2012 (5) TMI 320 - HC - Income Tax

Levy of interest u/s 234B - held that - Even if any provision of law is mandatory and provides for charging of tax or interest the view taken in Ranchi Club Ltd. is that such charge by the assessing officer should be specific and clear and assessee must be made to know that the assessing officer has applied its mind and has ordered charging of interest. The mandatory nature of charging of interest and the actual charging of interest by application of mind and the mention of the proviso of law under which such interest is charged are two different things. - Decided in favor of assessee. Investment allowance under section 32A (1) - machinery installed in Hotel - Industrial Undertaking - held that - Matter remanded back.

Summary

Issues:
1. Whether the assessee is entitled to investment allowance under section 32A of the Income Tax Act?
2. Whether the machinery installed in a hotel is entitled to investment allowance?
3. Whether interest under section 234B of the Income Tax Act is mandatory for default in payment of advance tax?

Analysis:
1. The High Court noted that the Tribunal remanded the matter to be decided in accordance with the law. The Court emphasized that the assessing authority should consider all relevant cases cited before him, including the Supreme Court's decision on investment allowance. The Court highlighted that the assessing officer should not ignore any other view taken by the Supreme Court or any larger bench decision covering the issue. The appeal against the remand order was deemed not ordinarily maintainable unless it decides any question or raises any substantial question of law.

2. Regarding the entitlement to investment allowance for machinery installed in a hotel, the Court referred to a Supreme Court case and emphasized that the assessing officer must consider all relevant cases cited before him. The Court noted the submission that interest under Section 234B cannot be charged unless it is included in the assessment order or related sheets. The Court discussed various judgments highlighting the mandatory nature of charging interest under specific sections of the Income Tax Act. The Court concluded that the charging of interest after the amendment of the statute is mandatory, and the liability falls automatically on the assessee in case of default.

3. The Court discussed the mandatory nature of charging interest under specific sections of the Income Tax Act and cited various judgments to support this position. The Court emphasized that the assessing officer should make it clear in the assessment order that interest is being charged, and the mention of the law under which such interest is charged is essential. The Court rejected the argument that interest could be charged in the demand notice without being specified in the assessment order or computation sheets. The Court ruled in favor of the assessee on the issue of interest under section 234B, stating that the third question is decided against the department and in favor of the assessee. Consequently, both income tax appeals were dismissed.