2013 (2) TMI 453 - HC - Income Tax

Waiver of interest u/s 220(2) Whether partial relief is allowed or not Assessee sold land AO computed tax and raised the demand Arrears of tax was deposited by assessee - After making payment assessee made an application under section 220(2A), for waiver of interest demanded under section 220(2) Held that - It is clear from section 220(2A), that the Commissioner or the Chief Commissioner need not always waive amount of interest in full but can grant waiver or reduction partially Relief to be granted under section 220(2A) should be proportionate to the extent of satisfaction of the conditions stated therein - section 220(2A) is an incentive to defaulter-assessee to co-operate with the Department and to remit the tax voluntarily at the earliest and, therefore, compliance should be rewarded by taking a liberal view and approach. In this case all the three conditions were to some extent satisfied, and the refusal of the Chief Commissioner to grant reduction in interest is not justified Therefore assessee is entitled to partial relief - AO was directed to grant reduction of interest by 25 per cent.

Issues:
1. Interpretation of conditions for waiver of interest under section 220(2A) of the Income-tax Act, 1961.
2. Consideration of circumstances leading to delay in tax payment and impact on interest waiver eligibility.
3. Evaluation of co-operation of the assessee in recovery proceedings and its relevance for interest waiver.

Interpretation of conditions for waiver of interest under section 220(2A):
The case involved a dispute over the application of conditions for interest waiver under section 220(2A) of the Income-tax Act, 1961. The Chief Commissioner had denied waiver of interest to the assessee based on the failure to satisfy all three conditions outlined in the provision. However, the High Court observed that the Chief Commissioner's interpretation was rigid and did not consider the practical implications of the assessee's actions. The court emphasized that the provision allows for partial relief based on the extent of satisfaction of the conditions, indicating a flexible approach to granting waivers.

Consideration of circumstances leading to delay in tax payment and impact on interest waiver eligibility:
The High Court analyzed the circumstances that led to the delay in tax payment by the assessee, particularly related to the retention of term deposits. The court noted that premature withdrawal of term deposits for tax payment would have resulted in a loss for the assessee, as interest on the deposits was taxable. The court highlighted that the Chief Commissioner did not adequately consider the benefit derived by the Department from the assessee retaining the term deposits, which influenced the delay in tax payment. The court concluded that the assessee was entitled to at least partial waiver of interest, taking into account the tax paid on the interest earned from the term deposits.

Evaluation of co-operation of the assessee in recovery proceedings and its relevance for interest waiver:
The High Court also assessed the assessee's co-operation in recovery proceedings, particularly in obtaining stays against garnishee and other recovery actions initiated by the Department. The court clarified that exercising the statutory right to seek stay during the appeal process should not be equated with lack of co-operation. The court emphasized that the assessee had voluntarily paid the entire tax amount before facing serious recovery actions by the Department, indicating a level of co-operation. The court concluded that the Chief Commissioner's refusal to grant reduction in interest was unjustified, and partial relief should be provided to the assessee based on the circumstances and compliance with the conditions for interest waiver.

In conclusion, the High Court allowed the writ appeal, vacated the judgment of the single judge, and modified the Chief Commissioner's order by reducing the interest rate from 12% to 9% per annum. The court directed the Assessing Officer to grant a 25% reduction in interest, recovering only 75% of the interest levied under section 220(2) as default interest payable by the assessee. This decision provided partial relief to the assessee based on the specific circumstances and interpretation of the relevant legal provisions.

← Previous Next →