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2018 (5) TMI 1268 - HC - Income TaxTax liability arising due to MAT provisions - Levy of interest u/s 234B and 234C, while computing the MAT under the deeming provisions of Section 115J - Held that - The Hon ble Supreme Court, in the case of Rolta India Ltd., (2011 (1) TMI 5 - SUPREME COURT OF INDIA) considered the correctness of an order passed by the Karnakata High Court in the case of Kwality Biscuits (supra) and took into consideration various decisions of the other High Courts and held that the decision of the Karnataka High Court in the case of Kwality Biscuits Ltd. (1999 (11) TMI 48 - KARNATAKA High Court) stood affirmed by the intra Court 2006 (4) TMI 121 - SUPREME Court and held that interest under Sections 234 B and 234 C shall be payable on failure to pay advance tax in respect of tax payable under Section 115 JA/115 JB In the light of the law laid down by the Hon ble Supreme Court in the case of Rolta India Ltd., (2011 (1) TMI 5 - SUPREME COURT OF INDIA) we have to necessarily hold that the Division Bench of this Court in the case of Geetha Ramakrishna Mills Pvt. Ltd. (2006 (8) TMI 112 - MADRAS HIGH COURT), does not lay down the correct legal principle that that, interest under Sections 234 A, 234 B and 234 C can be levied even if income is computed under Section 115 J. We may hasten to add that the Division Bench in Geetha Ramakrishna Mills Pvt. Ltd s case (supra), opined that the Appeal filed by the Revenue against the judgement of the Karnataka High Court in the case of Kwality Biscuits Ltd., (1999 (11) TMI 48 - KARNATAKA High Court) was dismissal simpliciter (2006 (4) TMI 121 - SUPREME Court) and would not be a declaration of the law. However, as pointed out by us earlier, it were the Civil Appeals, which were dismissed by the Hon ble Supreme Court and not the Special Leave Petitions. Decided in favor of assessee.
Issues Involved:
1. Levy of interest under Sections 234B and 234C while computing Minimum Alternate Tax (MAT) under Section 115J of the Income Tax Act. Issue-wise Detailed Analysis: 1. Levy of Interest under Sections 234B and 234C: The primary issue in this case was whether interest under Sections 234B and 234C of the Income Tax Act could be levied while computing the Minimum Alternate Tax (MAT) under the deeming provisions of Section 115J. Background: The assessment for the year 1990-91 was completed by the respondent on 10.01.1995 under Section 143(3) read with Section 147 of the Act, with a total taxable income of ?23,16,306/- under Section 115J. The respondent levied interest under Section 234B, which was upheld by the Commissioner of Income Tax (Appeals) [CIT (A)]. The Tribunal also upheld this decision, relying on the Division Bench decision in CIT (A) Vs. Geetha Ramakrishna Mills Pvt. Ltd., which allowed the levy of interest under Sections 234A, 234B, and 234C even if income is computed under Section 115J. Appellant's Argument: The appellant/assessee argued that the decision in Geetha Ramakrishna Mills Pvt. Ltd. was incorrect, citing the Supreme Court's decision in Joint Commissioner of Income Tax Vs. Rolta India Ltd., which relied on the Karnataka High Court's decision in Kwality Biscuits Ltd. Vs. CIT. The appellant contended that no interest is payable under Sections 234B and 234C as book profits under Section 115J can only be determined after the end of the financial year, making the provisions of Sections 207, 208, or 209 inapplicable. Respondent's Argument: The learned Standing Counsel for the Revenue argued that the Division Bench decision in Geetha Ramakrishna Mills Pvt. Ltd. was applicable, which considered and rejected the Karnataka High Court's decision in Kwality Biscuits, instead following decisions from other High Courts that supported the levy of interest. Court's Analysis: The Court noted the Supreme Court's decision in Rolta India Ltd., which affirmed the Karnataka High Court's decision in Kwality Biscuits, holding that interest under Sections 234B and 234C is not leviable when income is computed under Section 115J, as the entire exercise of computing income or book profits could only be done at the end of the financial year. The Supreme Court's decision clarified that Sections 234B and 234C are not applicable until the accounts are audited and the balance sheet is prepared. Conclusion: The Court concluded that the decision in Geetha Ramakrishna Mills Pvt. Ltd. does not lay down the correct legal principle. The Supreme Court's affirmation of the Karnataka High Court's decision in Kwality Biscuits, as well as the subsequent decision in Rolta India Ltd., overrules the Division Bench decision in Geetha Ramakrishna Mills Pvt. Ltd. Therefore, the Court held that interest under Sections 234B and 234C is not chargeable when income is assessed under Section 115J. Judgment: The Tax Case Appeal filed by the appellant/assessee was allowed. The substantial question of law was answered in favor of the appellant/assessee and against the Revenue. No costs were awarded.
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