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TMI Blog2020 (6) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... ain judgment out of which the appeals arose and were considered in the said case was rendered in Sulzer India Limited (supra). Supreme Court referred to the decision of this Court in Sulzer India Limited (supra), more particularly to paragraph 40 thereof which has been extracted above, and held that the aforesaid approach of the High Court was without any blemish. Accordingly, the appeals were dismissed. No error or infirmity in the view taken by the Tribunal. This issue is squarely covered by the decisions in Sulzer India Limited (supra) and Balkrishna Industries Ltd. (supra) and Tribunal rightly followed the same. Consequently, we see no reason to interfere with the same. Question No.1 so framed is accordingly answered against the Revenue and in favour of the assessee. Interest under section 234B and section 234C - Whether interest not chargeable with respect to tax liability determined under minimum alternate tax (MAT)? - HELD THAT:- Though in Rolta India Limited [ 2011 (1) TMI 5 - SUPREME COURT] Supreme Court held that interest under sections 234B and 234C is payable on failure to pay advance tax in respect of tax liability under section 115JB of the Act, the fact rema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2004-05. 6. The appeal has been preferred proposing the following two questions as substantial questions of law:- 1. Whether on the facts and in the circumstances of the case and in law, Tribunal was justified in upholding the decision of the Commissioner of Income Tax (Appeals) holding that surplus arising on prepayment of deferred sales tax loan at net present value (NPV) is a capital receipt which cannot be termed as remission on cessation of a trading liability under section 41(1) of the Act? 2. Whether on the facts and in the circumstances of the case and in law, Tribunal was justified in confirming the decision of the Commissioner of Income Tax (Appeals) holding that interest under section 234B and section 234C of the Act was not chargeable with respect to tax liability determined under minimum alternate tax (MAT)? 7. Respondent is an assessee under the Act. Status of the assessee is that of a resident company. Assessment year under consideration is 2004-05. Assessee carries on the business of refining of crude oil, selling of petroleum products and captive generation and distribution of electric power. 8. Assessee filed return of income declaring los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essation thereof that is required to be brought to tax. Sales tax collected is a trading receipt. Conversion of sales tax collected into loan and using the expression sales tax deferment loan did not change the real character of the receipt as trading receipt. Nomenclature was not decisive; the real character of the receipt was required to be considered. Accordingly, contention of the assessee was rejected. Thus, the amount of ₹ 255.685 crores was brought to tax, the same being added to the income of the assessee vide the assessment order dated 30th October, 2006. By the said assessment order Assessing Officer computed book profit under section 115JB of the Act at ₹ 2,44,63,94,360.00 and charged interest thereon under sections 234B and 234C of the Act. 12. Aggrieved by the said order of assessment, assessee preferred appeal before the Commissioner of Income Tax (Appeals)-3, Mumbai, ( CIT(Appeals) for short) or first appellate authority, raising various grounds of appeal. Assessee challenged the decision of the Assessing Officer treating the discount received by it on settlement of sales tax deferment loan as taxable income of the assessee. The issue was of taxabil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olding the field as per which interest under sections 234B and 234C of the Act was not chargeable with respect to tax liability determined under MAT. Tribunal also noted that in Joint Commissioner of Income Tax Vs. Rolta India Limited, 330 ITR 470, Supreme Court held that where MAT 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. However, according to the Tribunal, the judgment of the Supreme Court in Rolta India Limited (supra) was delivered subsequently which would not discredit the bona fide reason entertained by the assessee in not depositing the advance tax on MAT in view of the prevailing judgment of the Karnataka High Court in Kwality Biscuits Limited (supra) which was then holding the field. In such circumstances, Tribunal held that there was no reason to interfere with the finding of the first appellate authority, albeit on a different ground. 16. Aggrieved, Revenue is before us in appeal under section 260A of the Act raising the above two questions for consideration. 17. Mr.Kotangale, learned standing counsel, Revenue has assailed the find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bom). 19. Submissions made by learned counsel for the parties have been considered. Also perused the relevant materials on record as well as considered the decisions cited at the Bar. 20. In so far the first question is concerned as already noticed above, it relates to addition of ₹ 255.685 crores made by the Assessing Officer by invoking the provisions of section 41(1) of the Act. We have already noticed that assessee was granted incentives by the Karnataka Government whereby it availed sales tax deferment for a period of 11 years for phase-I of the refinery and 14 years for phase-II of the refinery. The scheme was called sales tax deferment loan scheme. The sale tax so collected was converted into loan to be repaid by the assessee to the State Government within the two periods specified as per phase-I and phase-II. Such a loan amount outstanding as on 29th February, 2004 was to the extent of ₹ 517.130 crores. Government of Karnataka issued two notifications, both dated 31st March, 2004, allowing prepayment of the sales tax deferment loan at the net present value (NPV) before expiry of the deferred periods of 11 years or 14 years as per phase-I and phase-II res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract the provisions of section 41(1)of the Act. 23. Tribunal considered the rival submissions and held as follows:- 9. We have carefully considered the rival submissions and find that the conclusion drawn by the CIT (A) on this aspect is fully covered by the judgment of the Hon ble Bombay High Court in the case of Sulzer India Ltd. (supra). The point argued by the ld. DR, based on the judgment of the Hon ble Supreme Court in the case of Chowringhee Sales Bureau P. Ltd. (supra), is untenable in as much as the same has already been considered by the Hon ble Bombay High Court in its judgment. There is also no dispute to the assertions made by the learned representative for the assessee that the sales tax deferred scheme under the Package Scheme of 1983 and the Package Scheme of Incentive, 1985 notified by Government of Maharashtra, which was considered by the Hon ble Bombay High Court in the case of Sulzer India Ltd. Others (supra) is pari materia to the scheme availed by the assessee herein, as notified by the Government of Karnataka. Having regard to the aforesaid, we find that the judgment of the Hon ble Bombay High Court in the case of Sulzer India Ltd. (supra), squarel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) by way of remission or cessation thereof, the amount obtained by the successor in business or the value of benefit accruing to the successor in business shall be deemed to be profits and gains of the business or profession, and accordingly chargeable to income tax as the income of that previous year. Explanation 1 - For the purposes of this sub section, the expression loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof shall include the remission or cessation of any liability by a unilateral act by the first mentioned person under clause (a) or the successor in business under clause (b) of that sub section by way of writing off such liability in his accounts. Explanation 2 - For the purposes of this sub section, successor in business means - (i) where there has been an amalgamation of a company with another company, the amalgamated company; (ii) where the first mentioned person is succeeded by any other person in that business or profession, the other person; (iii) where a firm carrying on a business or profession is succeeded by another firm, the other firm; (iv) where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt is not to be immediately paid to the Government upon collection but can be remitted later on in terms of the scheme, then we are of the opinion that the exercise undertaken by the Government of Maharashtra in terms of the amendment made to the Bombay Sales Tax Act and noted above, may relieve the assessee of his obligation, but that is not by way of obtaining remission. The worth of the amount which has to be remitted after 7 to 12 years has been determined prematurely. That has been done by finding out its net present value. If that is the value of the money that the State Government would be entitled to receive after the end of 7 to 12 years, then we do not see how ingredients of sub-section (1) of section 41 can be said to be fulfilled. The obligation to remit to the Government the sales tax amount already recovered and collected from the customers is in no way wiped out or diluted. The obligation remains. All that has happened is an option is given to the assessee to approach the SICOM and request it to consider the application of the assessee of premature payment and discharge of the liability by finding out its net present value. If that was a permissible exercise and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28. As was pointed out before the Tribunal, in the decision in Sulzer India Limited (supra) this court had also considered and adjudicated the appeal in the case of Associated Capsules(P) Limited. Therefore, the decision in Sulzer India Limited (supra) was the decision in Associated Capsules (P) Limited (supra) as well. 29. The question as to whether the differential amount arising on account of premature payment of deferred sales tax liability at net present value (NPV) should be treated as a capital or a revenue/trading receipt and applicability of section 41(1) of the Act thereto came up for consideration before the Supreme Court in Balkrishna Industries Limited (supra) in which the decision of this Court in Sulzer India Limited (supra) was also considered. Supreme Court noted that the main judgment out of which the appeals arose and were considered in the said case was rendered in Sulzer India Limited (supra). Supreme Court referred to the decision of this Court in Sulzer India Limited (supra), more particularly to paragraph 40 thereof which has been extracted above, and held that the aforesaid approach of the High Court was without any blemish. Accordingly, the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of advance tax with respect to the liability under MAT would not attract levy of interest under sections 234B and 234C of the Act. 36. Considering the rival submissions, Tribunal held as under :- 24. We have carefully considered the rival submissions. Before we proceed to test the efficacy of the stand of Revenue for charging interest u/s 234B 234C of the Act in the instant case, the brief relevant facts are to be appreciated which are as follows. In the instant case, in the return of income filed, tax liability was determined on the book profits in terms of Section 115JB of the Act. Even in the assessment finalized u/s 143(3) of the Act, the final tax liability was determined by Assessing Officer based on the book profits determined u/s 115JB of the Act. During the previous year relevant to the assessment year under consideration, the relevant dates for payment of advance tax were - 15.6.2003, 15.9.2003, 15.12.2003 and 15.3.2004. In the assessment order passed u/s 143(3) dated 30.10.2006, Assessing Officer charged interest u/s 234B 234C of the Act with respect to the tax liability u/s 115JB of the Act. At the time of the relevant dates for payment of advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be apposite to deal with the provisions contained in sections 234B and 234C of the Act. Section 234B deals with interest for default in payment of advance tax. As per sub-section (1) where in any financial year an assessee who is liable to pay advance tax under section 208 of the Act has failed to pay such tax or where the advance tax paid under section 210 is less than 90% of the assessed tax, the assessee shall be liable to pay simple interest at the percentage determined for every month or part of a month comprised in the period from the first day of April next following such financial year to the date of determination of total income under section 143(1) 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. 38. Thus, interest under section 234B would be charged when an assessee who is liable to pay advance tax has failed to pay such tax or where the advance tax paid is less than 90% of the assessed tax. 39. Section 234C on the other hand deals with interest for deferment of advance tax. Like sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MAT in view of the decision in Kwality Biscuits Limited (supra). In this context, Tribunal held that contention of Revenue that charging of interest under sections 234B and 234C is mandatory would not be germane in deciding the controversy in as much as the levy can be said to be mandatory only if its payment is attracted per se as per the prevailing legal position. Therefore, Tribunal affirmed the decision of the CIT (Appeals). 41. In Kwality Biscuits Limited (supra) one of the questions for consideration before the Karnataka High Court was whether in an assessment year where the assessee s income is computed by invoking the provisions of section 115J of the Act interest under sections 234B and 234C were leviable? Karnataka High Court referred to the requirements of sections 234B and 234C and also the scheme of section 115J whereafter it was held that since the entire exercise of computing income or book profit could be done only at the end of the financial year, provisions of sections 207, 208, 209 or 210 (dealing with liability to pay advance tax) cannot be made applicable. Until and unless the accounts are audited and the balance-sheet is prepared, even the assessee woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . A liability to pay tax although created retrospectively could not entail the punishment of payment of interest with retrospective effect. It was held that though Explanation to section 234B was introduced by the Finance Act, 2008 with retrospective effect, the assessee could not be termed as a defaulter for non-payment of advance tax because such a provision did not exist at the relevant time mandating payment of advance tax. 46. As noticed, in Rolta India Limited (supra) Supreme Court again examined the provisions of sections 234B and 234C and held that section 115JB is a self contained code pertaining to MAT and all companies were liable for payment of advance tax under section 115JB. Consequently, the provisions of sections 234B and 234C imposing interest on default in payment of advance tax were also applicable. Therefore, the decision of the Karnataka High Court in Kwality Biscuits limited (supra) was overruled. 47. Though in Rolta India Limited (supra) Supreme Court held that interest under sections 234B and 234C is payable on failure to pay advance tax in respect of tax liability under section 115JB of the Act, the fact remains that at the time of payment of advance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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