2016 (11) TMI 1011 - HC - Income Tax

Interest for deferment of advance tax - mandation of interest levy - Held that - Once it is held that interest under Section 234C of the Act, is mandatory and automatic, then the reason, or the cause for the delay and justification for deferment of payment of advance tax, is immaterial. The assessee has to pay tax in advance, in respect of total income which would be chargeable to tax for the assessment year immediately following the financial year. The assessee has to estimate the income and pay the tax in three installments, as stated above. The fact that an unanticipated income accrued in the last financial year, cannot be a ground not to pay advance tax with regard to the returned income, which includes the total income, on which tax is chargeable and on the failure to pay the advance tax, in instalments as provided for, under the Act or when the less amount is paid, the assessee is liable to pay interest. Line of judgments indicate that Section 234C of the Act is mandatory, unlike earlier provisions. No discretion is left to the authority, except in those cases, for which, provision has been made under Section 234(C) of the Act. Section 234C of the Act is applicable to cases, where there is shortfall in the making of payment, by the assessee, on the returned income, whether it be on account of underestimate or failure to estimate the amount of capital income or the income of the nature referred to in sub-clause (ix) of clause (24) of Section 2 of the Act; except in the case of income from any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from any gambling or betting of any form or nature whatsoever.

Issues Involved:
1. Disallowance of amortization of leasehold land.
2. Disallowance under Section 14A read with Rule 8D.
3. Disallowance of advertisement expenditure.
4. Denial of deductions under Chapter VIA.
5. Denial of additional TDS claim.
6. Levy of interest under Section 234C.

Issue-wise Detailed Analysis:

1. Disallowance of Amortization of Leasehold Land:
The Deputy Commissioner of Income Tax disallowed the amortization of the amount paid in respect of leasehold land amounting to ?947,146. The appellant challenged this disallowance but the specifics of the arguments or the court's reasoning on this issue are not detailed in the judgment.

2. Disallowance under Section 14A read with Rule 8D:
An amount of ?1,92,63,136 was disallowed under Section 14A read with Rule 8D as the expenditure incurred for earning income exempt under the Act. This amount was added to the total income. The appellant contested this addition, but the judgment does not provide further elaboration on the court's analysis or decision on this specific issue.

3. Disallowance of Advertisement Expenditure:
The expenditure of ?2,45,00,000 incurred in promoting the MRF Pace Foundation as advertisement expenditure for the promotion of the company’s brand image was disallowed on the grounds that it was not for business purposes and was of a charitable nature. The appellant argued against this disallowance, but the judgment does not delve into the court's reasoning or conclusion on this matter.

4. Denial of Deductions under Chapter VIA:
The deductions under Chapter VIA, specifically ?19,19,096 under Section 80JJAA and ?1,17,500 under Section 80G, were denied as they did not appear in the e-return, even though the tax was computed on the total income after considering these deductions. The appellant raised this issue, but the judgment does not specify the court's detailed analysis or decision on this point.

5. Denial of Additional TDS Claim:
The additional TDS claim of ?4,20,981 for TDS certificates filed during the course of the assessment was denied. The appellant contested this denial, but the judgment does not elaborate on the court's reasoning or conclusion on this issue.

6. Levy of Interest under Section 234C:
The core issue addressed in detail was the levy of interest under Section 234C, amounting to ?86,31,067, as against ?68,87,057 calculated in the return. The appellant argued that the deferment in payment of advance tax was beyond their control due to an unexpected favorable Supreme Court judgment on 21.09.2006, which resulted in an exceptional income of ?36.41 Crores. The appellant contended that Sections 234B and 234C operate differently and that the deferment was due to unanticipated income, thus, interest under Section 234C should not be levied.

The court, however, held that Section 234C is mandatory and automatic, and the reasons for deferment are immaterial. The court cited various precedents, including the Supreme Court's decision in CIT v. Anjum M.H. Ghaswala, which emphasized that the interest provisions under Sections 234A, 234B, and 234C are compensatory and not penal in nature. The court concluded that the levy of interest under Section 234C is justified, as the statute does not provide exceptions for unanticipated income except for capital gains and certain specified incomes.

Conclusion:
The court dismissed the appeal, upholding the levy of interest under Section 234C as mandatory and automatic, and ruled that the appellant's arguments did not warrant any deviation from the statutory provisions. The substantial question of law was answered in the negative, against the appellant. The judgment does not provide detailed analysis or conclusions on the other disallowances and claims contested by the appellant.

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