2016 (1) TMI 757 - HC - Income Tax

Waiver of interest under Section 234C - whether petitioner/assessee s explanation was satisfactory of acceptance for the benefit of waiver of interest charged under Section 234C by invoking clause 2(b) of the notification dated 26.06.2006 Annexure-B? - Held that - Admittedly the Chief Commissioner without making reference to any material over manufacture sales production of automotive parts by the petitioner during the 1st quarter of the financial year 2009-10 was not justified in concluding that petitioner could have by an internal mechanism anticipated the spurt in increase in profit in the last quarter of the year for payment of Advance Tax. It is no doubt true that petitioner did not experience a windfall during the last quarter of the financial year 2009-10 but did have an increase business income. Paragraph 2(b) of the notification cannot be read restrictively to mean that waiver of interest under Section 234 C is available only to cases of windfall since that would be too myopic. In fact discretion is invested in the Chief Commissioner to be exercised judiciously based on facts and circumstances since not circumscribed by any fetters. If as noticed supra and at the cost of repetition petitioner suffered decrease in current income in the three consecutive previous years coupled with global recession in automotive industry an admitted fact it was imminent for the Chief Commissioner to have exercised judicious discretion in petitioner s favour. In considered opinion in the facts and circumstances petitioner s explanation is acceptable calling for exercise of discretion by the Chief Commissioner under paragraph 2(b) of the notification dated 26.06.2006 Annexure-B over the extent of interest waiver. In the result petition is allowed. The order impugned is quashed and the proceeding remitted for consideration by the Chief Commissioner insofar as it relates to the extent of waiver of interest charged under Section 234C in terms of paragraph 2(b) of the notification dated 26.06.2006 Annexure-B. Compliance within four weeks from the date of receipt of a copy of this order.

Issues Involved:
1. Rejection of petitioner's application for waiver of interest under Section 234C of the Income Tax Act, 1961.
2. Determination of whether the petitioner's income was business income.
3. Applicability of the notification for waiver of interest.
4. Assessment of the petitioner's claim based on anticipated current income.
5. Consideration of global economic factors in estimating advance tax.
6. Judicial discretion in waiving interest under Section 234C.

Issue-wise Analysis:

1. Rejection of Petitioner's Application for Waiver of Interest:
The petitioner's application for waiver of interest under Section 234C for the accounting year 2010-11 was initially rejected. The learned single Judge held the income as business income, applying the notification for waiver of interest to the petitioner's case and remitted the proceeding to the Chief Commissioner, LTU, Bengaluru, for fresh consideration.

2. Determination of Whether the Petitioner's Income was Business Income:
The petitioner filed a return of income declaring Rs. 913,82,50,403/- for the assessment year 2010-11, resulting in interest under Section 234C due to delay in advance tax payment. The initial calculation was rectified, reducing the interest to Rs. 2,14,81,953/-. The petitioner's claim for waiver was based on the notification dated 23.05.1996, aligned with paragraph 2(b) of the notification dated 26.06.2006.

3. Applicability of the Notification for Waiver of Interest:
The Chief Commissioner, on remand, rejected the request for waiver, observing that the petitioner did not bring out any other reason for its inability to forecast sales, and the non-anticipation of income was not proved. The petitioner's claim was based on anticipated current income during the first quarter of the year, without anticipating the income would exceed the previous year's income.

4. Assessment of the Petitioner's Claim Based on Anticipated Current Income:
The Chief Commissioner concluded that there was no fall in turnover during the first quarter, and the estimation of advance tax payments should be based on internal estimates, not on global parameters. The petitioner's estimation was influenced by macroeconomic factors, including the global economic crisis.

5. Consideration of Global Economic Factors in Estimating Advance Tax:
The Chief Commissioner held that macroeconomic parameters and the state of the global economy cannot be the basis for estimating advance tax. The petitioner argued that the reduction in current income for three consecutive years and the global recession justified their anticipation of reduced income for the financial year 2009-10.

6. Judicial Discretion in Waiving Interest Under Section 234C:
The Chief Commissioner observed that waiver of interest under Section 119(2)(a) is not absolute and must be considered in light of the circumstances. The petitioner's explanation of reduced income due to global economic factors was rejected. However, the court found that the Chief Commissioner's conclusion that the petitioner should have anticipated the current income was far from acceptance. The court noted that the petitioner's reduction in current income for three previous years and the global recession justified their anticipation of reduced income.

Conclusion:
The court held that the petitioner's explanation was satisfactory and called for the exercise of discretion by the Chief Commissioner under paragraph 2(b) of the notification dated 26.06.2006. The petition was allowed, the impugned order was quashed, and the proceeding was remitted for consideration by the Chief Commissioner regarding the extent of waiver of interest charged under Section 234C. Compliance was directed within four weeks from the date of receipt of the order.

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