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2011 (3) TMI 179 - HC - Income TaxInterest u/s 234B and 234C - Book profit u/s 115JA - 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 - Held that Section 115JB, 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 - Decided against the assessee
Issues:
1. Interpretation of provisions of Section 115JA of the Income Tax Act, 1961. 2. Applicability of interest under Sections 234B and 234C in cases where income is computed under Section 115JA. 3. Conflict between High Courts on the issue of levying interest under Sections 234B and 234C in MAT cases. Analysis: Issue 1: The judgment involved the interpretation of provisions of Section 115JA of the Income Tax Act, 1961, specifically focusing on the computation of tax on book profit of the assessee. The Assessing Officer computed tax on the book profit under Section 115JA and held the assessee liable to pay interest under Sections 234B and 234C. However, the CIT(A) deleted the demand of interest, stating that the Assessing Officer could not create a demand of interest on deemed income under Section 115JA. The Tribunal upheld this view, leading to a legal dispute. Issue 2: The main issue revolved around the applicability of interest under Sections 234B and 234C in cases where income is computed as per the provisions of Section 115JA of the Income Tax Act, 1961. The revenue contended that interest is a statutory liability applicable to tax calculated on book profits under Section 115JA, citing the judgment of the Supreme Court in Jt. CIT, Mumbai v. Rolta India Ltd. The Supreme Court observed that Sections 115J/115JA are special provisions requiring the payment of advance tax, and thus, the levying of interest was deemed necessary. The Court emphasized that interest under Section 234B is applicable to all companies, including those falling under Section 115JA. Issue 3: The judgment highlighted a conflict between High Courts regarding the levying of interest under Sections 234B and 234C in cases where Section 115J applies. The Karnataka High Court in Kwality Biscuits Ltd. held that interest under these sections is not leviable until the profit is determined at the end of the financial year. However, other High Courts such as Gauhati, Madhya Pradesh, and Bombay took a different stance favoring the Department. The Karnataka High Court later distinguished its own decision in Jindal Thermal Power Company Ltd., emphasizing that interest under Sections 234B and 234C is payable on failure to pay advance tax under Section 115JA/115JB. This conflict was crucial in determining the liability of MAT companies for interest payment under the relevant provisions. In conclusion, the judgment resolved the issues by answering the question in favor of the revenue and against the assessee, allowing the appeals and emphasizing the statutory liability of interest under Sections 234B and 234C in cases involving computation under Section 115JA of the Income Tax Act, 1961.
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