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2019 (1) TMI 1090 - HC - Income TaxLiability to pay interest u/s 234B(2A) - retrospective legislation - whether the Settlement Commission could waive mandatory interest under Section 234 B or under similar provisions, namely Section 234A and Section 234C of the Act? - primary contention of the petitioner is that sub-section (2A) to Section 234 B introduced by the Finance Act, 2015 is not retrospective and would not be applicable as the petitioner had filed the application for settlement before sub-section (2A) to Section 234B was enacted - Held that - Referring to the sub-section (2A) to Section 234B and examine whether same states that it would be applicable to pending proceedings Clause (a) of the said Sub-Section states that where an application under Sub-Section 245C for any assessment year has been made, the assessee shall be liable to pay simple interest at the rate specified for every month or part of the month comprised in the period commencing on 1st day of April of the assessment year and ending with the date of making such application. This refers to the application that has been made. It would apply to all applications that have been made. Clause (b) states that whereas as a result of order of the Settlement Commission in Sub-Section (4) to Section 245D the amount of total income disclosed in the application under Sub-Section (1) to Section 245C is increased, the assessee would be liable to pay simple interest for every month or part of the month comprised in the period commencing from 1st day of April of such assessment year and ending with the date of the order on the amount by which the tax on the total income determined on the basis of such order exceeds the tax on the total income disclosed in the application filed under Sub-section (1) to Section 245C of the Act. The provision clearly uses the present tense i.e. where application under Sub-Section (1) to Section 245C of the assessment year has been made. Clause (a) is therefore clearly intended to cases where application was pending and orders had not been passed when sub-section (2A) to Section 234B was enacted. Clause (b) refers to the date of order i.e. as a result of Sub-Section (4) to Section 245D of the Act, which should be after insertion of sub-section (2A) to Section 234B of the Act. As a sequitur and consequence it would follow that the amendment was intended to apply to all pending proceedings in which orders under Section 245 D(4) are passed after sub-section (2A) was introduced and made part of the Statute. The intendment of the legislature is therefore, clear and it would apply to pending proceedings. Therefore the second principle as per the above dictum is applicable. Accordingly, we hold that sub-section (2A) to Section 234B would be applicable to all proceedings in which orders are pending and /or in which orders under Section 245 D (4) are passed on or after 1st June, 2015. WP dismissed.
Issues Involved:
1. Liability to pay interest under sub-section (2A) of Section 234B of the Income-Tax Act, 1961. 2. Retrospective application of sub-section (2A) to Section 234B. 3. Interpretation and applicability of the Finance Act, 2015. 4. Legal precedents and principles regarding retrospective legislation. Detailed Analysis: Issue 1: Liability to Pay Interest Under Sub-Section (2A) of Section 234B of the Income-Tax Act, 1961 The primary issue in the writ petitions is the liability of the petitioners to pay interest under sub-section (2A) of Section 234B of the Income-Tax Act, 1961. Sub-section (2A) was inserted by the Finance Act, 2015, effective from June 1, 2015. The petitioners had filed applications for settlement before the Settlement Commission prior to the enactment of sub-section (2A). The Settlement Commission, in its final orders, directed the levy of interest on the enhanced amount under sub-section (2A) to Section 234B. The petitioners contend that this provision should not apply to them as it was not in force when they filed their applications. Issue 2: Retrospective Application of Sub-Section (2A) to Section 234B The petitioners argue that sub-section (2A) of Section 234B is not retrospective and should not apply to applications filed before its enactment. They rely on the Supreme Court's interpretation in J.K. Synthetics Limited Vs. Commercial Taxes Officer and Brij Lal and Ors. Vs. Commissioner of Income-Tax, Jalandhar, which held that interest under Section 234B is applicable only up to the stage of Section 245D(1) and not up to the stage of Section 245D(4). The petitioners assert that the levy of interest is substantive and not procedural, and therefore, the new provision should not apply to their cases retrospectively. Issue 3: Interpretation and Applicability of the Finance Act, 2015 The court examined whether the newly inserted sub-section (2A) to Section 234B would apply to pending applications before the Settlement Commission as of June 1, 2015. The court referred to the provisions of Section 234B, which mandates the payment of interest on failure or shortfall in payment of advance tax. The court also considered the Constitution Bench decision in Commissioner of Income Tax Vs. Anjum M.H. Ghaswala & Ors., which held that the Settlement Commission could not waive mandatory interest under Sections 234A, 234B, and 234C of the Act. Issue 4: Legal Precedents and Principles Regarding Retrospective Legislation The court referred to several legal precedents to determine the retrospective application of the new provision. The court cited the Constitution Bench decision in Mohanlal Jain Vs. His Highness Maharaja Shri Sawai Mansinghji, which held that when vested rights are affected, amended law should not be presumed to be retrospective unless the language of the enactment includes pending actions. The court also referred to Shyabuddinsab Mohidinsab Akki Vs. The Gadag-betgeri Municipal Borough & Ors., which emphasized that the language and manner of the statute must be examined to determine the legislature's intention regarding pending proceedings. Conclusion: The court concluded that sub-section (2A) to Section 234B, inserted by the Finance Act, 2015, is applicable to all pending proceedings in which orders under Section 245D(4) are passed on or after June 1, 2015. The court held that the amendment was intended to apply to pending proceedings, and therefore, the petitioners are liable to pay interest under sub-section (2A) of Section 234B. The writ petitions were dismissed, and the court did not order any costs.
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