1993 (12) TMI 45 - HC - Income Tax

Summary

Issues:
- Whether the Income-tax Appellate Tribunal was right in deleting interest charged under section 215 of the Income-tax Act, 1961?
- Whether the assessee was disputing liability for charging interest or claiming waiver/reduction in the amount of interest?

Analysis:
The High Court judgment pertains to a petition filed under section 256(2) of the Income-tax Act, 1961, by the Commissioner of Income-tax, seeking a direction to the Income-tax Appellate Tribunal to refer a question of law to the court. The question at hand was whether the Tribunal was correct in deleting interest charged under section 215 of the Act, considering the nature of interest as compensatory rather than penal. The Tribunal had declined to refer the question, stating no referable question of law arose in the case. The background of the case involved an assessee, Messrs. Gurkartar Steels (P.) Ltd., who was held liable to pay interest under section 215 for non-payment of advance income tax. An appeal was partially allowed, but the issue of interest imposition was not waived entirely. The Appellate Tribunal later granted relief to the assessee, leading to the current dispute.

The critical aspect under consideration was whether the assessee was disputing liability for interest or seeking waiver/reduction. The Tribunal's order indicated that the assessee had consistently denied liability for interest, presenting grounds for appeal against the interest charge. The legal position, as highlighted in the Central Provinces Manganese Ore Co. Ltd. case, distinguished between penalty and interest levies under the Income-tax Act. Interest was deemed part of the assessment process, subject to appeal if the assessee disputed the levy entirely. The judgment emphasized that the assessee's denial of liability to be assessed under the Act allowed for an appeal against interest imposition.

The court rejected the Department's argument that interest assessment under section 215 was separate and could not be challenged in an appeal against the original assessment. Citing the Central Provinces Manganese Ore Co. Ltd. case, the court reiterated that interest imposition was appealable if the assessee denied liability. Ultimately, the court found that the Tribunal's decision to not levy interest was fact-based, and no question of law arose for reference under section 256. Consequently, the petition was dismissed, affirming the Tribunal's decision to delete the interest charged under section 215 of the Income-tax Act, 1961.