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2016 (2) TMI 264 - AT - Income TaxInterest under S.234B and S.234C - non payment of advance tax - whether CIT(A) has erred in deleting the interest charged u/s. 234B ? - Held that - We are concerned with the previous year commencing on 1.4.2009 and ending on 31.3.2010. As per the decision in the case of Ajantha Pharma Ltd. V/s. CIT (2010 (9) TMI 8 - SUPREME COURT) assessee was entitled to deduction under S.80HHC for the purpose of computation of book profit under S.115JB of the Act, and therefore, assessee need not have to pay advance tax. It is also not in dispute that the amendment was brought with retrospective effect by the Finance Act, 2010 nullifying the effect of the above Apex Court decision. Thus, prior to 31.3.2010, assessee could not have foreseen the retrospective amendment of law, and hence, assessee company cannot be expected to do the impossibility of paying advance tax as per the law not on the field as on 31.3.2010. Under identical circumstances, courts have held that interest under S.234B and S.234C need not be charged merely because there was variance between book profit computed based on retrospective amendment. The Learned Departmental Representative has not placed any decision of the higher forum wherein a contrary view has been taken on this issue. Having regard to the circumstances of the case, we are of the view that the order passed by the CIT(A) does not call for interference. - Decided against revenue
Issues:
1. Disallowance of interest charged under section 234B of the Income Tax Act. 2. Disallowance of certain deductions under section 80HHC and section 14A of the Act. 3. Disallowance of derivative loss and application of Rule 8D of the IT Rules. Issue 1: Disallowance of interest charged under section 234B: The Revenue appealed against the order of the Commissioner of Income-tax(Appeals) regarding the disallowance of interest charged under section 234B of the Income Tax Act. The Assessing Officer had charged interest under section 234B and 234C after recomputing the book profit due to the retrospective amendment of the law nullifying the deduction under section 80HHC. The assessee argued that the interest should not be charged as it was impossible to pay advance tax based on a law that did not exist at the time. The CIT(A) relied on precedents to support the view that interest arises only upon default and set aside the interest charged by the Assessing Officer. The Tribunal upheld the CIT(A)'s decision, stating that the assessee could not have foreseen the retrospective amendment and should not be penalized for the variance in book profit due to the change in law. Issue 2: Disallowance of deductions under sections 80HHC and 14A: The Assessing Officer disallowed deductions claimed under section 80HHC and disallowed certain expenses under section 14A of the Act. The assessee accepted the disallowance under section 80HHC but contested the disallowance under section 14A. The CIT(A) restricted the disallowance under section 14A to a lower amount, considering the source of investment. The Tribunal upheld the CIT(A)'s decision on the disallowance under section 14A but did not address the disallowance under section 80HHC as the assessee had accepted it. Issue 3: Disallowance of derivative loss and application of Rule 8D: The Assessing Officer disallowed a derivative loss and applied Rule 8D of the IT Rules for certain expenditures. The CIT(A) allowed the derivative loss as the transaction had matured and set aside the disallowance. The Tribunal noted that the Revenue did not appeal on these issues, and therefore, the decisions of the CIT(A) stood. The Tribunal did not interfere with the CIT(A)'s decision on these matters. In conclusion, the Tribunal dismissed the Revenue's appeal against the disallowance of interest charged under section 234B, considering the retrospective nature of the law amendment. The Tribunal upheld the CIT(A)'s decisions on the disallowance of deductions under sections 80HHC and 14A, as well as the treatment of derivative loss and application of Rule 8D, as the Revenue did not challenge these aspects.
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