2013 (5) TMI 126 - HC - Income Tax

Waiver of Interest U/s 234-B - Extended benefit of deduction U/s 80HHC of the Income-tax Act, 1961 - Held that - A division bench of the High Court of Gujarat in Bhaneben s case (2004 (3) TMI 35 - GUJARAT High Court) regard being had to the facts obtaining therein over delay in filing the return of income resulting in late payment of taxes, an unavoidable circumstance - Waiver of interest can be considered. As regards extending the benefit of waiver of interest under Section 234B, learned counsel for Revenue submits that in Bhanuben s case (2004 (3) TMI 35 - GUJARAT High Court), the Division Bench of High Court of Gujarat extended the relief upto 75% and directed the assessee to pay 25% of the interest levied - Petitioner having made out a case for consideration over reduction or waiver of interest under Sec. 234B of the act, the Chief Commissioner of Income Tax was not justified in rejecting the claim by the orders impugned, on the premise that the petitioner an assessee not within the jurisdiction of High Court of Kerala was disentitled to rely upon the decision of that court in A.V. Thomas case ( 1997 (1) TMI 60 - KERALA High Court). Petition is allowed in part - The orders Annexures-D and J of the Chief Commissioner of Income Tax, Bangalore are quashed and the petitioner is directed to pay 25% of the interest levied under Section 234B of the Act for the assessment year 2001-02.

Issues Involved:
1. Entitlement to deduction under Section 80HHC of the Income-tax Act, 1961.
2. Levy of interest under Section 234-B of the Income-tax Act for delay in payment of advance tax.
3. Application for waiver of interest under Section 119(2)(a) of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Entitlement to Deduction under Section 80HHC:
The petitioner company was initially granted the benefit of deduction under Section 80HHC for the assessment year 1996-97 by the Assessing Officer. However, this decision was overturned by the Commissioner of Income-tax (Appellate Authority), citing the Kerala High Court decision in Commissioner of Income-tax v. V.T. Joseph. The petitioner appealed to the Income Tax Appellate Tribunal (Tribunal), which restored the benefit based on a contrary decision by another learned Single Judge in Commissioner of Income Tax v. A.V. Thomas. The Tribunal's decision was later challenged by the revenue in the High Court, and during the pendency of this appeal, the Supreme Court in IPCA Laboratory Limited v. Deputy Commissioner of Income Tax provided a ruling that led the High Court to nullify the benefit previously extended to the petitioner.

2. Levy of Interest under Section 234-B:
The petitioner did not pay advance tax during the three quarters ending December 2000, under the belief that they were entitled to the deduction under Section 80HHC as per the A.V. Thomas case. Following the Supreme Court's decision in IPCA Laboratory Limited, the High Court ruled against the petitioner, making them liable for the tax for the assessment year 2001-02. Consequently, the Assessing Officer levied interest under Section 234-B for the delay in payment.

3. Application for Waiver of Interest under Section 119(2)(a):
The petitioner applied for a waiver of interest under Section 119(2)(a) of the Act, which was rejected by the Chief Commissioner of Income-tax, Bangalore. The petitioner argued that under Paragraph 2(c) of the Order F.No.400/234/95-IT(B) dated 30.1.1997 (as modified by Order F.No.400/129/2002-IT(B) dated 26.6.2006), the Chief Commissioner had the jurisdiction to reduce or waive interest in cases where income was not chargeable based on a High Court order, but later became chargeable due to a Supreme Court decision. The revenue countered that Paragraph 2(c) applied only to cases within the jurisdiction of the High Court that passed the order, and not to other High Courts.

Judgment:
The court examined whether the petitioner, an assessee in Karnataka, could claim a waiver of interest under Section 234B based on the decision of the Kerala High Court in A.V. Thomas. The court noted that the petitioner had a bona fide belief in the applicability of the A.V. Thomas decision, which justified their non-payment of advance tax. The court also highlighted that Paragraph 2(c) of the Order was not exhaustive and could include cases where decisions of other High Courts were persuasive.

The court referenced the Gujarat High Court's decision in Bhanuben Panchal and Chandrikaben Panchal, which suggested that unavoidable circumstances leading to late payment of taxes could qualify for waiver of interest. The court concluded that the Chief Commissioner was not justified in rejecting the waiver application solely because the petitioner was not within the jurisdiction of the Kerala High Court.

Conclusion:
The court allowed the petition in part, quashing the orders of the Chief Commissioner of Income-tax, Bangalore, and directed the petitioner to pay 25% of the interest levied under Section 234B for the assessment year 2001-02. The court emphasized that the decision of other High Courts could be considered for waiver of interest, reflecting the principle of persuasive precedent.

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