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TMI Blog2006 (3) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... mand pertaining to levying of interest under sections 234B and 234C of the Income-tax Act, 1961 (for short "the Act"), aggregating to Rs. 71,12,704 for the assessment year 2001-02 for the alleged default in payment of advance tax and Writ Petition No. 39460 of 2003 is filed challenging the intimation annexure C in so far as it demands the interest payable under sections 234B and 234C of the Act aggregating to Rs. 45,49,720 for the assessment year 2002-03 for the alleged default in payment of advance tax. It is the contention of the petitioner which is common in both the petitions that a Division Bench of this court has held that there is no obligation to pay advance tax in excess of assessment corresponding to the provisions of section 115J which was in force earlier and consequently there should be no levy of interest under sections 234B and 234C of the Act and if the first respondent seeks to rely as is seemingly done in view of the amendment of section 115JB effected by the Finance Act, 2002, with retrospective effect from April 1, 2001, enabling him to levy such interest. The said amendment in so far as it relates to retrospective operation for levy of interest under sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cent, of such. Thus, the concept of "deemed total income" emerged. The liability to pay MAT would arise only on the determination of book profits which by necessary implication could be determined only after the accounts are audited and the Division Bench of this court in the case of Kwality Biscuits Ltd. v. CIT [2000] 243 ITR 519 held that the provisions of Chapter XVII-C dealing with advance tax would not apply to tax payable under section 115J of the Act and, therefore, the interest under sections 234B and 234C of the Act is not leviable, if advance tax is not paid on the tax payable under section 115J of the Act. It is further averred that section 115J ceased to be effective from the assessment year 1991-92. The scheme of MAT, however, was revived effective from the assessment year 1997-98 by the Finance (No. 2) Act, 1996, by insertion of a new charging section 115JA into Chapter XII-B of the Act and under the said provision where the total income computed under the provisions of the Act is found to be less than 30 per cent, of the book profit, the total income chargeable to tax shall be deemed to be an amount equivalent to 30 per cent, of the book profit and section 115JA oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and December, 2000 and March, 2001 and on the view that there was no obligation to pay in advance, tax arising under Chapter XII-B as confirmed by the Division Bench of this High Court, the petitioner did not pay any advance tax in relation to its book profit for the assessment year 2001-02, The petitioner was advised that in the absence of a fiction that the book profits being deemed to be the total income for the purpose of the Act, the charge for payment of advance tax under section 207 of the Act is not attracted and, therefore, the petitioner was not liable to pay MAT payable under section 115JB as advance tax and the book profit arrived at was Rs. 42,79,20,950 in relation to which the petitioner was liable to tax at 7 1/2 per cent, in terms of section 115JB and the petitioner paid the tax under section 115JB including surcharge aggregating to Rs. 3,62,66,300 as self-assessment tax under section 140A and in the absence of any obligation to pay advance tax, the petitioner did not incur any liability to penal interest under sections 234B and 234C and the second respondent examined the return of income and issued an intimation dated December 24, 2002, under section 143(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions 234B and 234C of the Act and it is stated in the intimation itself that if the assessee has any grievance regarding the additions/disallowances made, it can move an application before the Assessing Officer under section 154 of the Act and the petitioner has an alternative and efficacious remedy available as per the provisions of the Income-tax Act and wherefor the writ petition is not maintainable. It is further averred that the contention that the provisions of the Finance Act, 2002 giving retrospective effect to the amendment to section 115JB of the Act with effect from April 1, 2001, is not correct and is liable to be rejected. It is averred that section 115JB was brought into force by including the same under the Finance Act, 2000 with effect from April 1, 2001, and would be fully applicable to the assessment year 2001-02. It was promulgated with effect from April 1, 2000 itself and the petitioner was fully aware of the provisions of the Finance Act and, therefore, the rate also came to be clearly contemplated by the Finance Act which was within the knowledge of the petitioner and by the Finance Act, 2002 certain amendment to section 115JB of the Act being incorporated wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of the total income of the assessee and wherefor the retrospective operation of the Finance Act, 2002 amending the provisions of section 115JB of the Act in so far as it relates to demand pertaining to interest under sections 234B and 234C is unconstitutional as the same would cause irreparable loss to the petitioner and would also be unreasonable as the petitioner which was not liable to pay advance tax and thereunder no obligation to pay interest under sections 234B and 234C has now to be made to pay the interest under sections 234B and 234C of the Act which was not payable prior to the Amendment Act and wherefor the retrospective amendment by the Finance Act, 2002 is unreasonable and expropriatory and impossible of performance and compliance. Learned senior counsel submitted that the Legislature has power to amend the Act retrospectively. However, retrospective operation of the Act is liable to be set aside as unconstitutional or read down as prospective where the same would cause unreasonable hardship to the petitioner. Learned counsel has relied upon the decisions in National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India [2003] 260 ITR 548 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and for deferment of advance tax. Learned counsel has relied upon the speech of the Minister of Finance while introducing the Finance Bill for 2000-01, the Finance Bill, 2000 and the Finance Act, 2000 and also the amendment carried out by the Finance (Amendment) Act, 2002 and submitted that in view of the fact that even substantive law can be amended retrospectively and the amendment is by way of substitution in view of the decision of the hon'ble Supreme Court in National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India [2003] 260 ITR 548 and Dr. S. Reddappa v. Union of India [1998] 232 ITR 62 (Karn), the amendment is justified and the petitioners have failed to prove that the said amendment is unconstitutional and, accordingly, the writ petitions are liable to be dismissed. In reply, learned senior counsel for the petitioner submitted that every word in a statute has to be given a meaning and since there was no deeming provision to treat book profit as total income the provision for payment of advance tax under section 207 was not applicable and every word in a statute has to be given meaning and a construction which would leave without effect any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... introduced to overcome a judicial decision as held by the hon'ble Supreme Court in National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India [2003] 260 ITR 548. The constitutional validity of the provisions of sections 234B and 234C of the Act have been held to be compensatory in nature and found to be constitutional and the constitutional validity has been upheld by a Division Bench of this court in Dr. S. Reddappa v. Union of India [1998] 232 ITR 62. Learned senior counsel appearing for the petitioner submitted that when the provisions contained in section 115JB as amended by the Amendment Act, 2000 and the Amendment Act, 2002 are compared, it is clear that it is only by virtue of the amendment made to the section by the Amendment Act, 2002 that the book profit is treated as total income and the liability to pay advance tax would arise and but for the retrospective operation of the provisions of the amendment by the Finance Act, 2002 there was no liability to pay interest under sections 234B and 234C and when there was no liability to pay advance tax in view of the provisions that necessitated prior to the amendment which is now made retrospective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amendment under the Finance Act, 2000 and the provisions of the section as it stands after the amendment by the Finance Act, 2002 and the same are as follows: Section 115JB as it stands now following the amendment by means of the Finance Act, 2002 with retrospective effect from the 1st day of April, 2001: "(1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after 1st day of April, 2001, is less than seven and one-half per cent, of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of seven and one-half per cent.'" It is clear from the abovesaid provisions of the Act that under the Finance Act, 2002 the amendment made to section 115JB(1) is as follows: "for the words 'the tax payable for the relevant previous year shall be deemed to be seven and one-half per cent, of such book profit', the words 'such bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded further that where the company has adopted or adopts the financial year under the Companies Act, 1956 (1 of 1956) which is different from the previous year under this Act,- (i) the accounting policies; (ii) the accounting standards adopted for preparing such accounts including profit and loss account; (iii) the method and rates adopted for calculating the depreciation, shall correspond to the accounting policies, accounting standards and the method and rates for calculating the depreciation which have been adopted for preparing such accounts including profit and loss account for such financial year or part of such financial year falling within the relevant previous year. Explanation.-For the purposes of this section, "book profit" means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2), as increased by,- (a) the amount of income-tax paid or payable, and the provision therefor; or (b) the amounts carried to any reserves, by whatever name called; or (c) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or (d) the amount by way of provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses. Explanation.-For the purposes of this clause, "net worth" shall have the meaning assigned to it in clause (ga) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986). (3) Nothing contained in sub-section (1) shall affect the determination of the amounts in relation to the relevant previous year to be carried forward to the subsequent year or years under the provisions of sub-section (2) of section 32 or sub-section (3) of section 32A or clause (ii) of sub-section (1) of section 72 or section 73 or section 74 or sub-section (3) of section 74A. (4) Every company to which this section applies, shall furnish a report in the prescribed form from an accountant as defined in the Explanation below sub-section (2) of section 288, certifying that the book profit has been computed in accordance with the provisions of this section along with the return of income filed under sub-section (1) of section 139 or along with the return of income furnished in response to a notice under clause (i) of sub-section (1) of section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company shall pay corporate tax as per the regular scheme and it is proposed to amend the section so as to provide that in case the tax liability of a company is less than 7.5 per cent, of the book profits, such book profits shall be deemed to be the "total income" chargeable to tax at the rate of seven and one-half per cent, and the provisions of the Finance Act, 2002 which received the assent of the President on May 11, 2002, amending sub-section (1) by substituting the words "such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate 7.5 per cent." in place of the words "the tax payable for the relevant previous year shall be deemed to be at 7.5 per cent, of such book profit" and wherefore, it is clear that having regard to the provisions of section 115JB of the Act as introduced by the Finance Act, 2000 which is a self-contained code pertaining to MAT, it is clear that liability for payment of advance tax arose after the introduction of section 115JB by the Finance Act, 2000 and the liability for payment of advance tax would not arise only in view of the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd a local authority, at the rate of ten per cent, of such 'advance tax'; (ii) in the case of a person other than a company, a co-operative society, a firm and a local authority- (A) at the rate of ten per cent. of such 'advance tax' where the total income exceeds sixty thousand rupees but does not exceed one lakh fifty thousand rupees; or (B) at the rate of fifteen per cent, of such 'advance tax' where the total income exceeds one lakh fifty thousand rupees; and (b) by a surcharge calculated at the rate of ten per cent, of such 'advance tax' in the case of a domestic company." It is not disputed that for the assessment year 2001-02 previous year (April 1, 2000 to March 31, 2001) the provisions of section 115JB which was introduced by the Finance Act, 2000 was applicable for the assessment year 2001-02 and it is not in dispute that the petitioner has not paid the advance tax on June 15, 2001, September 15, 2001, December 15, 2001 and March 15, 2002 nor paid the advance tax for the assessment year 2002-03. The petitioner has not paid the advance tax instalments on due dates June 15, 2000, September 15, 2000, December 15, 2000 and March 15, 2001 and for the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X
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