2005 (8) TMI 281 - AT - Income Tax

Summary

Issues Involved:
1. Challenge to the order of CIT(A) regarding the levy of interest under section 234C of the Income Tax Act.
2. Interpretation of provisions related to Minimum Alternate Tax (MAT) and advance tax liability for the assessment year 1997-98.

Analysis:

Issue 1: Challenge to the order of CIT(A) regarding the levy of interest under section 234C
The appellant objected to the order of CIT(A) upholding the method adopted by the Deputy CIT for computing interest under section 234C of the Income Tax Act. The appellant contended that the levy of interest under section 234C was contrary to facts and prejudicial to them. The CIT(A) dismissed the appeal, stating that the provisions of the Act were to have a retrospective effect, justifying the AO's action. However, the appellant argued that the introduction of MAT on 22nd July 1996 and the applicability of section 115JA from 1st April 1997 meant that the first installment of advance tax due on 15th June 1996 was not applicable to their case.

Issue 2: Interpretation of provisions related to MAT and advance tax liability
The appellant filed their return of income declaring nil income for the assessment year 1997-98. The Assessing Officer (AO) computed the income under section 115JA of the Act and charged interest under section 234C accordingly. The appellant challenged this computation before the CIT(A), arguing that the introduction of MAT on 22nd July 1996 and the applicability of section 115JA from 1st April 1997 meant they were not liable to pay the first installment of advance tax due on 15th June 1996. The Tribunal considered the provisions of section 115JA introduced through the Finance (No.2) Bill, 1996, and concluded that since the appellant's normal income liable to income tax was nil, they were not liable to pay advance tax installments for the assessment year 1997-98. The Tribunal held that the appellant's non-payment of the first installment due on 15th June 1996 did not make them liable to pay interest under section 234C of the Act.

In conclusion, the Tribunal allowed the appeal, reversing the CIT(A)'s order and directing the AO to recompute the appellant's liability to pay interest under section 234C in light of the findings regarding the MAT provisions and advance tax liability for the assessment year 1997-98.