2002 (9) TMI 99 - HC - Income Tax

Advance Tax Powers Of High Court Levy Of Interest - An order dated December 10 2001 passed by the Chief Commissioner of Income-tax Delhi-III New Delhi in pursuance of the notification issued by the Central Board of Direct Taxes (for short the Board ) under section 119(2)(a) of the Income-tax Act 1961 (for short the Act ) dated May 23 1996 for waiver of interest under sections 234A 234B and 234C of the Act is under challenge in this writ petition. By the impugned order the Commissioner has granted partial waiver of the interest charged from the petitioner under section 234B of the Act. - the writ petition being devoid of merit is dismissed.

Summary

Issues Involved:
1. Challenge to the partial waiver of interest under section 234B of the Income-tax Act, 1961.
2. Scope of judicial review of administrative decisions.
3. Application of Supreme Court decisions in the context of interest capitalization.

Issue-wise Detailed Analysis:

1. Challenge to the partial waiver of interest under section 234B of the Income-tax Act, 1961:
The petitioner, an assessee-company, challenged an order dated December 10, 2001, by the Chief Commissioner of Income-tax, Delhi-III, which granted partial waiver of interest under section 234B of the Income-tax Act, 1961. The petitioner argued that it met all the conditions laid out in the Board's notification dated May 23, 1996, for a full waiver of interest. The Chief Commissioner, however, granted only a 75% waiver, citing the lack of a direct decision from the jurisdictional High Court supporting the assessee's stand during the relevant financial year.

2. Scope of judicial review of administrative decisions:
The court examined the scope of judicial review, emphasizing that it cannot act as an appellate authority over administrative decisions. Judicial review is confined to examining the decision-making process, not the decision itself. The court can intervene if the administrative decision is arbitrary, based on non-existent facts, ignores relevant law, violates natural justice, or is one that no reasonable person would have made. The court cited several Supreme Court decisions, including U. P. Financial Corporation v. Gem Cap (India) Pvt. Ltd., Tata Cellular v. Union of India, and Apparel Export Promotion Council v. A. K. Chopra, to support this principle.

3. Application of Supreme Court decisions in the context of interest capitalization:
The petitioner contended that the Chief Commissioner failed to apply the principles from Supreme Court decisions in CIT v. Bokaro Steel Ltd. and CIT v. Karnataka Power Corporation, which allowed for the capitalization of interest on borrowed funds before the commencement of business. However, the court noted that the Supreme Court's decision in Tuticorin Alkali Chemicals and Fertilizers Ltd. still held the field, which stated that interest earned on borrowed funds before the commencement of business is taxable as income from other sources. The Chief Commissioner's decision to grant only a partial waiver was not found to be contrary to the Board's circulars or palpably erroneous.

Conclusion:
The court concluded that the Chief Commissioner's order did not suffer from any factual or legal infirmity warranting interference. The decision reflected the application of mind to relevant factors, and the court found no reason to substitute its judgment for that of the Chief Commissioner. Consequently, the writ petition was dismissed, and no costs were awarded.