2016 (9) TMI 160 - HC - Income Tax

Waiver of interest u/s 220 - discretionary power - Held that - There is no doubt about the proposition that the interest being charged is compensatory in nature. The power given under sub Section (2A) of Section 220 is to reduce or to waive the interest paid or payable. The reasons to reduce or waive interest, should be either the payment of such amount has caused or would cause genuine hardship, whether the default in payment of the amount on which interest has been paid or was payable was due to the circumstances beyond the control of the assessee and the assessee has co-operated with the enquiry relating to the assessment or any proceeding for the recovery of any amount due from him. All these three conditions have to be satisfied. On facts, it has to be verified whether these conditions have been fulfilled. In Ext.P6 order, it is found that all the conditions under Section 220(2A) for reduction or waiver of interest has been satisfied. This was a case in which payment was already made in instalments and what remained to be paid was a portion of interest. The Commissioner, having arrived at a finding, granted waiver for the balance interest payable i.e. ₹ 11,31,040/- and did not waive the entire interest, though it was found that the petitioner had satisfied all the conditions. As already indicated, statute permits reduction of interest or waiver of interest in full. This is a case in which the Commissioner has found that the interest payable can be waived thereby reducing the quantum of interest. Waiver itself is a discretion to be exercised in terms with the statute, and once such a discretion has been exercised, the scope of judicial review is very limited.

Summary

Issues:
1. Petition seeking waiver of interest under Income Tax Act.
2. Interpretation of Section 220(2A) regarding waiver of interest.
3. Application of genuine hardship criteria for interest waiver.
4. Discretion of Commissioner in granting interest waiver.

Analysis:

1. The petitioner filed a writ petition seeking a direction for the waiver of interest under the Income Tax Act. The assessment order was modified, and the petitioner remitted amounts in instalments. The petitioner applied for waiver of interest under Sections 234A, 234B, and 220(2) of the Act. The 1st respondent granted partial waiver, leading to a dispute over the remaining interest amount of ?15,06,296. The main contention was whether the entire interest should be waived under Section 220(2A) when a waiver is granted.

2. The petitioner argued that when interest is waived under Section 220(2A), the entire interest charged should be waived without any limit. Citing judgments like E.M.Joseph and B.M.Malani, the petitioner emphasized the need for a comprehensive waiver when genuine hardship is proven. However, the Revenue contended that waiver should be based on sufficient cause and after considering all relevant circumstances.

3. The court analyzed precedents like Kerala State Cashew Development Corporation Ltd. and emphasized the importance of genuine hardship criteria for interest waiver. The Apex Court's decision in B.M.Malani highlighted the need to determine genuine hardship objectively, considering the circumstances of the case. The court reiterated that waiver or reduction of interest should be based on valid reasons and not as a matter of course.

4. Examining Section 220(2A), the court noted the conditions for reducing or waiving interest, including genuine hardship, circumstances beyond the assessee's control, and cooperation in assessments. The court found that the Commissioner had properly exercised discretion in granting partial waiver based on the fulfillment of these conditions. The court concluded that the Commissioner's decision to waive a portion of the interest was not arbitrary and did not warrant interference, leading to the dismissal of the writ petition.