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TMI Blog2011 (7) TMI 961X X X X Extracts X X X X X X X X Extracts X X X X ..... 234B if the interest is charged under section 143(1) or under regular assessment and not otherwise. Thus keeping in view the provisions of section 234B no illegality or infirmity in the well reasoned order of the CIT (A) because assessment framed under section 147 being not made for the first time is not a regular assessment and, hence, the order of the CIT(A) in holding that the interest under section 234B can only be charged in a case of regular assessment, does not call for any interference. In the case of Jindal Thermal Power Co. Ltd. v. Deputy CIT reported in [2006 (3) TMI 95 - KARNATAKA High Court] distinguished its own decision in the case of Kwality Biscuits Ltd. (1999 (11) TMI 48 - KARNATAKA High Court) and held that section 115JB is a self-contained code pertaining to MAT, which imposed liability for payment of advance tax on MAT companies and, therefore, where such companies defaulted in payment of advance tax in respect of tax payable under section 115JB, it was liable to pay interest under sections 234B and 234C of the Act - Alternative contention of the assessee also rejected as the order of the apex court dismissing civil appeal reported as Kwality Bisc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rging of interest under section 234B of the Act. Feeling dissatisfied, the Department took the matter before the Tribunal and the assessee filed cross-objections. The Tribunal upheld the order of the Commissioner of Income-tax (Appeals), vide order dated August 28, 2001, by observing that the assessment completed under section 147 of the Act was not a regular assessment. Further, the assessment made by the Assessing Officer was revised by the Department under section 263 of the Act, vide order dated March 23, 1995, and a direction was issued to the Assessing Officer to withdraw the relief granted under section 80-I of the Act on the receipt of the duty drawback relating to the goods exported which were manufactured by the assessee in the industrial under taking. Accordingly, the Assessing Officer made assessment under section 143(3) of the Act on January 31, 1997, and recomputed the assessed income at Rs. 68,83,294 after recomputing the deduction under section 80-I of the Act. The interest under section 234B of the Act was increased by Rs. 9,82,000 on account of enhancement. Against the said assessment order, the assessee filed an appeal before the Commissioner of Income-tax (Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would render the order ineffective and would not take away the right of the Revenue to charge interest under section 234B(4) of the Act. According to the learned counsel, interest under section 234B of the Act was correctly charged in the assessment order passed under section 143(3)/147 and, therefore, it could be subsequently enhanced on completion of set aside assessment. 5. Controverting the aforesaid submissions, learned counsel for the assessee submitted that the Commissioner of Income-tax (Appeals), vide order dated November 27, 1992, and the Tribunal, vide order dated August 28, 2001, had held that sub-section (1) of section 234B of the Act was not applicable to the present case and no interest was chargeable thereunder as it was not the first assessment framed in pursuance of notice issued under section 147 of the Act. Even application filed under section 254(2) of the Act for rectification of order dated August 28, 2001, was dismissed on May 11, 2004. Continuing further, learned counsel argued that accordingly sub-section (4) of section 234B would not apply and the question of levy of interest under section 234B of the Act was not called for in the present case. He su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall 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 or 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. Explanation 1.-In this section, 'assessed tax' means,- (a) for the purposes of computing the interest payable under section 140A, the tax on the total income as declared in the return referred to in that section ; (b) in any other case, the tax on the total income determined under sub-section (1) of section 143 or on regular assessment, as reduced by the amount of tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such local income. Explanation 2.-Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of this Act shall apply accordingly ; (ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded. (5) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years." 10. Explanation 2 to section 234B of the Act postulates that where an assessment is made for the first time in pursuance of proceedings under section 147, it shall be regarded as a regular assessment for the purposes of section 234B of the Act. 11. The Kerala High Court in K. Govindan and Sons' case [1999] 238 ITR 1005 (Ker) while considering the identical Explanation 2 to section 139(8) of the Act, had recorded as under (page 1008) : "Considering Explanation 2 to section 139(8) which is clarificatory in nature and the other case law, we are of the considered view that the assessment made for the first time under section 147(a) read with section 148 is a regular assessment and that being so, the Assessing Officer could legally charge interest under section 139(8)." 12. The apex court, while affirming the decision of the Kerala High Court in K. Govi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t otherwise. The Commissioner of Income-tax (Appeals), thereafter, concluded that as the assessment was made for the first time under section 147 but has been framed without assessment under section 143(1) has already been completed so the Assessing Officer was not justified in invoking the provisions of section 234B for charging interest from the assessee as it was not a regular assessment first time framed by the Assessing Officer. The Commissioner of Income-tax (Appeals) thus deleted the interest amount charged under section 234B of the Income-tax Act by the Assessing Officer. 14. Keeping in view the provisions of section 234B, we do not find any illegality or infirmity in the well reasoned and well discussed order of the Commissioner of Income-tax (Appeals) because assessment framed under section 147 being not made for the first time is not a regular assessment and, hence, the order of the Commissioner of Income-tax (Appeals) in holding that the interest under section 234B of the Income-tax Act can only be charged in a case of regular assessment, does not call for any interference from outside and accordingly the same, in this regard is upheld. In this vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch 23, 1995, enhancing the assessed income would make the assessee liable to interest under section 234B(4) of the Act. The Commissioner of Income-tax (Appeals) and the Tribunal were not right in holding other wise. 15. Suffice it to notice that the reliance of the learned counsel for the assessee on Darshan Lal Gulati's case [2008] 173 Taxman 268 (P H) does not come to the rescue of the assessee as the same was on the individual fact situation involved therein. Now, adverting to the alternative submission of the learned counsel for the assessee, reference is made to the judgment of the Karnataka High Court in Kwality Biscuits Ltd.'s case [2000] 243 ITR 519 (Karn). The High Court, while disagreeing with the Tribunal, had held as under (page 526) : "Under section 115J, where the total income of the company is less than 30 per cent. of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to 30 per cent. of such book profit. It is, thus, by way of deeming fiction that this income has been considered to be the deemed income. The profit and loss account has to be prepared in accordanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. Kwality Biscuits Ltd. [2006] 284 ITR 434 (SC). 18. Similar issue had also been considered by the Gauhati High Court in Assam Bengal Carriers Ltd. v. CIT [1999] 239 ITR 862 (Gauhati), the Madhya Pradesh High Court in Itarsi Oils and Flours (P) Ltd. v. CIT [2001] 250 ITR 686 (MP), the Madras High Court in CIT v. Holiday Travels (P) Ltd. [2003] 263 ITR 307 (Mad) and the Bombay High Court in CIT v. Kotak Mahindra Finance Ltd. [2004] 265 ITR 119 (Bom), wherein it was held that that there is no mention in sections 234B and 234C of the Act that in cases of determination of income under section 115J of the Act, the provisions of the same would not be attracted. The Bombay High Court had concurred with the judgment of the Gauhati High Court and the Madhya Pradesh High Court. 19. This court in CIT v. Upper India Steel Manufacturing and Engineering Co. Ltd. [2005] 279 ITR 123 (P H) was considering an identical issue of levy of interest under sections 234B and 234C of the Act where there was non-payment or short payment due to computation of income on the basis of book profits under section 115J of the Act. The view of the High Courts of Gauhati, Madhya Pradesh, Madras and Bomba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, secondly, that a hardship is caused to the assessee because the liability to pay tax on the book profits is determined only at the end of the financial year. Both the grounds, according to us, are not tenable. As already observed earlier, the provisions of section 207 do not exclude the income determined under section 115J from the purview of current income on which advance tax is payable. Similarly, there is no scope for considering the hardship of the assessee as the levy is automatic and does not require any opportunity to be given to the assessee. We, therefore, dissent from the judgment of the Karnataka High Court in the case of Kwality Biscuits Ltd. [2000] 243 ITR 519 (Karn)" 21. This court, while concurring with the view of the High Courts of the Gauhati, Madhya Pradesh, Madras and Bombay, had concluded as under (page 135 of 279 ITR) : "We fully concur with the view expressed in the aforesaid judgments. The Madras High Court has correctly pointed out that for the purpose of payment of advance tax, all assessees including companies, are required to make an estimate of their current income. Even before the introduction of the provisions of section 115J of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook profit, the total income of the assessee shall be deemed to be an amount equal to 30 per cent. of such book profit. The object is to tax zero-tax companies. Section 115J was inserted by the Finance Act, 1987, with effect from April 1, 1988. This section was in force from April 1, 1988, to March 31, 1991. After April 1, 1991, section 115JA was inserted by the Finance Act of 1996 with effect from April 1, 1997. After insertion of section 115JA, section 115JB was inserted by the Finance Act, 2000, with effect from April 1, 2001. It is clear from reading sections 115JA and 115JB that the question whether a company which is liable to pay tax under either provision does not assume importance because specific provision(s) is made in the section saying that all other pro- visions of the Act shall apply to the MAT company (section 115JA(4) and section 115JB(5)). Similarly, amendments have been made in the relevant Finance Acts providing for payment of advance tax under sections 115JA and 115JB. So far as interest leviable under section 234B is concerned, the section is clear that it applies to all companies. The pre-requisite condition for applicability of section 234B is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y High Court in the case of CIT v. Kotak Mahindra Finance Ltd. reported in [2004] 265 ITR 119 (Bom) which decided the issue in favour of the Department and against the asses-see. It appears that none of the assessees challenged the decisions of the Gauhati High Court, Madhya Pradesh High Court as well as the Bombay High Court in the Supreme Court. However, it may be noted that the judgment of the Karnataka High Court in Kwality Biscuits Ltd. was confined to section 115J of the Act. The order of the Supreme Court dismissing the special leave petition in limine filed by the Department against Kwality Biscuits Ltd. is reported in [2006] 284 ITR 434. Thus, the judgment of the Karnataka High Court in Kwality Biscuits stood affirmed. However, the Karnataka High Court has thereafter in the case of Jindal Thermal Power Co. Ltd. v. Deputy CIT reported in [2006] 286 ITR 182 (Karn) distinguished its own decision in the case of Kwality Biscuits Ltd. (supra) and held that section 115JB, with which we are concerned, is a self-contained code pertaining to MAT, which imposed liability for payment of advance tax on MAT companies and, therefore, where such companies defaulted in payment of advance t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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