2008 (8) TMI 532 - HC - Income Tax

Book Profit Interest Assessee filed its return for the assessment year 1999-2000 claiming a deduction in respect of expenditure incurred on account of voluntary separation scheme. The Assessing Officer allowed only a certain amount and disallowed the balance for the purpose of computation of book profit u/s 115JA of the Act, because it was in the nature of provision only. The Tribunal confirmed the deletion of addition but allowed the cross objection in favour of the assessee in the matter of levy of interest. Held that- the order of Tribunal as well as Commissioner (Appeals) and the Assessing Officer were already set aside by the Court in the Assessee s own case. Therefore, the question raised by the Revenue for maintaing its appeal no longer existed the matter was directed to be considered afresh.

Summary

Issues:
1. Disallowance of expenditure for MAT calculation.
2. Levy of interest under section 234D.
3. Validity of notice under section 143(2).

Issue 1: Disallowance of expenditure for MAT calculation

The case involved an appeal by the Revenue against the order of the Income-tax Appellate Tribunal regarding the disallowance of a portion of the expenditure claimed by the assessee for the assessment year 1999-2000. The assessee had filed a return claiming expenditure on account of a voluntary separation scheme, out of which a specific amount was towards replenishment of a gratuity fund. The Assessing Officer allowed only a part of the claimed expenditure, disallowing the rest for the purpose of Minimum Alternate Tax (MAT) calculation, considering it as a provision. The Commissioner of Income-tax (Appeals) later allowed the appeal in favor of the assessee, stating that the provision made by the assessee was towards an ascertained liability. The Income-tax Appellate Tribunal upheld the order of the Commissioner of Income-tax (Appeals) on this issue, leading to the Revenue filing an appeal before the High Court. However, the High Court dismissed the appeal, stating that the matter had to be reconsidered afresh by the Assessing Officer, rendering the question of law raised for maintaining the appeal irrelevant.

Issue 2: Levy of interest under section 234D

Another aspect of the case involved the levy of interest under section 234D. The Assessing Officer had levied interest under this section while giving effect to the order disallowing a portion of the expenditure claimed by the assessee. The Commissioner of Income-tax (Appeals) had also upheld the levy of interest. However, the Income-tax Appellate Tribunal, following a decision from the Delhi Bench in a similar case, decided the issue in favor of the assessee. The High Court, considering the overall circumstances and remanding the matter to the Assessing Officer for fresh assessment, did not specifically address the levy of interest under section 234D in its judgment, as the entire matter was directed to be reconsidered afresh.

Issue 3: Validity of notice under section 143(2)

The High Court referred to a previous judgment in the assessee's own case, where it was held that the notice issued could not be treated as a notice under section 143(2). The court remanded the matter to the Assessing Officer, leaving all issues open for fresh consideration after issuing a proper notice and providing an opportunity to the assessee. This decision was relevant in the current case as well, where the High Court dismissed the appeal by the Revenue, stating that the order of the Tribunal and other authorities had been set aside, and the matter needed to be reconsidered afresh. Consequently, the issue regarding the validity of the notice under section 143(2) became a crucial factor in the overall judgment rendered by the High Court.

In conclusion, the High Court's judgment addressed various issues related to the disallowance of expenditure for MAT calculation, the levy of interest under section 234D, and the validity of the notice under section 143(2). The court emphasized the need for a fresh assessment by the Assessing Officer, rendering specific issues raised in the appeal irrelevant.