2006 (1) TMI 221 - AT - Income Tax

Minimum Alternate Tax - Profit Loss Account - interest on income-tax - terms income-tax - HELD THAT - The terms income-tax interest penalty and fine as used in the Income-tax Act carry different meanings and connotations. In this connection the provisions of section 156 are quite relevant. According to section 156 where any tax interest penalty fine or any other sum is payable in consequence of any order passed under the Income-tax Act the Assessing Officer is required to serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable. Two propositions clearly emerge from the provisions of section 156. First proposition is that the terms income-tax interest penalty and fine are neither inter-changeable nor overlap with each other in their meaning. Second proposition which emerges from section 156 is that the phrase sum so payable as used therein includes not only income-tax but also interest penalty and fine or any other sum which is found to be payable in consequence of any order passed under the Income-tax Act. The provisions of section 156 clearly highlight the fact that income-tax interest penalty and fine are distinct terms and that the term tax does not include interest penalty and fine . In our humble view interest on income-tax clearly falls outside the scope of the term income-tax as used in Explanation (a) to sub-section (2) of section 115JA. Wherever the intention was to include interest the Legislature has specifically provided as in section 156 for inclusion of interest in the phrase sum payable . No provision of law has been brought to our notice to show that the term income-tax has been defined to include interest within its ambit. We are therefore unable to artificially extend the scope of income-tax used in Explanation (a) to sub-section (2) of section 115 JA so as to include interest on income-tax also. Thus the appeal filed by the assessee is allowed.

Summary

Issues:
Interpretation of term "income-tax" in Explanation (a) to sub-section (2) of section 115JA - whether it includes interest on income-tax.

Analysis:
The appeal involved a dispute regarding the interpretation of the term "income-tax" in Explanation (a) to sub-section (2) of section 115JA of the Income-tax Act, 1961. The assessee objected to the enhancement of book profit by including interest paid on income-tax, contending that interest on income-tax was not part of income-tax as defined in section 2(43) of the Act. The Assessing Officer had increased the book profit by the amount of interest on income-tax, leading to a demand for additional tax. The learned Commissioner of Income-tax (Appeals) upheld the Assessing Officer's decision, stating that income tax commonly includes interest on income-tax. The Commissioner reasoned that interest on income-tax is always considered part of the liability towards income tax and is added back when computing income chargeable to tax. The Commissioner found no ambiguity in considering interest on income-tax as part of income tax. However, the authorized representative for the assessee argued that the term "income-tax" in Explanation (a) to sub-section (2) of section 115JA should not include interest on income-tax, as these terms have distinct meanings and are treated differently in the Income-tax Act.

The Tribunal analyzed the statutory provisions and legal principles to determine the scope of the term "income-tax" in the context of the case. It noted that while income-tax is charged under section 4 of the Income-tax Act at specified rates, interest is charged under separate provisions of the Act. The Tribunal highlighted the distinct purposes and treatment of income-tax and interest, emphasizing that they cannot be equated. It observed that the term "income-tax" and "interest" have acquired separate meanings and are understood differently in the legal framework. The Tribunal applied the rule of interpretation that words in technical legislation like the Income-tax Act are assumed to be used in their technical meaning. It concluded that interest on income-tax falls outside the scope of the term "income-tax" in Explanation (a) to sub-section (2) of section 115JA. The Tribunal found no provision defining "income-tax" to include interest and therefore allowed the appeal filed by the assessee, holding that interest on income-tax should not be considered part of income tax for the purpose of computing book profit under section 115JA.

In summary, the Tribunal's decision clarified the distinction between income-tax and interest on income-tax, emphasizing that interest should not be included in the term "income-tax" for the purpose of calculating book profit under section 115JA of the Income-tax Act, 1961. The judgment provided a detailed analysis of the statutory framework and legal principles to support its interpretation of the term "income-tax" in the relevant provision, ultimately ruling in favor of the assessee and allowing the appeal.