2015 (5) TMI 480 - HC - Income Tax

Interest under Section 234C - whether the second respondent is justified in declining the request made by the petitioner for waiver of interest in exercise of his authority under Section 119? Held that - The second respondent is empowered and authorised to waive interest payable by the petitioner under Section 234C of the Act only if the case of the petitioner falls under specied two classes of cases but the petitioner has no case that its case would fall under the said classes of cases which read thus (b) Any income chargeable to income-tax under any head of income, other than Capital Gains is received or accrued after due date of payment of the first or subsequent instalments of advance tax which was neither anticipated nor was in the contemplation of the assessee, and the advance tax on such income is paid in the remaining instalment or instalments, and the Chief Commissioner/Director General is satisfied on the facts and circumstances of the case that this is a fit case for reduction or waiver of the interest chargeable under section 234C of the Income-tax Act. (c) Where any income was not chargeable to income-tax in the case of an assesse on the basis of any order passed by the High Court within whose jurisdiction he is assessable to income-tax, and as a result, he did not pay income-tax in relation to such income in any previous year, and subsequently, in consequence of any retrospective amendment of law or the decision of the Supreme court of India, or as the case may be, a decision of a larger Bench of the jurisdictional High Court(which was not challenged before the Supreme Court and has become final), in any assessment or re-assessment proceedings the advance tax paid by the assessee during such financial year is found to be less than the amount of advance tax payable on his current income, and the assessee is chargeable to interest under section 234B or section 234C, and the Chief Commissioner/Director General is satisfied that this is a fit case for reduction or waiver of such interest.- Decided against assessee.

Summary

Issues:
Challenge to order passed by second respondent under Section 119(2)(a) of the Income Tax Act, 1961 for waiver of interest under Section 234C.

Analysis:
The petitioner, a public sector undertaking, filed returns for the assessment year 1990-91, claiming carried forward loss and offering book profit for taxation under Section 115J of the Act. The first respondent levied interest under Section 234C due to a shortfall in advance tax payment. Despite challenging the assessment order, the interest levy was upheld by the appellate authorities. The petitioner then sought waiver of interest under Section 234C from the second respondent, who dismissed the petition citing the upheld decision by the appellate authority and the Tribunal. The second respondent also noted that the case did not fall under the specified classes for waiver as per the Central Board of Direct Taxes notification dated 26/6/2006.

The petitioner contended, based on a Karnataka High Court decision, that interest under Section 234C is not applicable as book profit cannot be determined before the end of the assessment year. Sections 119(1) and 119(2)(a) of the Act empower the Central Board of Direct Taxes to waive interest under Sections 234A, 234B, and 234C, with other income tax authorities following guidelines issued by the Board. The classes of cases for waiver under Section 234C were specified in the notification dated 26/6/2006, and the petitioner's case did not fall under these classes. The court clarified that the issue was not the liability to pay interest but the authority of the second respondent to decline the waiver request. The cited decision did not pertain to the authority of income tax officers to waive interest under Section 119. As the petitioner's liability under Section 234C was already decided against them in the appeal, the second respondent's order was deemed appropriate, leading to the dismissal of the writ petition.