2014 (10) TMI 892 - HC - Income Tax

Waiver of interest payable under section 234B - earned single judge extending the benefit of the Board Circular in particular clause 2(c) in the case of the assessee and granting relief to him for waiver - Held that - In any assessment or reassessment proceedings the advance tax paid by the assessee during such financial year is found to be less than the amount of advance tax payable on his current income and the assessee is chargeable to interest under section 234B or section 234C and the Chief Commissioner/Director General is satisfied that this is a fit case for reduction or waiver of such interest he can exercise his power and grant the relief to the assessee. As is clear from the aforesaid clause if any order is passed on the basis of any order passed by the High Court within whose jurisdiction the assessee is not assessable to income- tax then the benefit of the circular is not available to the assessee. The said circular is carefully worded making it clear that it is only when a judgment of the High Court within whose jurisdiction the assessee is assessable is not liable to pay tax or if the Supreme Court of India declares the law it is the law for the whole country and then only the assessee would be entitled to have such benefit. Therefore the observations of the learned single judge the decision of the High Court or the Supreme Court need not be in the case of assessee is not a correct statement of law having regard to the wordings of the circular. It is only the decision of the High Court within whose jurisdiction the assessee is assessable is invoked which is reversed by the Supreme Court or if the Supreme Court lays down the law in a case arising from any jurisdiction in the entire country the assessee would be entitled to the benefit. Therefore drawing analogy and giving a particular interpretation would not be in accordance with law. In this view the learned single judge was not justified in extending the benefit of the said circular when it was not applicable to the case of assessee. - Decided in favour of revenue

Summary

Issues:
1. Interpretation of Board Circular clause 2(c) regarding waiver of interest under sections 234A to 234C of the Income-tax Act, 1961.
2. Applicability of High Court or Supreme Court decisions to the case of an assessee for granting relief.
3. Consideration of the Kerala High Court judgment in A. V. Thomas and Co. Ltd. [1997] 225 ITR 29 (Ker) and its impact on the case.

Issue 1: Interpretation of Board Circular clause 2(c):
The High Court judgment involved a writ appeal filed by the Revenue against a decision granting relief to the assessee for waiver of interest under section 234B of the Income-tax Act, 1961. The judgment focused on the interpretation of clause 2(c) of the Board Circular, which outlines the conditions for reducing or waiving interest payable by an assessee. The Court emphasized that the circular must be strictly construed, stating that the benefit is only available if the High Court within the assessee's jurisdiction declares the income as not chargeable to tax or if the Supreme Court lays down the law for the entire country. The Court highlighted that the decision of the High Court or Supreme Court must directly impact the assessee's case for the circular to apply. The judgment clarified that the benefit is not automatic and must align with the specific conditions outlined in the circular.

Issue 2: Applicability of Court Decisions to Assessee's Case:
The judgment discussed the relevance of High Court or Supreme Court decisions to the case of an assessee for granting relief under the Income-tax Act. It referenced a Kerala High Court judgment in A. V. Thomas and Co. Ltd. [1997] and its subsequent impact on the assessee's case. The Court noted that the Supreme Court decision in IPCA Laboratory Ltd. impliedly overruled the Kerala High Court judgment, leading to the assessee being held liable for tax under section 80HHC. The judgment emphasized that the assessee's belief in the applicability of the Kerala High Court judgment was incorrect, as the Supreme Court's decision altered the legal position. It highlighted the importance of the specific jurisdiction of the High Court or the Supreme Court in determining the applicability of legal decisions to the assessee's case.

Issue 3: Consideration of A. V. Thomas Judgment:
The judgment analyzed the impact of the Kerala High Court judgment in A. V. Thomas and Co. Ltd. on the assessee's case. It highlighted that the Tribunal initially granted relief to the assessee based on this judgment under section 80HHC of the Act. However, the subsequent Supreme Court decision in IPCA Laboratory Ltd. altered the legal position, making the assessee liable for tax. The Court emphasized that the assessee's entitlement to relief under the Board Circular is contingent upon the specific conditions outlined, and mere reliance on previous judgments may not suffice if the legal landscape changes. The judgment underscored the need for a precise interpretation of legal provisions and the applicability of court decisions to individual cases.

In conclusion, the High Court judgment delved into the intricate details of interpreting the Board Circular clause 2(c) and the significance of High Court and Supreme Court decisions in granting relief to an assessee under the Income-tax Act. It underscored the need for a nuanced understanding of legal provisions and the specific applicability of court judgments to individual cases, emphasizing the importance of aligning with the conditions outlined in the circular for availing benefits.