2019 (9) TMI 1239 - HC - Income Tax

Adjustment towards interest payable u/s 234B(2)(ii) - filing return of income i.e. when payment of Self-Assessment Tax u/s 140A is required to be made - whether the AO was correct in computing interest on the date of payment of taxes by the assessee and adjusting the amount so paid towards interest? - HELD THAT - As per section 140A of the Act where any tax is payable on the basis of any return, the assessee shall be liable to pay such tax together with interest and the return is required to be accompanied by proof of payment of such tax and interest. Thus, the computation of interest and liability to pay such interest arises at the time of filing return. The Explanation below this Section 140A of the Act in fact supports the above interpretation. As per this explanation, where the amount paid by the assessee under this section falls short of the aggregate of the tax and interest, the amount so paid shall first be adjusted towards the interest payable and the balance shall be adjusted towards the tax payable. The amount paid here will be the aggregate of the amount paid under this section not the individual amount. This exercise is to be done at the time when the return is being filed so that in case any assessee has not paid the full amount i.e. tax and interest then, the amount paid shall first be adjusted towards interest and liability to pay interest on balance tax shall continue. The judgment delivered in the case of M/s Patson Transforms Ltd. Vs. DCIT 2005 (11) TMI 388 - ITAT AHMEDABAD relied upon by the CIT (Appeals) and the Tribunal has examined this issue in detail with example. We are in agreement with the conclusion of CIT(Appeals) and the Tribunal based on the above judgment. Question answered in favour of the assessee and against the Revenue.

Summary

Issues:
1. Questions of law involving ITA Nos. 336, 362, and 367 of 2015.
2. Interpretation of provisions under the Income Tax Act, 1961 regarding advance against depreciation.
3. Treatment of tariff adjustments as unascertained liability.
4. Disallowance of provisions for gratuity, leave encashment, and other benefits.
5. Depreciation claimed on land under Companies Act.
6. Application of M/s Apollo Tyres case in book profit computation.
7. Calculation of interest under Section 234B of the Income Tax Act.

Analysis:
1. The judgment addresses multiple questions of law raised in ITA Nos. 336, 362, and 367 of 2015 concerning the Income Tax Act, 1961. The primary issue revolves around the treatment of advance against depreciation, where the appellant-revenue challenges the Tribunal's decision regarding the addition of income received in advance under different sections of the Act.
2. The court deliberates on the interpretation of provisions related to advance against depreciation, emphasizing the distinction between income received in advance and its treatment as business income subject to taxation. The judgment cites the Supreme Court's decision and scrutinizes the Tribunal's reasoning to determine the correct application of the law in the case at hand.
3. Another crucial aspect involves the treatment of tariff adjustments as unascertained liability, where the court examines the factual background and the approval process by the Central Electricity Regulatory Commission (CERC) to ascertain the liability status during the relevant assessment year.
4. The judgment also addresses the disallowance of provisions for gratuity, leave encashment, and other benefits, emphasizing the necessity of establishing the nature of these provisions as ascertained to warrant their inclusion or exclusion in the computation of book profits under section 115JB.
5. Furthermore, the court evaluates the claim of depreciation on land after amortization, highlighting the provisions of the Companies Act and the absence of a specified rate of depreciation for land, leading to a detailed analysis of the correctness of claiming such depreciation.
6. The application of the decision in the case of M/s Apollo Tyres in book profit computation is examined concerning the adherence to the provisions of the Companies Act and the eligibility of certain depreciation claims, providing a nuanced analysis of the legal precedent's relevance in the present scenario.
7. Lastly, the judgment delves into the calculation of interest under Section 234B of the Income Tax Act, focusing on the timing of interest computation and payment adjustments, citing relevant provisions and precedents to elucidate the correct methodology for determining the interest payable by the assessee. The court ultimately rules in favor of the assessee based on the interpretation of Section 140A and relevant explanations, upholding the decisions of the CIT(A) and the Tribunal in this regard.