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TMI Blog2011 (9) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings under Section 147 of the Act were initiated by issue of notice dated 5th July, 2004 as it was noticed that the petitioner had claimed excessive deduction under Section 80 HHC. The petitioner in fact had business loss in exports of Rs.7,16,189/- but this was ignored for computation of deduction under Section 80 HHC. 3. By this time, the Supreme Court had decided IPCA Laboratory Limited versus Deputy Commissioner of Income Tax, [2004] 266 ITR 521 (SC) holding, inter alia, that on a plain reading of Section 80 HHC it is clear that in arriving at the profits earned from exports, profits and losses of both manufactured goods and trading goods have to be taken into consideration. If after such adjustment, there is positive profit, the assessee would be entitled to deduction under Section 80 HHC. If there is a loss, he will not be entitled to any deduction. 4. The petitioner filed a return of income in response to the notice under Section 147 of the Act again declaring total income to Rs.6,76,660/- as declared in the original return. The Assessing Officer held that the assessee had suffered loss in export business and, therefore, not entitled to deduction under Section 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This may be a case of genuine hardship due to subsequent decision of the Hon ble Supreme Court, the same cannot be a ground not to charge the interest. Interest u/s. 234B is mandatory and compensatory in nature. However, for reduction or waiver of interest, appropriate petition may be filed before appropriate authorities. 5. We have considered rival submissions. As per the income declared in return of income, the assessee was required to pay advance tax. Thus, liability to pay advance tax is not denied. Though the assessee has paid advance tax is not denied. Though the assessee has paid advance tax as per his own estimate, interest is chargeable on the advance tax payable on the basis of assessed income and not income declared in return of income. Charging of interest being mandatory in nature in view of the decision of the Hon ble Supreme Court in the case of Anjum Ghaswala, 252 ITR 1, the levy has to upheld. However, the assess, if so advised, may approach appropriate authority for reduction or waiver of the interest charged. 7. The petitioner thereafter filed an application under Section 234B and 234C for waiver of interest before the Commissioner of Income-Tax, which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 234A, 234B and 234C and the Settlement Commission also does not have any power to do so under Chapter XIX-A of the Act. It was accordingly opined:- We do not find any such problem in the provisions of the Act to which we have already referred. Sections 234A, 234B and 234C in clear terms impose a mandate to collect interest at the rates stipulated therein. The expression shall used in the said section cannot by any stretch of imagination be construed as may . There are sufficient indications in the scheme of the Act to show that the expression shall used in sections 234A, 234B and 234C is used by the Legislature deliberately and it has not left any scope for interpreting the said expression as may . This is clear from the fact that prior to the Amendment brought about by the Finance Act, 1987, the Legislature in the corresponding section pertaining to imposition of interest used the expression may thereby giving discretion to the authorities concerned to either reduce or waive the interest. The change brought about by the Amending Act (Finance Act, 1987) is a clear indication of the fact that the intention of the Legislature was to make the collection of st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r clause (a) of sub-section (2) of section 119 of the Income-tax Act, 1961, the Central Board of Direct Taxes hereby direct that the Chief Commissioner of Income-tax and Director-General of Income-tax may reduce or waive interest charged under section 234A or section 234B or section 234C of the Act in the classes of cases or classes of income specified in paragraph 2 of this order for the period and to the extent the Chief Commissioner of Income-tax /Director General of Income-tax deem fit. However, no reduction or waiver of such interest shall be ordered unless the assessee has filed the return of income for the relevant assessment year and paid the entire tax due on the income as assessed except the amount of interest for which reduction or waiver has been requested for. The Chief Commissioner of Income-tax or the Director-General of Income-tax may also impose any other conditions deemed fit for the said reduction or waiver of interest. 2. The class of incomes or class of cases in which the reduction or waiver of interest under section 234A or section 234B or, as the case may be, section 234C can be considered, are as follows: xxx (d) Where any income which was not chargeable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner to claim waiver or reduction of interest. 16. The second circular dated 30th January, 1997 expanded the scope of clause (d) and deleted the condition that there should be a decision of the High Court or the Supreme Court in the assessee s own case. Decision of the High Court or the Supreme Court could be in case of a third party, but it should have interpreted the Section. Another condition, that the retrospective amendment or the decision of the High Court or jurisdictional High Court must be after the end of the relevant previous year, was also withdrawn. As noticed above, there is no decision of the jurisdictional High Court of Delhi on the issue in question. The petitioner was aware that the interpretation placed by him was being contested by the Department/Revenue. The manner or mode of claiming deduction was therefore debatable and was being contested by both sides. The issue was open. The second circular dated 23rd May, 1996 is, therefore, not applicable. 17. Reliance placed by the petitioner on the circular No. 2/2006 dated 17th January, 2006 is also misconceived. As a result of Taxation Law (Amendment) Act, 2005, profits on sale of Duty Entitlement Pass B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in IPCA Laboratories (supra) dated 11th March, 2004, wherein it has been held that deduction under Section 80 HHC is to be arrived at and claimed on profits earned from both export of self-manufactured goods and trading goods and profit and loss of both trades have to be taken into consideration. If after the adjustment there is positive profit, then only deduction under Section 80 HHC can be claimed. If there is loss, there cannot be any entitlement. As per the computation made in Form No. 10CCAC, which has been enclosed as annexure B to the petition, the petitioner had business loss of Rs.7,16,188/-, after excluding the income from the export incentives. In these circumstances, it is not possible to accept the contention of the petitioner that the retrospective amendment by Taxation Law (Amendment) Act, 2005 was detrimental and had reduced the claim for deduction made by him under Section 80 HHC as originally claimed. In fact, this aspect has been dealt with and explained vide response given by the Revenue in their reply dated 10th February, 2010 to the application for waiver of interest filed by the petitioner. In the said response, it has been stated as under:- With retro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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