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2021 (5) TMI 42 - HC - Income TaxWaiver of Interest under section 234B - whether the petitioner is entitled for complete or partial waivers or no waiver at all from payment of interest under section 234 B? - HELD THAT - As per clause (d) to CBDT Circular F. No. 400/234/95-IT (B) dated 23.5.1996 where any income which was not chargeable to income tax on the basis of any order passed in the case of an assessee by the High Court within whose jurisdiction such assessee was assessable to income tax and as a result such assessee did not pay income tax in relation to such income in any previous year and subsequently in consequence of any retrospective amendment of law as the case may be decision of the Supreme Court in his own case 2001 (1) TMI 80 - SUPREME COURT which event has taken place after the end of any such previous year in any assessment or reassessment proceedings the advance tax paid by the assessee during the financial year immediately preceding the relevant assessment years found to be less then the amount of advance tax payable on his current income the assessee chargeable to interest under section 234B and/or 234C is entitled to reduction of waiver of such interest if the Chief Commissioner of the Director-General of Income Tax is satisfied for grant of such reduction or waiver interest. Thus the facts as they stand out make it clear that the petitioner was indeed entitled for partial waiver of interest under section 234 B of the Income Tax Act 1961 inasmuch as there was stay granted by this court on 6.1.1989 and on 12.6.1989. These orders continued to be in force as these writ petition filed by the petitioner came to be allowed on 19.12.19 94 and was reversed only on 31.1.2001. Therefore up to the date of the order of the Honourable Supreme Court this was a fit case for exercising the discretion vested with the first respondent for reducing the proportionate interest under section 234B of the Income Tax Act 1961. First respondent ought to have also considered the mitigating circumstances in as much as the total surplus generated by the petitioner during the relevant assessment year was 4, 69, 62, 119/-. Out of the aforesaid cumulative surplus generated 3, 89, 70 000/- being 75% of the aforesaid surplus generated by the petitioner was given for a charitable purpose to another Trust named Aditanar Educational Institution for educational purpose as was done in the past since inception. The cumulative tax that has been determined to be paid by the petitioner by the Income Tax Officer in the respective assessment order was 2, 47, 57, 082/-. The cumulative out flow on account of tax would have been 6, 37, 27 082/-which ought to have been considered by the first respondent before rejecting the application for waiver of interest. It would imply that the petitioner would have to borrow the amounts for keeping its commitment to the said Trust and to the department. Up to the date of the decision of the Honourable Supreme Court on 31.1.2001 the respondent department could not have demanded tax. After all some form of exemption on the payment/transfer made to the aforesaid trust for educational purpose has been exempted right from beginning and all along the petitioner had to approach the court for relief which was also granted to the petitioner and stand of the petitioner was upheld. The amendment to the law in 1983 with effect from 1.4.1984 changed the perspective and the issue attained finality only after the Honourable Supreme Court pronounced its judgement in 2001 (1) TMI 80 - SUPREME COURT Therefore this was a fit case for granting waiver by the first respondent to the petitioner upto 31.01.2001. This court is inclined to modify the impugned order and grants partial waiver of interest to the petitioner upto 31.01.2001 being the date of the order of the Honourable Supreme Court 2001 (1) TMI 80 - SUPREME COURT which reversed the decision of the Division Bench of this Court in 1994 (12) TMI 62 - MADRAS HIGH COURT The second respondent is therefore directed to re-quantify the proportionate interest to be paid by the petitioner on account of the delay in payment of advance tax from the date of disposal of the appeal of the Income Tax Department by the Honourable Supreme Court on 31.1.2001 till the actual date of payment aforesaid tax by the petitioner. This exercise shall be carried out within a period of three months from the date of receipt of a copy of this order.
Issues Involved:
1. Waiver of interest under Section 234B of the Income Tax Act, 1961. 2. Applicability of CBDT Circulars for waiver of interest. 3. Determination of genuine hardship. 4. Consideration of bona fide belief in tax exemption. Detailed Analysis: 1. Waiver of Interest under Section 234B of the Income Tax Act, 1961 The petitioner challenged the order dated 04.05.2011 denying the waiver of interest under Section 234B for the Assessment Years 1989-1990, 1990-1991, and 1991-1992. The petitioner claimed that it was under a bona fide belief that it was exempt from tax due to its charitable activities and past exemptions granted under the Income Tax Act. The petitioner paid the tax for the disputed years only after the Supreme Court's decision on 31.01.2001. 2. Applicability of CBDT Circulars for Waiver of Interest The petitioner argued that its case was covered by CBDT Circular F.No.400/234/95-IT(B), dated 23.05.1996, which provides for waiver of interest under certain conditions. The relevant clause states that if an assessee did not pay income tax due to a High Court order and subsequently a Supreme Court decision or retrospective amendment made the income taxable, the assessee could seek waiver of interest. The petitioner contended that it fell within this clause as the Supreme Court reversed the High Court's favorable decision. 3. Determination of Genuine Hardship The petitioner submitted that it had no willful default and faced genuine hardship due to the payment of interest. It argued that the total amount used for charitable purposes and tax payment exceeded the net surplus generated, causing financial strain. The petitioner cited CBDT Circulars and previous court orders to support its claim of genuine hardship. 4. Consideration of Bona Fide Belief in Tax Exemption The petitioner maintained that it had a bona fide belief in its tax-exempt status based on earlier court decisions and consistent exemptions granted till the amendment in 1983. The petitioner argued that the Supreme Court's decision in 2001 was the first definitive ruling against its claim, and until then, it had a reasonable basis to believe in its exemption. Court's Findings: The court noted that the petitioner had consistently sought exemptions and had favorable court rulings until the Supreme Court's decision in 2001. The court recognized the petitioner's bona fide belief and the financial implications of the Supreme Court's reversal. The court found that the petitioner was entitled to partial waiver of interest under the CBDT Circular, considering the stay orders granted by the High Court and the eventual reversal by the Supreme Court. The court directed the respondent to re-quantify the interest payable from the date of the Supreme Court's decision till the actual payment date. Conclusion: The court allowed the writ petition, granting partial waiver of interest up to 31.01.2001, the date of the Supreme Court's decision. The respondent was instructed to re-quantify the interest for the period post-31.01.2001 and the petitioner was ordered to pay the re-quantified interest within one month of the re-assessment. The court emphasized the petitioner's bona fide belief and the financial hardship faced due to the tax and interest payments.
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