2011 (7) TMI 961 - HC - Income Tax

Reopening of assessment - excess deduction claimed u/s 80HHC and 80-I - failure to pay the advance tax on the assessed income calls for pay interest under section 234B - MAT Provision - Held that - The assessee filled its original return declaring income at Rs. 43,58,142 which was processed under section 143(1)(a) and AO found that the assessee has claimed excess deduction under sections 80HHC and 80-I which were allowed while processing the return under section 143(1)(a) on February 26, 1990, was served upon the assessee on October 11, 1990. Thereafter, the assessment under section 147/143(3) of the Income- tax Act was framed on August 25, 1992, and the AO charged interest under section 234B. On going through the provisions of Explanations 1 and 2 of section 234B, CIT(A) came to the conclusion that the interest under section 234B can only be charged by the AO in the case of regular assessment framed u/s 143(1)(a) or first time under section 143(3) because sub-section (3) of section 234B gives power to the AO to increase the interest under section 234B if the interest is charged under section 143(1) or under regular assessment and not otherwise. Thus keeping in view the provisions of section 234B no illegality or infirmity in the well reasoned order of the CIT (A) because assessment framed under section 147 being not made for the first time is not a regular assessment and, hence, the order of the CIT(A) in holding that the interest under section 234B can only be charged in a case of regular assessment, does not call for any interference. In the case of Jindal Thermal Power Co. Ltd. v. Deputy CIT reported in 2006 (3) TMI 95 - KARNATAKA High Court distinguished its own decision in the case of Kwality Biscuits Ltd. (1999 (11) TMI 48 - KARNATAKA High Court) and 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 - Alternative contention of the assessee also rejected as the order of the apex court dismissing civil appeal reported as Kwality Biscuits Ltd. s case 2006 (4) TMI 121 - SUPREME Court would not come to its rescue in view of the decision of Rolta India Ltd. s case 2011 (1) TMI 5 - SUPREME COURT OF INDIA - Decided against the assessee

Summary

Issues Involved:
1. Interpretation of section 234B(4) of the Income-tax Act, 1961.
2. Whether the assessment under section 143(3)/147 is considered a regular assessment.
3. Applicability of interest under section 234B on book profits under section 115J.

Issue-wise Detailed Analysis:

1. Interpretation of section 234B(4) of the Income-tax Act, 1961:
The primary question of law was whether the Tribunal's interpretation of section 234B(4) was sustainable. The Revenue argued that the Tribunal misinterpreted the law by not considering the assessment under section 143(3)/147 as a regular assessment. The court emphasized that Explanation 2 to section 234B clarifies that an assessment made for the first time under section 147 is regarded as a regular assessment for the purposes of section 234B. This interpretation aligns with the Supreme Court's decision in K. Govindan and Sons v. CIT, which held that an initial assessment under section 147 is a regular assessment.

2. Whether the assessment under section 143(3)/147 is considered a regular assessment:
The court examined whether the assessment framed on August 25, 1992, under section 143(3)/147 was a regular assessment. The Tribunal had previously held that the assessment under section 147 was not a regular assessment. However, the court found this interpretation contrary to the statutory provision and the settled law as held by the Supreme Court. The court concluded that the assessment under section 147 should be regarded as a regular assessment, making the assessee liable to pay interest under section 234B.

3. Applicability of interest under section 234B on book profits under section 115J:
The court also addressed whether interest under section 234B applies when income is assessed based on book profits under section 115J. The assessee argued that interest under section 234B should not apply to book profits. The court referred to the Karnataka High Court's decision in Kwality Biscuits Ltd. v. CIT, which held that interest under sections 234B and 234C is not applicable to income computed under section 115J. However, the court noted that this view was not shared by other High Courts and was ultimately overruled by the Supreme Court in Joint CIT v. Rolta India Ltd. The Supreme Court held that sections 234B and 234C apply to all companies, including those assessed under section 115J/115JA, and that the liability to pay advance tax arises irrespective of the computation method.

Conclusion:
The court found substantial force in the Revenue's submissions, holding that the Tribunal's interpretation was contrary to the statutory provisions and the Supreme Court's established law. The court ruled in favor of the Revenue, concluding that the assessment under section 143(3)/147 is a regular assessment, and interest under section 234B applies to income computed under section 115J. The appeal was allowed, answering the question of law in favor of the Revenue and against the assessee.