2007 (4) TMI 296 - AT - Income Tax

Summary

Issues Involved:
1. Levy of interest u/s 234B(3) beyond the date of payment of tax u/s 140A.
2. Recomputing deduction u/s 80HHC by deducting unabsorbed investment allowance.

Summary:

Issue 1: Levy of Interest u/s 234B(3) Beyond the Date of Payment of Tax u/s 140A

The assessee, a public sector company, challenged the order of the Commissioner of Income-tax (Appeals)-II, Cochin, which confirmed the levy of interest u/s 234B(3) beyond the date of payment of tax u/s 140A. The original assessment was completed u/s 143(3) and subsequently reassessed u/s 147, resulting in an increased tax liability. The controversy centered on whether the self-assessment tax paid u/s 140A should be considered when computing interest payable u/s 234B(3). The Assessing Officer and CIT(A) opined that u/s 234B(3), only subsection (1) was relevant, ignoring subsection (2) which considers tax paid u/s 140A. The Tribunal held that interest should be charged only up to the date the tax was paid u/s 140A, applying the rule of harmonious construction. Thus, the order of the CIT(A) was set aside, and the Assessing Officer was directed to compute interest liability up to the date of payment u/s 140A.

Issue 2: Recomputing Deduction u/s 80HHC by Deducting Unabsorbed Investment Allowance

The assessee contested the CIT(A)'s confirmation of the Assessing Officer's order u/s 154, which reduced the deduction u/s 80HHC by adjusting unabsorbed investment allowance from the assessment year 1990-91. The CIT(A) upheld the Assessing Officer's view, referencing decisions from the Kerala High Court and the Supreme Court, which mandated the set-off of unabsorbed allowances before computing deductions u/s 80HHC. The Tribunal found no merit in the assessee's argument that the issue was debatable and not subject to rectification u/s 154, affirming that the language of the statute was clear. Consequently, the Tribunal dismissed the assessee's contention on this issue.

Conclusion:

The appeal was partly allowed, with the Tribunal directing the reassessment of interest liability u/s 234B(3) considering the tax paid u/s 140A, while upholding the reduction of deduction u/s 80HHC by adjusting unabsorbed investment allowance.