2006 (8) TMI 112 - HC - Income Tax

Even where the assessment was made u/s 115J, interest could be levied u/s 234B and 234C section 115J is no more applicable for assessee for delaying the payment of advance tax

Summary

Issues:
1. Whether interest under Section 234A, 234B, and 234C of the Income Tax Act can be levied in cases where the assessment was based on book profits under Section 115J of the Act?

Analysis:

Issue 1:
The appeal questioned the Tribunal's decision regarding the levying of interest under Sections 234A, 234B, and 234C of the Income Tax Act in a case where the assessment was conducted based on book profits under Section 115J of the Act. The respondent, a closely held company in textiles, filed its return of income admitting Nil total income for the relevant assessment year. The Assessing Officer computed the book profit under Section 115J of the Act, set off certain losses, and determined the total tax liability along with interest under the specified sections. The Commissioner of Income Tax (Appeals) held that interest under the mentioned sections could not be levied when the liability arises under Section 115J. The Tribunal upheld this decision, leading to the appeal by the Revenue.

Issue 1 - Analysis Continued:
The Revenue argued that interest is leviable under the specified sections even if the liability arises during the computation of income under Section 115J. Various court decisions were cited to support this argument, emphasizing that the liability to pay advance tax triggers the interest provisions, irrespective of Section 115J. The High Court considered conflicting judgments from different High Courts and held that interest could indeed be levied even when the assessment was conducted under Section 115J. Additionally, the introduction of Sections 115JA and 115JB further clarified the applicability of advance tax provisions to companies falling under those sections, removing the availability of Section 115J for delaying advance tax payments.

Conclusion:
The High Court ruled in favor of the Revenue, allowing the appeal and holding that interest under Sections 234A, 234B, and 234C of the Income Tax Act can be levied even in cases where the assessment is based on book profits under Section 115J. The judgment considered various legal precedents and the introduction of new sections to support this decision, emphasizing the importance of timely advance tax payments and the applicability of interest provisions regardless of the assessment method used.