2011 (6) TMI 565 - HC - Income Tax

Writ petition - revision petition - application for waiver of interest charged under Section 234B of the Income Tax Act - company had received income by way of interest on term deposits from banks. In the return filed by the assessee, it was claimed that the interest earned is on borrowed funds and is not assessable to tax. Ext.P1 is the copy of the assessment order which was challenged in the revision petition. Finally it was held in Ext.P3 that the assessee has not made out a case for waiver of interest charged under Section 234B and the revision petition was dismissed, writ petition is dismissed

Summary

Issues:
Challenge to Ext.P3 order by Chief Commissioner of Income Tax in a revision petition, application for waiver of interest under Section 234B of the Income Tax Act, interpretation of relevant case law regarding tax assessment.

Analysis:
The petitioner contested the Ext.P3 order issued by the Chief Commissioner of Income Tax in a revision petition concerning the assessment year 1996-97. The crux of the matter revolved around the application for waiver of interest charged under Section 234B of the Income Tax Act. The return of income for that year declared 'nil' income, but scrutiny revealed a substantial amount received as interest on term deposits. The petitioner claimed that the interest earned was on borrowed funds and hence not taxable. The assessment order, Ext.P1, was challenged, and ultimately, Ext.P3 concluded that the petitioner failed to justify the waiver of interest under Section 234B.

In a subsequent affidavit, the petitioner presented Ext.P4 order related to the assessment year 1997-98, where all interest levied under Sections 234B and C was waived. The respondents highlighted the precedent set by the Kerala High Court in Collis Lines (P) Ltd. vs. ITO, which was upheld by the Supreme Court in Tuticorin Alkali Chemicals and Fertilizers Ltd. vs. CIT. Although a different view favoring the assessee emerged in CIT vs. Autokast Ltd., the decision in Collis Lines was deemed applicable during the relevant assessment year.

The judgment emphasized that Ext.P3 was in line with the prevailing legal interpretation based on the Collis Lines case. Despite the absence of the Senior Counsel for the petitioner, the court noted the completion of service and subsequently dismissed the writ petition, citing the petitioner's failure to succeed based on the legal position established by the Apex Court. The judgment concluded by dismissing the petition without costs.

In summary, the judgment addressed the challenge to the Chief Commissioner's order, the application for waiver of interest under Section 234B, and the impact of relevant case law on tax assessment decisions. The court upheld Ext.P3, considering the legal precedents and the petitioner's inability to demonstrate grounds for the waiver.