2012 (9) TMI 512 - AT - Income Tax

Whether interest u/s 234B is chargeable in the case on the revised computation of income at a higher figure made consequent to withdrawal of claim for exemption u/s 80IB(9) in the light of retrospective amendment to section 80IB by Finance Act(2) of 2009 - Held that - Assessee is not liable for interest u/s 234B on ground that assessee had not withheld any money belonging to the Government and the interest payable on account of enhanced compensation was unknown to the assessee on the date of completion of assessment. Therefore, the assessee could not have included the interest received on enhanced compensation in the assessment year while estimating his income for the purposes of calculation of advance tax for the relevant years. Therefore, there was no question of levying interest u/s 234B. See CIT vs. Anand Prakash (2009 (2) TMI 30 - DELHI HIGH COURT) - Decided in favor of assessee

Summary

Issues:
- Appeal against CIT (A) order regarding interest under section 234B
- Claim for deduction u/s 80-IB withdrawn due to retrospective amendment
- Liability for interest u/s 234B after withdrawal of deduction claim

Analysis:
1. The appeal was filed by the Revenue against the CIT (A) order dated 29.07.2011, concerning the withdrawal of a claim for deduction u/s 80-IB by a non-resident company based in the Republic of Panama. The company had initially declared income under section 115JB of the Act but later withdrew its claim for deduction u/s 80-IB due to a retrospective amendment by the Finance Act (No.2) of 2009. The issue revolved around the liability for interest u/s 234B after the withdrawal of the deduction claim.

2. The CIT (A) granted relief to the assessee based on the decision of the jurisdictional High Court in the case of Director of Income Tax vs. Jacabs Civil Incorporated. The Revenue challenged this decision on the grounds that interest under section 234B should be chargeable despite the revised computation of income. The Revenue contended that the assessee would have escaped tax and interest payment if the return had not been scrutinized.

3. The arguments put forth by the Revenue and the assessee focused on the retrospective nature of the amendment to section 80-IB by the Finance Act (No.2) of 2009. The Revenue claimed that interest should be levied as per the provisions of the Act, while the assessee relied on case laws such as Emami Ltd. vs. CIT and Director of Income Tax vs. Jacabs Civil Incorporated to support the non-levy of interest under section 234B in case of a change in law with retrospective effect.

4. The ITAT, after considering the submissions and case laws, held that the assessee, who had filed the return before the retrospective amendment, was not liable for interest u/s 234B. The ITAT referred to the Kolkata High Court and the jurisdictional High Court's decisions to support its conclusion. The ITAT also upheld the CIT (A) findings based on the case law of Mitusubishi Corporation, ultimately dismissing the Revenue's appeal.

5. In conclusion, the ITAT's judgment emphasized that the assessee's liability for interest u/s 234B was negated due to the retrospective nature of the amendment to section 80-IB. The decision was based on legal precedents and upheld the relief granted by the CIT (A) to the assessee, thereby dismissing the Revenue's appeal.