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2007 (6) TMI 154 - HC - Income TaxTax not paid against voluntary retirement payment bonafide belief assessee ignorant about introduction of section 35DDA w.e.f. 1.4.01 same was paid as self assessment much before filing of return held that interest on advance tax not payable.
Issues:
Levy of interest under sections 234B and 234C of the Income Tax Act, 1961. Analysis: The case involved an appeal by the Revenue against the order of the Income Tax Appellate Tribunal regarding the levy of interest under sections 234B and 234C of the Income Tax Act. The assessee, a company, had filed its return of income for the assessment year 2001-2002, admitting a total income. The assessment was completed under Section 143(3) of the Act, determining a total income. The issue arose due to the introduction of Section 35DDA by the Finance Act of 2001, effective from 01.04.2001, impacting deductions for Voluntary Retirement Scheme (VRS) payments. The assessee had not paid advance tax, leading to the levy of interest under sections 234B and 234C. The Commissioner of Income-tax (Appeals) upheld the levy, but the Tribunal allowed the assessee's appeal. The Revenue challenged this decision. The Revenue argued that the assessee was not entitled to full deduction on VRS payments due to the new provision under Section 35DDA, justifying the levy of interest. However, the Tribunal considered the legal position before the introduction of Section 35DDA and the binding decisions allowing deductions for VRS payments. The Tribunal noted that the Finance Bill was passed in May 2001, after the relevant assessment year, making it difficult for the assessee to anticipate the change in liability. The assessee had also made a self-assessment tax payment before the due date, demonstrating good faith. The Tribunal concluded that the assessee was not liable to pay advance tax and therefore, interest under sections 234B and 234C was not justified. The High Court upheld the Tribunal's decision, emphasizing that the Tribunal's findings were based on valid evidence and materials. The Court found no error or legal infirmity in the Tribunal's order, leading to the dismissal of the tax case. The Court stated that no substantial question of law arose for consideration, and hence, no costs were awarded.
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