ITA No. 250 of 2004 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 250 of 2004 Date of Decision: 5.9.2011 The Commissioner of Income tax-I, Chandigarh ....Appellant. Versus M/s Rana Sugars Ltd. ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL, ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Senior Standing Counsel, for the appellant. AJAY KUMAR MITTAL, J. 1. This order shall dispose of ITA Nos. 250 of 2004 and 111 of 2005 as, according to the learned counsel, identical question of law is involved therein. For brevity, the facts are being extracted from ITA No. 250 of 2004. 2. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 13.2.2004 passed by the Income Tax Appellate Tribunal, Chandigarh Bench “B”, Chandigarh (hereinafter referred to as “the Tribunal”) in ITA No. 333/CHANDI/99, for the assessment year 1997-98, raising the following substantial question of law:- “Whether on the facts and circumstances of the case, the Hon'ble ITAT was right in law in upholding the ITA No. 250 of 2004 -2- decision of the CIT(A) that interest u/s 234B & 234C cannot be charged in cases where income of the assessee is computed as per provisions of section 115JA of the Income Tax Act, 1961?” 3. Briefly stated, the facts necessary for adjudication as narrated in the appeal are that the assessee filed its return on 30.11.1997 for the assessment year 1997-98 declaring loss of Rs.85,76,500/-. However, an income of Rs.60,44810/- was computed under Section 115JA of the Act. The tax due from the assessee was calculated to be Rs.26,17,917/- including the additional tax under Section 143(1A) of Rs.18,648/-. The assessee had not paid any advance tax except TDS of Rs.1,19,130/-. However, the assessee had paid Rs.25,99,269/- under Section 140-A of the Act on 29.11.1997 under self assessment scheme. The case was processed under Section 143(1)(a) of the Act on 29.6.1998 and demand of Rs.4,14,976/- under Section 234B of the Act and Rs.1,78,958/- under Section 234C of the Act was created on account of interest. The assessee filed an application under Section 154 of the Act on 27.7.1998 for rectification on the issue of charge of interest along with other issues. The prayer for rectification on the issue of charging of interest was declined whereas relief was allowed on other issue. Accordingly, the interest charged under Sections 234B and 234C of the Act was reduced. The case was taken up for scrutiny and the assessment was completed under Section 143(3) of the Act on the same income. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [in short “the CIT(A)”]. The CIT(A) vide order ITA No. 250 of 2004 -3- dated 17.2.1998 allowed the appeal and deleted the interest under Sections 234B and 234C of the Act holding that the assessee was not liable to pay advance tax on deemed income. Feeling dissatisfied, the department filed an appeal before the Tribunal who vide order dated 13.2.2004 upheld the order of the CIT(A) following the earlier decision of the Tribunal dated 18.11.2002 in ITA Nos. 284 and 285/Chandi/2000 (DCIT v. Upper India Steel Ltd., Ludhiana). Hence, the present appeal by the revenue. 4. We have heard learned counsel for the revenue. 5. The Tribunal while adjudicating the issue had followed the earlier decision of the Tribunal dated 18.11.2002 in Upper India Steel Ltd., Ludhiana's case (supra) against which appeals under Section 260A of the Act were filed in this Court bearing ITA Nos. 172 and 173 of 2004. This Court while reversing the decision of the Tribunal adjudicated the issue in favour of the revenue. Against the decision of the High Court, Civil Appeal No. 459 of 2006 had been filed which was heard by the Hon'ble Supreme Court along with the case of Joint Commissioner of Income Tax v. Rolta India Ltd. [2011] 330 ITR 470 (SC) and the view taken by this Court was affirmed, as has been noticed therein. 6. The Apex Court in Rolta India Ltd's case (supra) had recorded as under:- “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 ITA No. 250 of 2004 -4- 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 Section 115J/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 zerotax 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 to 31.3.1991. After 1.4.1991, Section 115JA was inserted by Finance Act of 1996 w.e.f. 1.4.1997. After insertion of Section 115JA, Section 115JB was ITA No. 250 of 2004 -5- inserted by Finance Act, 2000 w.e.f. 1.4.2001. It is clear from reading Sections 115JA and 115JB 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 115JA and 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 Section 115J/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 ITA No. 250 of 2004 -6- 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, 1961 had 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 ITA No. 250 of 2004 -7- 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. case 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 ITR 686 as also by the Bombay High Court in the case of CIT v. Kotak Mahindra Finance Ltd. reported in (2003) 130 TAXMAN 730 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 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) ITA No. 250 of 2004 -8- 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 aforestated 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 234B and 234C imposing interest on default in payment of advance tax were also applicable.” 7. In view of the above, the order of the Tribunal cannot be ITA No. 250 of 2004 -9- sustained. Accordingly, the substantial question of law is answered in favour of the revenue and against the assessee. 8. The appeals stand allowed. (AJAY KUMAR MITTAL) JUDGE September 5, 2011 (ADARSH KUMAR GOEL) gbs ACTING CHIEF JUSTICE ITA No. 250 of 2004 -10- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 111 of 2005 Date of Decision: 5.9.2011 The Commissioner of Income Tax-I, Chandigarh ....Appellant. Versus M/s Rana Sugars Ltd. ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL, ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Senior Standing Counsel, for the appellant. AJAY KUMAR MITTAL, J. For orders, see ITA No. 250 of 2004 (The Commissioner of Income Tax-I, Chandigarh v. M/s Rana Sugars Ltd). (AJAY KUMAR MITTAL) JUDGE September 5, 2011 (ADARSH KUMAR GOEL) gbs ACTING CHIEF JUSTICE