2008 (2) TMI 396 - HC - Income Tax

Revenue challenging the order of the Tribunal cancelling the interest levied u/s 234B and 234C for non-payment/short payment of advance tax on 30 per cent. of the book profit as deemed income assessed u/s 115J there is no provision either under Chapter XVII or Chapter XII-B requiring the assessee to estimate book profit and to remit advance tax thereon - the provision for advance tax under Chapter XVII do not have any application for the tax payable u/s 115J - Revenue appeal dismissed tribunal s order is upheld

Summary

Issues:
- Challenge to the order of the Tribunal cancelling interest levied under sections 234B and 234C of the Income-tax Act, 1961, for non-payment/short payment of advance tax on 30% of the book profit as deemed income assessed under section 115J of the Act.

Detailed Analysis:

Issue 1: Interest Levied under Sections 234B and 234C
The appeal filed by the Revenue challenged the Tribunal's order cancelling the interest levied under sections 234B and 234C of the Income-tax Act for non-payment/short payment of advance tax on 30% of the book profit as deemed income under section 115J. The Assessing Officer had levied interest after determining the tax payable, but the Tribunal cancelled it based on a decision of the Karnataka High Court. The main issue was whether interest is leviable under sections 234B and 234C on non-payment of advance tax on 30% of book profit deemed income under section 115J.

Issue 2: Interpretation of Precedents
The court considered conflicting decisions from various High Courts. While the Karnataka High Court's decision was confirmed by the Supreme Court, the Madras High Court and others held that interest is payable under sections 234B and 234C. The appellant relied on these decisions to argue that advance tax is payable on book profit deemed income under section 115J. However, the respondent heavily relied on the Karnataka decision, emphasizing that the Supreme Court's dismissal of a civil appeal made it a binding precedent.

Issue 3: Advance Tax on Deemed Income
The court analyzed the provisions of advance tax under Chapter XVII of the Act. It noted that advance tax is payable on income earned during the previous year, as specified in sections 207 to 211. The court highlighted that Chapter XVII does not address deemed income under section 115J, which is determined differently. The court emphasized that the provisions for advance tax are based on estimated income computed by the assessee, whereas assessment under section 115J is based on actual income without any provision for estimating book profit and paying advance tax on it.

Conclusion:
The court dismissed the appeal, upholding the Tribunal's decision to cancel the interest levied under sections 234B and 234C on the tax assessed under section 115J. The court reasoned that the provisions for advance tax do not apply to income assessable under section 115J, as it is based on actual income without provisions for estimating book profit. The court's decision was influenced by the Karnataka High Court's ruling, which was considered a binding precedent despite conflicting decisions from other High Courts.