2022 (12) TMI 1462 - HC - Income Tax

Recovery of Tax - waiver of interest - CIT had partially allowed the claim of the petitioner for waiver of interest charged under Section 220(2) - quantum of depreciation on theatre building - As in the two assessment years, the assessee had claimed 15% and 25% respectively, depreciation was allowed by the Assessing Officer to the extent of 10 per cent. only in the two orders of assessment HELD THAT - As decided in Anand Theatres 2000 (5) TMI 4 - SUPREME COURT .a building used for running of a hotel or carrying on cinema business could not be held to be a plant.Thus the question decided in favour of the Revenue and against the assessee by holding that the building which is used as a hotel or as a cinema theatre cannot be given depreciation as a plant. For the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or Commissioner to exercise jurisdiction under Sub-Section (2A) for reduction or waiver of interest, the said authority must be satisfied that Payment of such amount would cause or has caused genuine hardship to the assessee, Default in the payment of the amount on which interest has been paid or was payable under Sub-Section (2) of Section 220 was due to circumstances beyond the control of the assessee and assessee had co-operated in any enquiry relating to the assessment or any proceeding for the recovery of any amount due from him. Considering the status of the petitioner, a view can be taken that none of the above pre-conditions were attracted in its case. Nonetheless substantial relief has been granted by the CIT/1st respondent. Writ petition dismissed considering the status of the assessee, none of the preconditions mentioned in section 220(2A) were satisfied in its case. No good ground to interfere with the order passed by the Commissioner granting partial waiver of interest.

Summary

Issues:
Assailing legality and validity of the order dated 17.09.2002 passed by the 1st respondent under Section 220(2A) of the Income Tax Act, 1961.

Analysis:

1. Background of the Case:
The petitioner, a company engaged in processing and printing cinematographic films, contested the assessment orders for the years 1991-92 and 1993-94, where the assessing officer restricted depreciation claims on the theatre building. Appeals were made to the CIT(A) and subsequently to the Tribunal, which ruled in favor of the Revenue based on the Supreme Court judgment in Commissioner of Income Tax, Trivandrum v. Anand Theatres.

2. Order of the 1st Respondent:
The 1st respondent partially allowed the petitioner's claim for waiver of interest under Section 220(2) for the period between the orders of the CIT(A) and the Tribunal. The interest was waived for the intervening period between the decisions of the CIT(A) and the Supreme Court, based on the Anand Theatres case.

3. Legal Provisions - Section 220 of the Income Tax Act:
Section 220 deals with default in tax payment and the levy of interest. Sub-Section (2) imposes simple interest if the tax amount is not paid within the specified period. Sub-Section (2A) empowers authorities to reduce or waive interest under specific conditions, ensuring genuine hardship, circumstances beyond control, and cooperation in proceedings.

4. Judicial Interpretation - Anand Theatres Case:
The Supreme Court in the Anand Theatres case clarified that buildings used for hotels or cinema theaters do not qualify for depreciation as plants under Section 32 of the Act. The judgment emphasized the distinction between buildings and plant/machinery for depreciation purposes.

5. Decision of the High Court:
The High Court upheld the 1st respondent's order, citing no grounds for interference. The court acknowledged the substantial relief granted despite the petitioner's failure to meet the pre-conditions for interest waiver under Section 220(2A). The writ petition was dismissed with no costs awarded.

In conclusion, the High Court's judgment affirms the 1st respondent's decision to partially allow the petitioner's claim for interest waiver, based on the legal provisions of Section 220 and the judicial interpretation in the Anand Theatres case. The court found no justification to overturn the order, leading to the dismissal of the writ petition.