2006 (11) TMI 363 - AT - Income Tax

Summary

Issues involved: Whether interest charged under sections 234B and 234C on taxes levied under section 115JA of the Income-tax Act is justified.

Summary:
1. The case concerns the justification of charging interest under sections 234B and 234C on taxes levied under section 115JA of the Income-tax Act.

2. The ld. CIT(A) held that the Assessing Officer is not justified in charging interest under sections 234B and 234C on the book profits computed under section 115JA.

3. The decision of the Hon'ble Supreme Court in CIT v. Kwality Biscuits Ltd. upheld that interest cannot be levied under sections 234B and 234C on book profit computed under section 115J due to the timing of computation and audit requirements.

4. The ld. Departmental Representative argued that all provisions of the Income-tax Act, including sections 234B and 234C, are applicable to the assessee under section 115JA based on sub-section (4) of section 115JA.

5. Section 115JA deems a specified percentage of book profit as total income and does not cover assessment procedures, making other Income-tax Act provisions applicable.

6. Provisions related to advance tax and interest for defaults apply to assessees under section 115JA due to the absence of collection and recovery mechanisms in section 115JA.

7. The total income computed under section 115JA is liable for advance tax and interest under sections 234B and 234C, as per the provisions of the Income-tax Act.

8. The liability for advance tax and interest for defaults or deferment applies to assessees under section 115JA, similar to the provisions for section 115JB as per judicial precedents.

9. The decision is supported by the judgment in Jindal Thermal Power Co. Ltd. v. Dy. CIT, which imposed liability for advance tax under section 115JB, similar to section 115JA.

10. The provisions of section 115JA(4) and section 115JB(5) necessitate the payment of advance tax and interest under sections 234B and 234C for total income computed under these sections.

11. The Assessing Officer's action in charging interest under sections 234B and 234C is confirmed, and the Department's appeal is allowed based on the above considerations.