2011 (4) TMI 481 - HC - Income Tax

Waiver of interest u/s 234B and 234C - Rejection of application for waiver of interest - Circulars issued by the board u/s 119(2)(a) - Held that - As the petitioner s case does not fall within the ambit of either of the two circulars the impugned order of the respondent dated December 10, 2010, is valid and does not necessitate interference in proceedings under article 226 of the Constitution of India - Decided against the assessee

Summary

Issues:
1. Rejection of waiver application for assessment year 1999-2000.
2. Eligibility for deduction under section 80HHC of the Income-tax Act.
3. Request for waiver of interest charged under sections 234B and 234C of the Act.
4. Compliance with conditions for waiver of interest as per Central Board of Direct Taxes orders.
5. Interpretation of relevant legal provisions and circulars.

Issue 1: Rejection of Waiver Application for Assessment Year 1999-2000:
The petitioner sought to challenge the order of the respondent dated December 10, 2010, rejecting their waiver application for the assessment year 1999-2000, claiming it to be illegal and arbitrary. The petitioner requested a direction to waive the interest charged under sections 234B and 234C of the Income-tax Act, 1961, amounting to Rs. 23,76,542. The impugned order denied the waiver, citing non-fulfillment of conditions stipulated in the Central Board of Direct Taxes order and the irrelevance of certain facts considered by the petitioner in their application.

Issue 2: Eligibility for Deduction under Section 80HHC of the Income-tax Act:
The petitioner, engaged in aqua farms and power generation, filed their return of income claiming deduction under section 80HHC based on disclaimer certificates from export houses. However, reassessment proceedings were initiated due to a Supreme Court decision, resulting in the disallowance of the claimed deduction. The petitioner contended that they were eligible for waiver of interest as the export houses issuing disclaimer certificates did not claim the benefit of deduction under section 80HHC. The judgment in IPCA Laboratory Ltd. clarified the eligibility criteria for deduction under section 80HHC, emphasizing the definition of "supporting manufacturer."

Issue 3: Request for Waiver of Interest under Sections 234B and 234C:
The petitioner submitted an application seeking waiver of interest under sections 234B and 234C, stating genuine reasons for non-payment of advance tax. The respondent rejected the waiver, emphasizing that the conditions specified in the Central Board of Direct Taxes order were not met in the petitioner's case. The petitioner argued that their case aligned with the provisions of the Central Board of Direct Taxes circular, highlighting discrepancies in the assessment process regarding export houses and disclaimer certificates.

Issue 4: Compliance with Conditions for Waiver of Interest as per Central Board of Direct Taxes Orders:
The judgment analyzed the conditions outlined in the Central Board of Direct Taxes order dated June 26, 2006, for granting waiver of interest under sections 234B and 234C. The court determined that the petitioner did not satisfy the conditions specified in the order, as the interest charged was not due to a retrospective amendment of the law or a decision of the Supreme Court. The assessment process and the Assessing Officer's considerations were deemed irrelevant for the waiver of interest under section 119(2)(a) of the Act.

Issue 5: Interpretation of Relevant Legal Provisions and Circulars:
The judgment scrutinized the retrospective amendment to section 80HHC of the Act and the subsequent Circular dated January 17, 2006, issued by the Central Board of Direct Taxes. The court clarified the conditions for waiver of interest under the Central Board of Direct Taxes order and highlighted the discriminatory nature of the circular concerning supporting manufacturers. The court concluded that the petitioner's case did not align with the circular's provisions, justifying the rejection of the waiver application by the respondent.

In conclusion, the court dismissed the writ petitions challenging the rejection of the waiver application, emphasizing the lack of compliance with the specified conditions for interest waiver and the absence of alignment with the Circular dated January 17, 2006. The judgment underscored the importance of meeting the prescribed criteria for seeking waivers under the Income-tax Act and Central Board of Direct Taxes orders.