2007 (7) TMI 382 - HC - Income Tax

Book profit- Whether the Income-tax Appellate Tribunal was justified in holding that no interest under sections 234B and 234C of the Act is leviable once income-tax is determined under section 115J of the Act? Held that- in the light of the decision of Karnataka High Court and the Supreme Court the Income-tax Appellate Tribunal was justified in holding that no interest under sections 234B and 234C of the Act is leviable once the income-tax is determined under section 115J of the Act.

Summary

Issues:
Interpretation of sections 234B and 234C of the Income-tax Act in relation to income determined under section 115J.

Analysis:
The judgment delivered by the High Court of Madhya Pradesh involved the interpretation of sections 234B and 234C of the Income-tax Act, 1961, in the context of income determined under section 115J. The court formulated the substantial question of law as to whether the Income-tax Appellate Tribunal was justified in holding that no interest under sections 234B and 234C of the Act is leviable once income tax is determined under section 115J. The court referred to a previous judgment by the Karnataka High Court in Kwality Biscuits Ltd. v. CIT [2000] 243 ITR 519, where it was held that the provisions of sections 207, 208, 209, or 210 cannot be made applicable until the accounts are audited and the balance-sheet is prepared. The Karnataka High Court's decision was challenged before the Supreme Court, which dismissed the appeals in CIT v. Kwality Biscuits Ltd. [2006] 284 ITR 434. In light of these decisions, the High Court of Madhya Pradesh concluded that the Income-tax Appellate Tribunal was justified in holding that no interest under sections 234B and 234C of the Act is leviable once income tax is determined under section 115J. As a result, the appeal was dismissed.

This judgment clarifies the application of provisions related to interest under sections 234B and 234C of the Income-tax Act when income tax is determined under section 115J. The court's decision was influenced by previous rulings by the Karnataka High Court and the Supreme Court, which emphasized the importance of auditing accounts and preparing balance-sheets before applying certain provisions. The judgment provides guidance on the timing and circumstances under which interest may be levied under the specified sections of the Act. The dismissal of the appeal signifies the court's adherence to the legal principles established in the aforementioned cases and its interpretation of the relevant statutory provisions in the context of the present case.