2015 (7) TMI 873 - HC - Income Tax

Interpretation of the provisions of Section 115JA - whether the interest under Sections 234B and 234C is to be charged under Section 143(1)(a) as a prima facie adjustment whereby no such charge made under Section 143(3)? - Held that - The matter is no longer res integra. This Court in Commissioner of Income Tax v. Nahar Spinning Mills Limited, (2011 (7) TMI 961 - Punjab and Haryana High Court) following the judgment of CIT(Joint) v. Rolta India Limited, (2011 (1) TMI 5 - SUPREME COURT OF INDIA ) came to the conclusion that interest under Sections 234B and 234C of the Act would be payable on failure to pay advance tax in respect of tax payable under Section 115JA/115JB of the Act. Thus it is held that the appellant was liable to pay interest under Sections 234B and 234C of the Act in respect of tax determined on the basis of Section 115JA of the Act. Decided against the assessee and in favour of the revenue

Summary

Issues:
Whether interest under Sections 234B and 234C can be charged in respect of income determined based on book profit under Section 115JA of the Income Tax Act, 1961.

Analysis:
The judgment by the PUNJAB AND HARYANA HIGH COURT dealt with ITA Nos.406, 515, and 516 of 2005, where the issue involved was identical in all the appeals. The specific case extracted for reference was ITA No.406 of 2005, where the appellant, M/S Swaraj Mazda Limited, challenged the order passed by the Income Tax Appellate Tribunal for the assessment year 1998-99. The primary questions of law raised by the appellant related to the interpretation of provisions concerning the charging of interest under Sections 234B and 234C in connection with Section 115JA of the Act.

The facts of the case revealed that the appellant filed its income tax return for the relevant year after excluding brought forward losses, resulting in a taxable income below 30% of the book profit. Consequently, the appellant filed the return at a reduced income figure based on Section 115JA of the Act. However, during the processing of the return under Section 143(1)(a) of the Act, the Assessing Officer made adjustments to the income, levied additional tax, and charged interest under Sections 234B and 234C. The appellant contested these adjustments, leading to appeals and subsequent legal proceedings.

The crux of the matter revolved around whether interest under Sections 234B and 234C could be imposed on income determined using the provisions of Section 115JA of the Act. The Court referred to precedent, specifically the case of Commissioner of Income Tax v. Nahar Spinning Mills Limited, and the judgment of the Supreme Court in CIT(Joint) v. Rolta India Limited. The Court, following established legal interpretations, concluded that interest under Sections 234B and 234C would indeed be applicable in cases of failure to pay advance tax related to tax liabilities under Section 115JA/115JB of the Act.

In light of the legal precedents and the interpretation of relevant provisions, the Court held that the appellant was liable to pay interest under Sections 234B and 234C concerning the tax determined based on Section 115JA of the Act. Consequently, the substantial questions of law were decided against the appellant in favor of the revenue, leading to the dismissal of all three appeals (ITA Nos.406, 515, and 516 of 2005).