2013 (2) TMI 531 - AT - Income Tax

Assessee company is engaged in the business of generation of electricity through windmills - claimed deduction under section 80IA - disallowed in a reassessment proceedings undertaken under section 147 - This claim was accepted in the order passed under section 143(1) on 24.02.1998 - later on 10th November 2003, through notice under section 148 reassessment proceedings were initiated and the reassessment was completed on 29.10.2004 Grievance of the assessee company is against this increase of tax demand resulting from charging of interest under section 220(2) of the Act on the tax demand The grievance of the assessee is based on the premise that when the tax demand got vacated as a result of order dated 27th February, 2006 passed by the Assessing Officer to give effect to the order of the Commissioner of Income Tax(Appeals) dated 30.01.2006, no such interest could be charged because interest under section 220(2) is not chargeable when there is neither existing demand nor any default attributable to assessee. Held that - On this ticklish issue, there are decision in the cases of Seshasayee Paper & Boards Ltd. Vs.CIT 2002 (9) TMI 59 - MADRAS HIGH COURT as well as the latest decision of Hon ble Delhi High Court in the case of Girnar Investment Ltd. Vs. CIT 2012 (1) TMI 10 - DELHI HIGH COURT dated 5th January, 2012 . Issue remanded back to the CIT(A) so that he can also consider the decision of Girnar Investment Ltd (supra) recently rendered by the Delhi High Court - and has to pass a speaking order as to which decision actually applicable to the facts of the case and why - Accordingly, on this issue he has to pass a reasoned order which speaks about the application of the case laws - Accordingly, all the appeals are allowed both of assessee as well as Revenue for statistical purposes

Summary

Issues:
16 appeals - 8 by assessee and 8 by Revenue for assessment years 1997-98 to 2004-05. Disallowance of deduction under section 80IA, interest charged under section 220(2) of the Act, treatment of assessee as "assesse-in-default."

Analysis:
The case involved a bunch of 16 appeals, 8 each by the assessee and the Revenue, concerning assessment years 1997-98 to 2004-05. The primary issue revolved around the disallowance of deduction claimed under section 80IA of the Income Tax Act, 1961. The assessee, engaged in generating electricity through windmills, faced a reassessment that led to the disallowance of the claimed relief. The initial relief granted under section 80IA was later withdrawn, resulting in a substantial tax demand. The matter escalated through appeals and counter-appeals, with conflicting decisions from the Commissioner of Income Tax (Appeals) and the ITAT. The crux of the issue was the charging of interest under section 220(2) of the Act on the tax demand, post the Tribunal's order, which the assessee contested based on legal precedents.

The dispute primarily focused on the applicability of interest under section 220(2) of the Act. The assessee argued that no interest should be charged as there was no existing demand or default attributable to them after the initial relief was reinstated. Citing relevant case laws such as Seshasayee Paper & Boards Ltd. Vs. CIT (2003) 260 ITR 419(Mad), Vikrant Tyres Ltd. Vs. First ITO (2001) 247 ITR 821(SC), and Birla Cotton Spinning & Weaving Mills Ltd. Vs. ITO (1995) 211 ITR 610(Cal), the assessee contended that interest was not warranted in the given circumstances. The Tribunal acknowledged the complexity of the issue and decided to remand it back to the CIT(A) for a thorough reconsideration in light of recent legal developments, including the decision in Girnar Investment Ltd. Vs. CIT by the Delhi High Court. The Tribunal directed the CIT(A) to provide a detailed, reasoned order addressing the application of relevant case laws to the facts of the case.

In conclusion, the Tribunal allowed all appeals for statistical purposes, emphasizing the need for a comprehensive review of the interest charge issue by the CIT(A) in light of recent legal precedents. The decision aimed to ensure a fair and well-informed judgment considering the evolving legal landscape surrounding the matter.