2009 (1) TMI 6 - HC - Income Tax

Whether Tribunal was right in holding that interest under Section 234B and 234C was leviable in case of computation of income under the provisions of Section 115JA - assessee contend that in a case of computation of income u/s 115JA, Section 234B and 234C are not leviable book profit - question is answered in the negative against the Revenue and in favour of the assessee

Summary

Issues:
1. Interpretation of provisions of Section 115JA of the Income Tax Act regarding the leviability of interest under Section 234B and 234C.

Analysis:
The High Court analyzed the appeal against the order dismissing the appeal of the assessee by the C.I.T. (Appeals). The main question raised was whether interest under Section 234B and 234C was applicable in the computation of income under Section 115JA of the Income Tax Act. The assessee argued that in cases under Section 115JA, these provisions were not leviable. However, the court referred to the case law of C.I.T. vs. Kotak Mahindra Finance Ltd. and held that the provisions of Section 234B and 234C are attracted even in cases falling under Section 115J. The court emphasized that advance tax is payable during any financial year in respect of the "current income," which includes the total income under the Income Tax Act, including Section 115J. The interest under Section 234B and 234C was deemed compensatory and not penal, applicable in cases of non-payment or short payment of tax on the current income accrued to the assessee for the previous year. The court disagreed with the judgment of the Karnataka High Court in Quality Biscuits Ltd. v. CIT and held that the judgment of a coordinate Bench should have been followed.

The Karnataka High Court held that tax under Section 115J is levied after computing the profit under the Income Tax Act and determining the book profit as per Section 115J. The liability arises if the total income is less than 30% of the book profits. The High Court further explained that the determination of total income and book profit can only occur after the relevant assessment year, and the liability under Section 115J applies to deemed income. The court emphasized that the provisions of Sections 207, 208, 209, or 210 cannot be applied until the accounts are audited and the balance sheet is prepared, as the liability arises after determining book profits as per the Companies Act. Therefore, the court held that interest could not be charged under Section 234B and 234C in the case under Section 115JA.

The court considered the dismissal of Special Leave Petitions by the Supreme Court and discussed the doctrine of merger. It concluded that since the Supreme Court dismissed the appeals, the judgment of the Karnataka High Court was affirmed, making it binding. Therefore, the court allowed the appeal, answering the framed question against the Revenue and in favor of the assessee.