By TIOL News Service

ALLAHABAD, MAY 15, 2017: THE Issue is - Whether income computed u/s 115J for the period prior to enforcement of Section 115JA and Section 115JB, would attract levy of interest u/s 234B and 234C. NO is the verdict.

Facts of the case:

The assessee had preferred the present appeal challenging the action of ITAT in upholding the levy of interest u/s 234B and 234C of the Income Tax Act, on the income of assessee and his liability to be taxed as per the provisions of Section 115-J.

On appeal, the HC held that,

++ liability to pay interest u/s 234B and 234C arises for the default in payment of advance tax liable to be paid u/s 208 of the Act and therefore, it was held that as taxable income u/s 115J is computable at the end of the year there is no question of payment of advance tax or interest thereon for non-payment. Bombay High Court in Snowcem India Ltd. Vs. Deputy Commissioner of Income Tax - 2009-TIOL-39-HC-MUM-IT held that in view of the dismissal of appeal by the Supreme Court in Kwality Biscuits Ltd., the judgement of the Karnataka High Court stands merged and upheld by the Supreme Court to the effect that interest u/s 234B and 234C would not be chargeable on taxable income computed u/s 115J of the Act. The Calcutta High Court in Binani Industries Ltd. Vs. Commissioner, Income Tax again held that no interest is leviable for default in payment of advance tax computed u/s 115J. However, the Supreme Court in the case of Joint Commissioner of Income Tax Vs. Rolta India Ltd. - 2011-TIOL-02-SC-IT-LB was ceased with the similar controversy with regard to charging of interest on payment of advance tax computed u/s 115JA. It relying upon the entire gamut of decision on the above point including that of Kwality Biscuits Ltd., held that interest u/s 234B and 234C shall be payable on failure to pay advance tax in respect of the tax payable u/s 115JA/115JB. The aforesaid decision of the Supreme Court is specifically in respect of payment of interest on failure to pay advance tax in computed u/s 115JA/115JB and not in respect non-payment of tax computed u/s 115J of the Act. The observation therein that there is no exclusion of Section 115J in the levy of interest u/s 234B is not material so as to affect the right of the assessee herein;

++ the provisions of Section 115J were inserted with effect from April, 1988 and it remained in force upto 31st March, 1991. At that time there was neither Section 115JA nor Section 115JB of the Act. The aforesaid two provisions were enforced by the Finance Act of 1996 w.e.f. 1st April, 1997 and by the Finance Act, 2000 w.e.f. 1st April 2001 respectively thereupon Sub-Section 4 and Sub-Section 5 were added to Section 115 JA and Section 115 JB of the Act. On the basis of above additions, it was observed that no distinction can be made between the computation made under either of the above provisions so far as the interest leviable u/s 243B of the Act. In the instant case, we are seized with the matter of the assessment for the year 1989-90 when neither of the two Sections 115JA and 115JB were in-existence what to say about Sub-Section 4 and Section 5 to the aforesaid provisions. Therefore, we are of the view that the decision of the Supreme Court in Rolta India Ltd. would not be applicable to the present case and that the question regarding the levy of interest u/s 234B and 234C on the tax computed u/s 115J would stand covered by the decision of the Karnataka High Court in Kwality Biscuits Ltd. which has been approved by the Supreme Court. In view of above, the question hereinabove is answered in favour of assessee and against the department and it is held the income computed u/s 115J for the period prior to enforcement of Section 115JA and Section 115JB would not attract interest u/s 234B and 234C of the Act.

(See 2017-TIOL-918-HC-ALL-IT)