanation was subject- matter of challenge before this Court in Raj Kumar Singhal’s case (supra) where the Division Bench while upholding the validity of the said provision, interpreted it as under:- “......A comparison of the two provisions shows that under the original provision interest was leviable on the income as declared in the return filed by the assessee. By the amended provision, the interest is leviable on the income as determined by the assessing authority minus the income on which the tax has been paid or deducted. The amendment is only calculated to clarify the ambiguity that was felt in the original provision. It is not arbitrary or unreasonable..... (p.562)”. 7. Section 234C of the Act provides for interest for deferment of advance tax. Section 234C (1)(b) is relevant in the present case as it applies in case of assessees other than company. According to the aforesaid provision, the assessee is liable to pay interest on the returned income at the rate specified therein for the period for which advance tax has been deferred. In view of the above, so far as the liability to pay interest under Section 234B is concerned, since the assessing Income Tax Appeal No. 258 of 2005 =8= officer had created a demand in the assessment order, the assessee is liable to pay interest on the basis of assessed tax. However, as regards interest under Section 234C of the Act is concerned, since the assessee had paid the advance tax on the returned income in view of the law prevailing then, the liability to pay interest under Section 234C could not be said to have arisen. Accordingly, we answer the questions proposed by the appellant, holding that so far as charging of interest under Section 234B is concerned, it is chargeable on the basis of assessed tax determined vide assessment order passed by the assessing officer whereas interest under Section 234C was not payable by the assessee. In view of the above, the appeals stand disposed of in the manner indicated above. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) September , 2010 JUDGE * * rkmalik