1998 (3) TMI 168 - AT - Income Tax

Advance Tax, Scheme Of Amalgamation, Estimate Of Advance Tax, Carry Forward Of Loss, Interest For Failure To Pay

Summary

Issues:
Levy of interest under section 7(c) of the Companies (Profits) Surtax Act, 1964 for non-payment of advance surtax.

Analysis:
The appellant, a public limited company engaged in manufacturing wines, spirits, and trading, appealed against the levy of interest under section 7(c) of the Companies (Profits) Surtax Act, 1964. The appellant initially filed a 'nil' estimate of advance tax under section 7A of the Act in anticipation of a proposed amalgamation with another company. Subsequently, the appellant filed a return showing a surplus, which included setting off accumulated losses from the other company. The Assessing Officer (AO) levied interest under section 7(c) based on the surplus disclosed. The appellant contended that the interest levy was not justified due to the pending amalgamation approval and the belief that no advance surtax was due. The Commissioner of Income Tax (Appeals) upheld the interest levy, leading to the appellant's further appeal.

The appellant's argument was based on the correspondence with tax authorities regarding the amalgamation and the belief that no advance surtax was payable due to pending approvals. The appellant's representative cited case laws to support the contention that interest under section 7(c) should be waived. However, the departmental representative argued that the appellant failed to establish a bona fide belief for non-payment of advance surtax. The Tribunal considered the appellant's filings, the correspondence, and the legal arguments presented.

The Tribunal upheld the AO's decision to levy interest under section 7(c) of the Act. It noted that the appellant's 'nil' estimate did not absolve it from the obligation to pay advance surtax and corresponding interest. The Tribunal differentiated between the case at hand and the case laws cited by the appellant, emphasizing that the appellant's actions did not align with the legal precedents referenced. The Tribunal concluded that the interest levy was justified, considering the appellant's filings, previous tax payments, and the exhaustion of losses and depreciation from the other company. Therefore, the Tribunal dismissed the appeal, affirming the levy of interest under section 7(c) of the Companies (Profits) Surtax Act, 1964.