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TMI Blog2021 (5) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by the assessee during the financial year immediately preceding the relevant assessment years found to be less then the amount of advance tax payable on his current income, the assessee chargeable to interest under section 234B and/or 234C is entitled to reduction of waiver of such interest if the Chief Commissioner of the Director-General of Income Tax is satisfied for grant of such reduction or waiver interest. Thus, the facts as they stand out make it clear that the petitioner was indeed entitled for partial waiver of interest under section 234 B of the Income Tax Act, 1961 inasmuch as there was stay granted by this court on 6.1.1989 and on 12.6.1989. These orders continued to be in force as these writ petition filed by the petitioner came to be allowed on 19.12.19 94 and was reversed only on 31.1.2001. Therefore, up to the date of the order of the Honourable Supreme Court this was a fit case for exercising the discretion vested with the first respondent for reducing the proportionate interest under section 234B of the Income Tax Act, 1961. First respondent ought to have also considered the mitigating circumstances in as much as the total surplus generated by the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Petitioner : Mr.R.Meenakshi Sundaram For the Respondents : M/s.Hema Muralikrishnan Senior Standing Counsel ORDER The petitioner has challenged the impugned order dated 04.05.2011 passed by the first respondent in F.No.DGIT(E)/2011-12/133 denying the waiver of interest to the petitioner under Section 234B of the Income Tax Act, 1961. 2. The dispute pertains to delay in payment of tax for the Assessment Years 1989-1990, 1990-1991 and 1991-1992. It is case of the petitioner that the petitioner trust was created in year 1954 and all along upto 1976-1977, exemption was granted to the petitioner from payment of tax under the provisions of the Income Tax Act, 1922 and thereafter Income Tax Act, 1961 after the said Act came into force. For the period upto 1983-84 (Assessment Year 1984-1985), the petitioner had claimed exemption under Section 13(1)(bb) of the Income Tax Act. With effect from 01.04.1984 the exemption in form of Section 11(4) was introduced. 3. The petitioner claims that it was under bonafide belief for the period after the introduction of Section 11(4) of the Income Tax Act with effect from 01.04.1984, the petitioner was still exempt from payment of income tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Institution/Trust. It is the contention of the learned counsel for the petitioner that if an amount of ₹ 3,89,70,000/- and tax of ₹ 2,47,57,082/- are considered as prayed towards Section 11 of the Income Tax Act, 1961, the application and tax liability, the total amount that was used out of the petitioner's packet would be ₹ 6,37,27,082/- which would be over and above the net surplus generated by the petitioner. 9. It is further submitted that assuming the petitioner had paid the amount as advance tax, the petitioner would have paid such amount out of its pocket for the application of charitable purpose. The learned counsel for the petitioner further submits that the Central Board of Direct Taxes (CBDT) has issued certain Circulars/Notification under Section 119(2)(a) of the Income Tax Act, 1961 bearing reference F.No.212/495/92-IT (A-II), dated 02.05.1994 and F.No.400/234/95-IT(B), dated 23.05.1996 and F.No.400/234/95-IT(B), dated 30.01.1997. 10. He further submits that the case of the petitioner is covered by the CBDT Circular F.No.400/234/95-IT(B), dated 23.05.1996. The relevant clause from the said clause is reproduced below:- 2.The class of incomes or c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f interest on the ground that the first respondent on the earlier occasion passed an order dated 18.02.2005 and that order came to be challenged before this Court in W.P.No.7457 of 2005. He further submits that considering the submissions of the petitioner, this Court allowed the said writ petition by setting aside the order dated 18.02.2005 passed by the first respondent vide order dated 12.03.2007 with the following observations:- 10. A perusal of Section 234-B shows that an assessee shall be liable to pay interest for non-payment/short payment of advance tax. The interest payable is held as compensatory in character. The Central Board of Direct Taxes, in exercise of its powers under Section 119(2)(a), authorised the Chief Commissioner and Director General of Investigation to reduce or waive penal interest charged under Section 234-A, 234-B and 234-C in the following circumstances: i. Where, in the course of search and seizure operations, books of account have been taken over by the Department and were not available to the tax-payer to prepare his return of income; ii. Where, in the course of search and seizure operations, cash had been seized which was not permitted to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders in accordance with law. 13. In the circumstances, the writ petition is allowed, but with a direction as stated above, remanding the matter back to the first respondent to pass orders in accordance with law and in terms of the Board's circular cited above. There will, however, be no order as to costs. 13. He further submits that thereafter, the case was taken again by the respondents for considering the case of the petitioner for grant of exemption/waiver of interest and by an order dated 03.03.2010, the first respondent once again rejected the request of the petitioner for waiver of interest under Section 234B of the Income Tax Act, 1961. He further submits that the petitioner thereafter filed the second writ petition in W.P.No.5859 of 2010. By an order dated 23.09.2010, this Court once again set aside the order dated 03.03.2010 passed by the first respondent with the following observations:- 7. Learned Senior Counsel appearing for the petitioner pointed out that the petitioner satisfied the conditions in Clause 2(d) of the circular of the Board. Having regard to the order passed by this Court in W.P.No.7457 of 2005, dated 12.03.2007, the first respondent should h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .01.2001 which was reported in (2001) 2 SCC 707 : (2001) 247 ITR 785 (S.C.). 16. He further submits that right from the beginning up to the Assessment Year 1986-1987, there were no disputes relating to the availability of exemption in terms of the decision of the Hon'ble Supreme Court in Additional Commissioner of Income Tax Vs. Surat Art Silk Cloth Manufacturers Association, (1980) 2 SCC 31 : (1980) 121 ITR 1 (SC) and as per the decision of the Hon'ble Supreme Court in Asst. Custodian of Evacuee Property Vs. Brij Kishore Agarwala, (1975) 1 SCC 21 and the decision of this Court in Commissioner of Income-tax Vs. Rao Bahadur Calavala Cunnan Chetty Charities, (1979) SCC OnLine Mad 219 : (1982) 135 ITR 0485 (Madras). 17. He further submits that the petitioner was under bonafide belief with a view that the exemption under Section 11(4A) of the Income Tax Act, 1961 which was inserted by the Finance Act, 1983, w.e.f. 01.04.1984, was available to the petitioner and the issue finally settled by only the Hon'ble Supreme Court vide order dated 31.01.2001 which was reported in (2001) 2 SCC 707 : (2001) 247 ITR 785 (S.C.) and therefore, the petitioner is entitled for waiver of interest in ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t sight of the distinction between a claim for registration under Section 12AA and a claim for exemption under Section 11 of the Act. To say the least, the Tribunal's justification would amount to judicial indiscipline for not following the decision of the Hon'ble Supreme Court and this Court in the assessee's own case. The DIT(E) failed to adhere to the instructions issued by the CBDT which is binding on the DIT(E). As observed earlier, the recent pandemic has taught very many lessons and one of which is that, mode and method of education cannot be in any manner restricted, but should be given the widest meaning that is possible. 19. Defending the impugned order, the learned Senior Standing Counsel for the respondents submits that the exemption was claimed by the petitioner under Section 13(1)(bb) of the Income Tax Act, 1961 for the earlier assessments years cannot be the basis for claiming exemption under the newly inserted exemption Section 11(4A) of the Income Tax Act, 1961 which was introduced by the Finance Act, 1983, w.e.f. 01.04.1984. She submits that these writ petitions pertain to the Assessment Years 1989-1990, 1990-91 and 1991-1992 and advance tax was not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular. 11.2. Therefore, what is required to be seen is what is the scope and ambit of the Circular dated 26.06.2006. A bare perusal of the Circular would show that the CBDT has delegated its power to the Chief Commissioner and/or the Director General of Income Tax to reduce or waive interest charged under Section 234A or under Section 234B or under Section 234C of the 1961 Act, in the classes of cases or classes of incomes specified in paragraph 2 of the said Circular. 11.3. The extent to which the said delegatees, i.e., Chief Commissioner/Director General of Income Tax, may waive or reduce the interest has been left to their discretion. 11.4. Furthermore, the Circular makes it clear that no reduction or waiver of interest under the provisions referred to above shall be ordered, unless the assessee has filed a return of income for the relevant AY and paid the entire income tax (principal component of demand due on the income, as assessed). 11.5. In addition thereto, the Chief Commissioner/Director General of Income Tax has been empowered to impose any other condition, as it may deem fit, while granting reduction or waiver of interest. 11.6. Therefore, what emanates upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne's legal contention cannot be characterised as an unavoidable circumstance. The decision of the adjudicator is something that is always beyond the control of the assessee and it cannot be foreseen unless of course there is something like matchfixing! The expression "unavoidable circumstance" occurring in clause 2(e) of the circular dated 23.05.1996 cannot obviously encompass outcomes of judicial and quasi judicial proceedings. This is all the more so because, clause 2(d) deals with arising of liability on account of a subsequent decision of the Hon'ble Supreme Court. If adverse judicial or quasi judicial decisions are to furnish a cause for seeking waiver of interest, it would have been expressly stated in clause 2(e) as in clause 2(d). When a person embarks on the journey of litigation, one should always be prepared for an adverse verdict. Therefore, there is nothing unforeseeable about the outcome of judicial or quasi judicial proceeding.'' 24. Finally, she drew my attention to the decision of this Court in M/s.Rayala Corporation Pvt. Ltd. case referred to supra, in support of her plea that the petitioner has not made out any case for exemption/waiver from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d liable to pay tax and no exemption was available to the petitioner under Section 11 of the Act. The petitioner has also remitted the tax for these assessment years through belatedly. 31. The petitioner thereafter approached the first respondent for exemption from payment of interest under section 234 B of the Income Tax Act, 1961. 32. The first respondent by an order dated 18.2.2005 rejected the application for waiver of interest under the aforesaid provision of the Income Tax Act, 1961. The petitioner therefore filed W.P.No. 7457 of 2005 which set aside the aforesaid order dated 18.2.2005 of the first respondent dated 18.2.2005 and remanded the case back to the respondent to consider the case afresh with the following observation:- "It is no doubt true that given the provisions of Section 11 (4A), the demand was raised on the assessee. However, the subsequent declaration of law and the cancelling of the orders of assessment merit to be considered on the question of bona fides while considering the plea for waiver. It is not denied that the fresh order of assessment itself came to be passed after the Supreme Court decision. In the light of the above facts and considering t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le because of favourable High Court's order in its own case has been rebutted in both the earlier order of the DGIT(E). The first due dates of liability for payment of advance tax for Assessment Years 1989-90, 1990-91 and 1991-92 were 15.09.1988, 15.09.1989 and 15.09.1990. The order of the Madras High Court which was in favour of the assessee (subsequently reversed by the Hon'ble Supreme Court in favour of the Department) was passed only on 19.12.1994. Therefore, the said order was not in existence when advance tax was due and therefore, the contention of the applicant is contrary to the facts of the case. (B) Regarding genuine hardship, the assessee was asked to furnish evidence by producing bank pass books and also relevant copies of accounts to prove that on due dates for payment of advance tax for all the relevant assessment years, the assessee was having serious financial problems for payment of advance tax. The assessee during the course of hearing and also in its written submission filed on 22.01.2011 and on 26.01.2011 frankly admitted that genuine hardship in the shape of financial problem and shortage of liquid funds did not exist in the assessee's case. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Thereafter, another order came to be passed by this court on 12.6.1989. 37. Though, content of these orders have not been furnished, it is evident that the petitioner took a bonafide stand that it was not liable to pay tax though the Section 11 had been amended vide Finance Act, 1983 with effect from 1.4.1984. The contention of the petitioner was also accepted by this court in its order dated 19.12.1994 in [1995] 213 ITR 639. That position continued to 31.1.2001 till the Honourable Supreme Court reversed the said order dated 19.12.1994 vide its order dated 31.1.2001 in [2001] 247 ITR 785. 38. Therefore, the question to be answered is whether the petitioner is entitled for complete or partial waivers or no waiver at all from payment of interest under section 234 B of the Income Tax Act, 1961. 39. As per clause (d) to CBDT Circular F. No. 400/234/95-IT (B) dated 23.5.1996, where any income which was not chargeable to income tax on the basis of any order passed in the case of an assessee by the High Court within whose jurisdiction such assessee was assessable to income tax, and as a result, such assessee did not pay income tax in relation to such income in any previous year and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2001, the respondent department could not have demanded tax. After all, some form of exemption on the payment/transfer made to the aforesaid trust for educational purpose has been exempted right from beginning and all along the petitioner had to approach the court for relief which was also granted to the petitioner and stand of the petitioner was upheld. The amendment to the law in 1983 with effect from 1.4.1984 changed the perspective and the issue attained finality only after the Honourable Supreme Court pronounced its judgement in [2001] 247 ITR 785 on 31.1.2001. Therefore, this was a fit case for granting waiver by the first respondent to the petitioner upto 31.01.2001. 43. Under these circumstances, this court is inclined to modify the impugned order and grants partial waiver of interest to the petitioner upto 31.01.2001, being the date of the order of the Honourable Supreme Court reported in [2001] 247 ITR 785 which reversed the decision of the Division Bench of this Court in [1995] 213 ITR 639 on 19.12.1994. 44. The second respondent is therefore directed to re-quantify the proportionate interest to be paid by the petitioner on account of the delay in 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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