2011 (9) TMI 288 - HC - Income Tax

Minimum Alternate Tax (MAT) u/s 115J - Levy of interest u/s 234B / 234C - Whether on the facts and circumstances of the case the Hon ble ITAT was right in law in upholding the decision of the CIT(A) that interest u/s 234B & 234C cannot be charged in cases where income of the assessee is computed as per provisions of section 115JA of the Income Tax Act 1961? - Held that - The pre-requisite condition for applicability of Section 234B is that assessee is liable to pay tax under Section 208 and the expression assessed tax is defined to mean the tax on the total income determined under Section 143(1) or under Section 143(3) as reduced by the amount of tax deducted or collected at source. Thus there is no exclusion of Section 115J/115JA in the levy of interest under Section 234B. The expression assessed tax is defined to mean the tax assessed on regular assessment which means the tax determined on the application of Section 115J/115JA in the regular assessment. - Assessee is liable to pay Interest u/s 234B / 234C

Summary

Issues:
1. Interpretation of provisions of Section 115JA of the Income Tax Act, 1961 regarding charging of interest under Sections 234B and 234C.
2. Applicability of advance tax payment requirements on deemed income for MAT companies.
3. Judicial interpretation of special provisions under Section 115JA and Section 115JB for MAT companies.

Analysis:

Issue 1:
The appeal before the High Court involved the question of whether interest under Sections 234B and 234C of the Income Tax Act can be charged when the income of the assessee is computed as per the provisions of Section 115JA. The assessee had contested the charging of interest, leading to a series of legal proceedings.

Issue 2:
The High Court examined the special provisions under Section 115JA, which require MAT companies to pay advance tax on deemed income. The Court considered the Apex Court's decision in Rolta India Ltd's case, emphasizing that the levy of interest was necessary under the statutory scheme of Sections 115J and 115JA. The Court noted that the obligation to pay advance tax under these sections is clear, and interest under Section 234B applies to all companies, including those falling under MAT provisions.

Issue 3:
Further, the Court analyzed conflicting judgments on the timing of estimating profits for MAT companies. It referenced the Karnataka High Court's decision in Kwality Biscuits Ltd. case, which held that interest under Sections 234B and 234C is not applicable until profits are determined at the end of the financial year. However, this view was not universally accepted, with other High Courts ruling in favor of the tax department.

The High Court ultimately ruled in favor of the revenue, holding that interest under Sections 234B and 234C is applicable to MAT companies for failure to pay advance tax under Section 115JA/115JB. The Court cited the self-contained nature of Section 115JB and the applicability of advance tax provisions to all companies falling under MAT. The judgment clarified that Circular No. 13/2001 issued by CBDT did not exempt MAT companies from advance tax payments and the consequent interest under Sections 234B and 234C.

In conclusion, the High Court allowed the appeals, finding in favor of the revenue and against the assessee, based on the interpretation of the Income Tax Act's provisions and judicial precedents.