2008 (7) TMI 390 - HC - Income Tax

Interest for non deposit of advance tax debatable addition held that - Tribunal has observed in its order that the liability for charging interest u/s 215 arose due to addition in total income declared by the assessee and due to acceptance of differences regarding status of the assessee. The Tribunal has further observed, the additions made in the assessment order by the AO were highly debatable and the same were not foreseen at the time of filing the estimate of advance-tax. At the same time, it cannot also be denied the fact that the assessee was under a bona fide belief that its status of a company in which public are substantially interested would be accepted.

Summary

Issues:
1. Whether the Income Tax Appellate Tribunal erred in treating the assessee-company as a Public Limited Company?
2. Whether the Tribunal was correct in deleting the interest charged under Section 215 of the Income-tax Act?

Analysis:

Issue 1:
The High Court heard a Tax Appeal filed by the Revenue against the Income Tax Appellate Tribunal's order for A.Y. 1987-88. The court formulated questions of law, including whether the Tribunal erred in treating the assessee-company as a Public Limited Company. The court noted that a related case (CIT v. Emtici Engineering Ltd.) had already been decided in favor of the assessee regarding the company's status. Following the precedent, the court ruled in favor of the assessee, considering it a company in which the public is substantially interested.

Issue 2:
Regarding the second question of whether the Tribunal was right in deleting the interest charged under Section 215 of the Income-tax Act, the court provided a detailed analysis. The court considered this question consequential to the first issue and decided in favor of the assessee. The Tribunal's decision to delete the interest was based on the assessee's bona fide belief about its status and the debatable nature of the additions made by the Assessing Officer. The court concurred with the Tribunal's view, emphasizing that since the assessee's contention was accepted, there was no basis for charging interest under Section 215. The court also highlighted the possibility of revisiting the interest issue if its decision was challenged at a higher court level. Consequently, the court answered this question in favor of the assessee, aligning it with the decision on the first issue.

In conclusion, the High Court dismissed the Tax Appeal without costs, upholding the decisions in favor of the assessee on both issues based on the precedents and legal reasoning presented during the proceedings.