2020 (1) TMI 1137 - HC - Income Tax

Waiver of interest u/s 12-A of the Interest Tax Act - HELD THAT - The power to grant waiver from payment of interest under the Income Tax Act, 1961 stems from sub-clause (2) (a) to section 119. The Central Board of Direct Taxes has also delegated such powers in certain cases up to particular amount with the Principal/Chief Commissioner of Income Tax. Since Section 119 of the Income Tax Act has not been incorporated in Section 21 of the Interest Tax Act, 1954, the petitioner cannot claim the benefit of the above circular for waiver of interest. Therefore, in absence of any power to grant waiver of interest under the provisions of the Interest Tax Act, 1974, the 1st respondent cannot grant waiver to an assessee under the provisions of the said Act. That apart, the authority has also decided that the petitioner was not entitled for waiver under the said circular since Finance Act No.2 of 1991 had extended the scope of interest tax to cover credit institutions and thus financial companies carrying on high purchase transactions were brought within the ambit of the Interest Tax Act, 1974. The petitioner also filed returns but failed to pay tax on such interest. Though, the 1st respondent has denied the benefit of the above circular on merits, it is evident that the said circular cannot be made applicable to waiver of interest under the provisions of the Interest Tax Act, 1974 in absence of any statutory backup.

Summary

Issues:
Challenge to impugned orders rejecting waiver of interest under Section 12-A of the Interest Tax Act, 1974.

Analysis:
The petitioner challenged the orders passed by the 1st respondent rejecting the waiver of interest under Section 12-A of the Interest Tax Act, 1974 for the Assessment Years 1992-93 to 1998-99. The petitioner contended that the finance charges collected should not be treated as interest for the purpose of interest tax payment based on Circulars issued by the Central Board of Direct Taxes. The petitioner had initially not paid tax on these charges but later accepted liability after reassessment. The petitioner sought waiver of interest based on Circulars and previous court decisions supporting waiver in similar circumstances.

The court considered the provisions of the Interest Tax Act, 1974 and the Income Tax Act, 1961. It noted that Section 119 of the Income Tax Act, which grants power to waive interest, was not applicable to the Interest Tax Act. As a result, the petitioner could not claim the benefit of Circulars issued under the Income Tax Act for waiver of interest under the Interest Tax Act. The court also highlighted that Finance Act No.2 of 1991 extended the scope of interest tax to cover financial companies involved in high purchase transactions, bringing them under the ambit of the Interest Tax Act. The petitioner failed to pay tax on such interest despite filing returns.

The court concluded that the Circulars cited by the petitioner could not be applied for waiver of interest under the Interest Tax Act due to the lack of statutory backing. Therefore, the court found no merit in the writ petitions and dismissed them, along with closing the connected Miscellaneous Petitions. No costs were awarded in this matter.

This detailed analysis of the judgment showcases the court's reasoning behind rejecting the petitioner's request for waiver of interest under the Interest Tax Act, 1974, emphasizing the statutory limitations and the scope of applicable laws and Circulars in such cases.