2021 (3) TMI 471 - AT - Income Tax

Interest charged u/s.234B and 234C - Book profit u/s 115JB - HELD THAT - Interest u/s.234B and 234C of the Act, cannot be levied on the tax payable on the additional book profit. Hence, the Assessing Office is directed to compute interest under Section 234B 234C by excluding the said additional income brought to tax based on the amended provision which came into Statute subsequently. Thus, the Ground No.2 raised by the appellant is hereby allowed. Levy of interest u/s 234B and C on retrospective amendment under section 115 JB - Admittedly, additional income under section 115 JB of the Act came to be computed on account of retrospective amendment made to section 115 JB by Finance Act (No. 2), 2009, with retrospective effect from 01/04/2001, wherein clause (i) was introduced to provide for increase in book profit by the amount set aside for provision in diminution in the value of asset. Since the clause (i) was not on statute book during the relevant assessment year, the assessee did not increase the book profits while estimating the payment of advance tax. Thus no interest shall be chargeable under section 234B and C of the Act on tax liability arising on assessee by virtue of retrospective amendment under section 115 JB. See M/S. NHPC LTD. 2016 (2) TMI 676 - ITAT DELHI

Issues Involved:
1. Deletion of interest charged under sections 234B and 234C of the Income Tax Act.
2. Decision on issues not emanating from the giving effect order.
3. Impact of retrospective amendments on the charge of interest.

Issue-wise Detailed Analysis:

1. Deletion of Interest Charged under Sections 234B and 234C:

The revenue contested the deletion of interest charged under sections 234B and 234C by the CIT(A). The assessee, a private limited company, filed its original return of income on 26/09/2008. Following a search under section 132, the assessee filed a return of income on 30/04/2014. The AO made additions to the book profit and assessed tax payable accordingly. The CIT(A) allowed the assessee’s appeal regarding the computation of interest under sections 234B and 234C, stating that the retrospective amendment by the Finance Act (No. 2), 2009, effective from 01/04/2001, was not in force during the relevant assessment year, and thus, the assessee could not be expected to pay advance tax based on this amendment.

The CIT(A) relied on various judicial precedents, including the judgments of the Hon’ble Calcutta High Court in Emami Limited (337 ITR 470) and the Hon’ble Bombay High Court in CIT vs JSW Energy Ltd. (379 ITR 36), which held that interest under sections 234B and 234C cannot be levied when the liability arises due to a retrospective amendment. The Tribunal upheld the CIT(A)’s decision, emphasizing that the assessee could not be deemed a defaulter for not paying advance tax on income that was not chargeable under the law prevailing at the time.

2. Decision on Issues Not Emanating from the Giving Effect Order:

The revenue argued that the CIT(A) erred in deciding issues not emanating from the giving effect order. The CIT(A) had addressed the computation of interest under sections 234B and 234C, which the revenue claimed was not part of the giving effect order. However, the Tribunal found that the CIT(A) was within its rights to address these issues, as they were directly related to the assessment and computation of tax and interest.

3. Impact of Retrospective Amendments on the Charge of Interest:

The Tribunal extensively discussed the impact of retrospective amendments on the charge of interest under sections 234B and 234C. The retrospective amendment to section 115JB by Finance Act (No. 2), 2009, introduced clause (i) to increase the book profit by the amount set aside for the provision for diminution in the value of assets. The Tribunal noted that since this amendment was not in force during the relevant assessment year, the assessee could not have anticipated this change and, therefore, could not be penalized for not paying advance tax based on this amendment.

The Tribunal cited various judicial precedents, including the decisions of the Hon’ble Karnataka High Court in Sh. Vijay Kumar Saboo (ITA No. 65 and 66 of 2005), the Hon’ble Gujarat High Court in CIT vs National Diary Development Board (397 ITR 543), and the ITAT Delhi bench in NHPC Ltd. vs ACIT (85 Taxmann.com 215), all of which supported the view that interest under sections 234B and 234C cannot be charged when the liability arises due to retrospective amendments.

Conclusion:

The Tribunal upheld the CIT(A)’s decision to delete the interest charged under sections 234B and 234C, stating that the assessee could not be held liable for advance tax on income arising due to retrospective amendments. The revenue's appeal was dismissed, and the CIT(A)’s order was affirmed.

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