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TMI Blog2000 (7) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is to the levy of interest under section 234B of the Income-tax Act, 1961. In order to appreciate the point of controversy, the factual matrix of the case may be stated thus. The assessee is a Warehousing Corpn. set up under the Warehousing Corporation Act, 1962. In its profit and loss account attached with the return for the year under consideration, it had shown the following incomes:--- Rs. (i) Warehousing charges 7,65,76,819 (ii) Supervision charges 27,01,231 (iii) Interest on advances 19,90,541 (iv) Surplus on trading of wheat 8,27,39,992. The whole of the aforesaid income was claimed to be exempt under section 10(29) of the Income-tax Act, 1961 ('the Act'). In the assessment completed vide order under section 143(3) of the Act dated 8-12-1994 the Assessing Officer held that only the income of Rs. 7,65,76,819 from warehousing charges for storage, processing or facilitating the marketing of commodities was exempt under section 10(29) of the Act. The income from supervision charges, interest and buying and selling of wheat was thus held to be taxable. After making certain disallowances/additions, the total (taxable) income was computed at Rs. 8,77,03,400 as agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder consideration also exemption of the aforesaid types of income was claimed in the return filed on31-12-1992. It was explained that in its decision rendered on 1- 1 2-1993 in the case of CIT v. Rajasthan State Warehousing Corpn. [1994] 75 Taxman 66/210 ITR 906, the Rajasthan High Court held that income derived from procurement of grains for the State Government etc. did not relate to letting of godowns or warehouses and hence it was not exempt under section 10(29) of the Income-tax Act. According to the ld. counsel, it was in view of this decision that the Assessing Officer and the ld. CIT(A) had held the income of Rs. 8,27,39,992 from trading of wheat to be taxable. The order of the ld. CIT(A) was affirmed by the Tribunal also, inter alia on the basis of this decision. 4.1 In the aforesaid background, the learned counsel for the assessee submitted that in the financial year 1991-92 when the instalments of advance tax were payable, the assessee was under a bona fide belief that it was not liable to pay any advance tax, its entire income being exempt under section 10(29) of the Income-tax Act as in past. It was stressed that on the relevant dates the assessee had before it the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws an assessee to subsequently revise the advance tax payable in the remaining instalments in accordance with the revised estimate of his current income, without any requirement of filing a revised estimate. Sub-section (3) empowers the Assessing Officer to pass an order requiring an assessee who has been already assessed to income-tax, but has not paid any advance tax during the relevant financial year, to pay advance tax calculated in the manner laid down in section 209. Such an order must be passed during the financial year but not later than the last day of February. Sub-section (4) empowers the Assessing Officer to pass a revised order for payment of advance tax by the assessee where, subsequent to the passing of the original order, but before the first day of March, a return of income in respect of any later year has been furnished or any regular assessment for a later year has been made. Sub-section (5) enables the assessee to pay less amount of advance tax than what is demanded by the Assessing Officer under sub-section (3) or (4) if, in his estimation, the advance tax payable on his current income would be less than the amount demanded by the officer. Sub-section (6) corre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by such assessee under the provisions of section 210 is less than ninety per cent of the assessed tax, the assessee shall be liable to pay simple interest at the rate of two per cent for every month or part of a month comprised in the period from the 1st day of April next following such financial year to the date of determination of total income under sub section (1) of section 143 and where a regular assessment is made, to the date of such regular assessment, on an amount equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax." 6. The important aspects that emerge from the provisions referred to above, in so far as they are relevant to the issue before us, can be succinctly culled out as under :--- (a) Advance tax is payable by an assessee during any financial year in respect of his total income which would be chargeable to tax in the relevant assessment year. (b) The liability to pay advance tax arises in the context of the current income of the assessee which would be chargeable to tax for the assessment year immediately following the relevant financial year, if the tax payable is Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom dealings in foodgrains having been held to be taxable in the assessment only in view of the decision of the Hon'ble Rajasthan High Court delivered subsequent to the relevant financial year, it could not by any stretch of imagination be said that the assessee was liable or bound in law to pay advance tax. In other words, it could not be held that the assessee could know or anticipate that the condition of liability to pay advance tax as per provisions of sections 207 and 208 of the Act would be attracted in its case. A somewhat similar situation existed in the case of Ranchi Club Ltd. and the Hon'ble Patna High Court held that the assessee could not be said to have committed a default within the meaning of section 234B of the Act. In arriving at this conclusion, the Hon'ble High Court referred to theApex Courtdecision in the case of J.K. Synthetics Ltd. which though delivered in a different context, but the principle laid down by it was held to cover cases of the present nature. 8. It would be relevant to refer very briefly to the facts in the case of J.K. Synthetics Ltd. In this case the appeals were directed against certain assessment orders made by the Commercial Tax Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cing the deposit of full amount of 'tax due' in the State Government on the basis of the return. That is the requirement of section 7(2). Section 7(2A), no doubt, permits payment of tax at shorter intervals but the ultimate requirement is deposit of the full amount of 'tax due' shown in the return. When section 11B(a) uses the expression "tax payable under sub-section (2) and (2A) of section 7", that must be understood in the context of the aforesaid expressions employed in the two sub-sections. Therefore, the expression 'tax payable' under the said two sub-sections is the full amount of tax due and 'tax due' is that amount which becomes due ex-hypothesis on the turnover and taxable turnover 'shown in or based on the return." The word 'payable' is a descriptive word, which ordinarily means 'that which must be paid or is due, or may be paid' but its correct meaning can only be determined if the context in which it is used is kept in view. The word has been frequently understood to mean that which may, can or should be paid and is held equivalent to 'due'. Therefore, the conjoint reading of sections 7(1), (2) and (2A) and 11B of the Act leaves no room for doubt that the expression 't ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has another aspect also. Since the assessee had earlier been assessed to tax and had not paid advance tax voluntarily. Sub-section (3) of section 210 empowered the Assessing Officer to pass an order requiring it to pay advance tax. But in this case even the Assessing Officer could not pass such an order because the basis for passing the order was the assessed income of the latest previous year which was "nil' and no positive income was declared in the return for the subsequent period filed upto the last day of February of the Financial Year 1991-92. 12. In view of the foregoing discussion, we have no hesitation in coming to the conclusion that in the peculiar circumstances of the case the failure to pay advance tax cannot be attributed to the assessee, and, therefore, it cannot be held liable to interest under section 234B of the Income-tax Act. 13. In the result, the appeal is allowed. Per Shri Phool Singh, Judicial Member --- I have gone through the draft order prepared by my esteemed brother Shri Krishan Swarup, Accountant Member, and also discussed the matter with him in detail. I am unable to persuade myself to agree with the findings recorded by him. In view of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me from procurement of wheat as agent of the Government and the Department had been accepting the case of the assessee and exemption was allowed under section 10(29) in respect of both types of incomes. Copies of assessment orders for assessment years 1990-91 and 1991-92 had been placed on record to substantiate this plea. The learned counsel submitted that on the basis of earlier assessment orders the assessee also claimed exemption under section 10(29) of the Act in respect of both types of income viz. income from rent from godowns and income from procurement of wheat for assessment year 1992-93 but the Assessing Officer on the basis of decision of Hon'ble Rajasthan High Court in the case of Rajasthan State Warehousing Corpn. concluded that income derived from procurement of grains for the State Government etc. did not relate, to letting out of godowns or warehouse and it was not exempt under section 10(29) of the Act. The learned counsel submitted that it was on account of above referred decision which was rendered on1-12-1993, the assessee's claim for exemption under section 10(29) in relation to income from procurement of wheat was rejected. 4. According to the learned couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the incomes including income from trading in procurement of foodgrains and thus assessee was not supposed to pay any advance tax and thus interest under section 234B is not chargeable as assessee has not omitted any information in filing the return and was having bona fide basis for not showing the income from trading in procurement of wheat etc. as its income because the Department had been treating such income as exempt under section 10(29) from so many years. The learned counsel for the assessee submitted that Patna High Court in the case of Ranchi Club Ltd. had concluded that no interest under section 234B can be. charged in identical circumstances and Their Lordships have followed the ratio ofApex Courtin the case of J.K. Synthetics. On the basis of these facts, the submission of the learned counsel for the assessee had been that assessee was having bona fide belief that it was not liable to pay any advance tax and thus charging of interest under section 234B cannot be held to be justified. 5. As against it the learned DR placed reliance on the order of the Assessing Officer as well as the CIT(A) and main plank of his argument is that provisions of section 234B of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 91-92 the assessee was claiming exemption under section 10(29) of the Act in respect of both types of incomes viz. income from letting out of godowns and warehouse and income from procurement of wheat etc. on behalf of the State Government and income-tax authorities were allowing the claim of the assessee. But fact remains that the assessee as well as of income-tax authorities both failed to appreciate the correct legal preposition in this context. As is evident that Hon'ble High Court of Rajasthan in the case of Rajasthan State Warehousing Corpn. had specifically laid down that income from trading of wheat procurement on behalf of the State Government etc. is not to be treated as exempt under section 10(29) but the same is taxable. In view of this decision of Rajasthan High Court, it can easily be inferred that income earned by the assessee from trading in wheat procurement was taxable in all the years as legal position for all the assessment years was the same which the Hon'ble High Court of Rajasthan had laid down in the case referred to above. If we apply the above position of law then income from trading in procurement of wheat was taxable since the insertion of section 10(29) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o exempt under section 10(29) of the Act and thus he was justified in not making any payment of advance tax. This explanation cannot be allowed to be entertained in view of the specific nature of provisions of section 234B which are made mandatory without giving any discretionary power to Assessing Officer to entertain such explanation from assessee howsoever bona fide explanation may be. It is to be noted that whenever Legislature in its wisdom has thought it fit that any explanation of the assessee is to be entertained by the Assessing Officer before char in interest or before levy of any type of penalty specific provision to that effect had been made in the relevant section and a notice is issued before charging interest or before levy of any penalty and after considering the explanation of the assessee the Assessing Officer passes the relevant orders of charging interest or levy of penalty or otherwise. But in the provisions of Section 234B no such provision has been made and from clauses attached to the Direct Tax Laws (Amendment) Act, 1987, it is very clear that provisions are mandatory. I may recall a maxim "expressum facit cessare tacitum' and meaning thereof is that when t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atory measure meant to offset the loss which the Revenue suffers on account of non-payment of the said amount. This becomes evident also from the fact that the sections contain specific provisos in regard to the period for which this additional liability is imposed on the defaulting assessees." 13. From the above it transpires that interests are not penal in nature but only compensatory as the same are leviable because assessee had utilised the amount which was public revenue and payment of interest is nothing but a token in respect of utilisation of the public fund by the assessee. That appears to be the very reason that Legislature in its wisdom has made the provision of Section 234B as mandatory and thus I cannot entertain the explanation of the assessee that due to bona fide belief it could not pay the amount of advance tax. 14. It is also to be observed that some of the assessees had been facing lot of hardship on account of mandatory nature of provisions of Sections 234A, 234B and 234C of the Act and when CBDT when came to know the plight of assessees who were having bona fide explanations for not complying with the provisions in filing the return making payment of advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it may be noted that provisions of Section 234B were not at issue before Their Lordships of Patna High Court in the case referred to above as particular. Issue was of charging of interest under section 234A and Their Lordships opined that provisions of Sections 234A and 234B were not applicable in that case. It may also be mentioned here that the reasoning of Their Lordships in the case of Ranchi Club Ltd. had not been appreciated by the same High Court in a subsequent decision in the case of Uday Mistanna Bhandar v. CIT [1996] 222 ITR 44/[1997]90 Taxman 500 in which Their Lordships have observed that ratio of Ranchi Club Ltd. had not laid down a correct law and Their Lordships have further observed that said ratio required reconsideration through a larger Bench and matter stands referred to Larger Bench. Their Lordships have also observed that ratio of theApex Courtdecision in the case of J.K. Synthetics Ltd. might not be fully applicable while interpreting Section 234A read with Explanation 4 thereto. Once Their Lordships have observed that ratio of Apex Court in the case of J.K. Synthetics Ltd. is not applicable to the issue involving Section 234A which was having identical pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Warehousing Corpn. [1991] 58 Taxman 55/[1992] 195 ITR 273. This decision is dated28th March, 1991. In this case it was held that the assessee was an authority constituted under the law for the marketing of commodities. The Tribunal had held that income received by it, though called miscellaneous receipts was in truth income derived from letting warehouses for storage, processing and facilitating the marketing of commodities. Commission was received both for procuring and storing wheat and other food articles on behalf of the Food Corporation ofIndia. The assessee's income from misc. receipts and commission was entitled to exemption under section 10(29) of the Act. 4. Assessee was also engaged in the activity of storage and procuring of foodgrains as agent of Food Corporation ofIndia. Following the decision of the Hon'ble High Court the Assessing Officer allowed the claim of the assessee made under section 10(29). 5. It is pertinent to note that the assessee filed its return for the relevant year of assessment in December, 1992, Assessment for the Assessment Year 1991-92 was completed on NIL income on15-12-1993. Exemption claimed by the assessee under section 10(29) Was fully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As such it was not included. Subsequently, there was amendment with retrospective effect making cash assistance from Government taxable Assessment was completed subsequent to the introduction of the provision. Apex Court held that additional tax on the basis of receipt of the cash compensatory support was not valid. 9. Shri Garg also relied on the decision of the Apex Court rendered in the case of J.K. Synthetics Ltd. v. CTO [1994] 4 SCC 276. In this case the assessee filed the return on the premise that the amount of freight charge in respect of sale of cement did not form part of the sale price for payment of Sales-tax. This premise was rejected by theApex Courtin the case of Hindustan Sugar Mills. Accordingly, the assessee paid additional Sales-tax on inclusion of freight amount in calculating the sale price pursuant to that decision. Hon'ble Supreme Court had held that the assessee was not liable to pay tax under section 11B on the additional amount of tax on freight. 10. Shri Garg also invited my attention on the decision of the ITAT rendered in the case of Vikshara Trading Investment (P.) Ltd. In this case the Tribunal held that interest under section 234-B is not cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int. As no other decision was available, therefore, the Department also accepted this decision. The assessee acted bona fide in conformity with the decision of the High Court. Just because the decision was reversed by theApex Courtliability to pay advance tax cannot be fastened on the assessee. At the relevant point of time it was impossible on the part of the assessee to foresee the decision of the Supreme Court on the point. Law is trite on the subject. It is canonized in the well-known common law dictum :--- "LEX NON COGIT AD IMPOSSIBILIA" [Law cannot compel you to do the impossible]. 15. I am inclined to agree with the argument of the learned Departmental Representative that section 234B is mandatory in nature. But before invoking section 234B it is also essential to see that whether the assessee comes within the sweep of this section. The condition precedent for invoking the provisions of section 234B are that the assessee must be fastened with the liability to pay advance tax under section 208. Taking into consideration the entire conspectus of the case, I am of the opinion that the assessee was not liable to make the payment of advance tax. The case of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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