2010 (6) TMI 244 - HC - Income Tax

Advance Tax - The Chief Commissioner and Director General of Income Tax (Exemptions) have got jurisdiction to waive or reduce the interest in pursuance of the Circular-cum-notification dated May 23, 1996, if the request of the assessee fall within the category 2(a) to(e) of the circular. Held that - it had been rightly pointed out by Director General of Income Tax (Exemptions) that the case of the did not fall under the said clause, on the ground that assessee had not brought any High Court or Supreme Court order holding that it was entitled for the waiver of interest. Thus Director General of Income Tax (Exemptions) right in rejecting the application for waiver of interest.

Summary

Issues:
1. Appeal against order passed by learned single judge in W. P. No. 11966 of 2006.
2. Interpretation of circular-cum-notification dated May 23, 1996 regarding waiver of interest under sections 234A, 234B, and 234C of the Income-tax Act, 1961.

Analysis:
1. The appeal was filed against the order of the learned single judge in W. P. No. 11966 of 2006. The respondent, an association, obtained registration as a charitable trust under section 12A(1)(a) of the Income-tax Act, 1961. The Income-tax Appellate Tribunal had earlier allowed exemption under section 11 of the Act for the respondent. However, due to a court judgment, the Department issued notices for assessment years 1994-95 to 1997-98, leading to revised returns by the respondent. The respondent later sought waiver of interest under sections 234B and 234C, which was rejected by the Director General of Income-tax (Exemptions). The learned single judge allowed the writ petition, but the appellants challenged this decision.

2. The key contention was the interpretation of the circular-cum-notification dated May 23, 1996, regarding the waiver of interest. The appellants argued that the respondent's case did not fall under the categories specified in the circular, and the Director General rightly rejected the waiver request. They relied on a Supreme Court decision emphasizing the limited scope of the circular. The respondent, however, supported the learned single judge's decision. After examining the circular, the court found that the respondent's case did not fit within the specified categories for interest waiver. The court noted that the Tribunal's decision did not automatically entitle the respondent to waiver under the circular. As this crucial aspect was not highlighted during the initial proceedings, the court concluded that the learned single judge's decision was not sustainable.

3. Consequently, the court partially allowed the appeal, setting aside the learned single judge's order. The respondent was directed to file an application before the Central Board of Direct Taxes for consideration within four weeks. The Central Board of Direct Taxes was instructed to review the application impartially and make a decision within three months, disregarding the court's observations. All arguments raised by both parties were left open for further consideration.

This detailed analysis outlines the issues raised in the judgment, the arguments presented by both parties, and the court's decision based on the interpretation of the relevant legal provisions and precedents.