Emami Ltd. v. Commissioner of Incometax

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The Tax Publishers2012 TaxPub(DT) 0452 (Cal-HC) : (2012) 048 (I) ITCL 0517 : (2011) 337 ITR 0470 : (2011) 245 CTR 0656 : (2011) 200 TAXMAN 0326 : (2011) 063 DTR 0301 INCOME TAX ACT, 1961 --Interest under sections 234B and 234C--Leviability Amendment to section 115JB vis-a-vis liability of advance tax--The assessee carried on business, inter alia, of manufacturing toiletries and medicines. As the assessee did not have any taxable income according to the normal computation provisions of the IT Act for the assessment year 2001-02, the assessee had no liability under section 115JB as the assessee was entitled to deduct a total amount of Rs. 26.51 crore withdrawn from the revaluation reserve and credited to the profit and loss account in computing the book profit. After such deduction, the assessee was left with a book loss of Rs. 5.87 crore and in such circumstances, the assessee had no liability to pay any advance tax under section 208 for the assessment year 2001-02. The Chartered Accountants of the assessee in their report in Form No. 29B computing the book profits under section 115JB for the assessment year 2001-02 stated that the assessee was not liable to tax under section 115JB and such report along with its return for the assessment year 2001-02 was filed on 31-10-2001. According to the said return, the assessee did not have any taxable income either according to the normal computation provisions or under section 115JB. By the Finance Act, 2001, section 115JB was amended with retrospective effect from 1-4-2001. In view of the aforesaid retrospective amendment, the assessee was not in a position to deduct the sum of Rs. 26.51 crore withdrawn from the revaluation reserve. In such circumstances, the assessee recomputed the book profit under section 115JB for the assessment year 2001-02 on the basis that the said sum of Rs. 26.51 crore credited to the profit and loss account was not deductible. On such basis, the assessee worked out the amount of tax payable and paid the same on 31-8-2002. After taking into consideration the tax deducted at source of Rs. 19,26,983 and the sum of Rs. 1,55,62,511 paid on 31-8-2002, the assessee was not required to make any further payment. On 31-3-2004, the assessing officer passed an order under section 143(3)/115JB for the assessment year 2001-02. The assessing officer computed the tax liability under section 115JB at the same figure as shown in the assessees revised return. However, the AO charged interest under section 234B of Rs. 44,00,937 and interest under section 234C of Rs. 11,78,960, since the assessee did not pay any advance tax with reference to the liability for tax under the retrospective amended section 115JB. Being dissatisfied, the assessee preferred an appeal before the Commissioner (Appeals) who by an order dated 11-10-2004 allowed the same. The Commissioner (Appeals) held that since the amended provision did not exist in the statute during the relevant previous year, namely, the financial year 2000-01, the assessees contention that it had no liability under section 208 to pay advance tax was well-founded. The Commissioner (Appeals) held that since the interest under sections 234B and 234C was chargeable only where the assessee was liable to pay advance tax, the assessee could not be said to have been in default. Being dissatisfied, the assessing officer preferred an appeal before the Tribunal and by the order impugned herein, the said Tribunal allowed the appeal holding that the appellant was liable to pay interest under sections 234B and 234C. *Held:* The amended provisions of section 115JB having come into force with effect from 1-4-2001, the appellant cannot be held defaulter of payment of advance tax. As pointed out earlier, on the last date of the financial year preceding the relevant assessment year, as the book profit of the appellant in accordance with the then provision of law was nil, one cannot conceive of any 'advance tax' which in essence is payable within the last day of the financial year preceding the relevant assessment year as provided in sections 207 and 208 or within the dates indicated in section 211 which inevitably falls within the last date of financial year preceding the relevant assessment year. Consequently, the assessee cannot be branded as a defaulter in payment of advance tax; no interest under sections 234B ad 234C was to be levied on assessee. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 0452 (Cal-HC) : (2012) 048 (I) ITCL 0517 : (2011) 337 ITR 0470 : (2011) 245 CTR 0656 : (2011) 200 TAXMAN 0326 : (2011) 063 DTR 0301

INCOME TAX ACT, 1961

--Interest under sections 234B and 234C--Leviability Amendment to section 115JB vis-a-vis liability of advance tax--The assessee carried on business, inter alia, of manufacturing toiletries and medicines. As the assessee did not have any taxable income according to the normal computation provisions of the IT Act for the assessment year 2001-02, the assessee had no liability under section 115JB as the assessee was entitled to deduct a total amount of Rs. 26.51 crore withdrawn from the revaluation reserve and credited to the profit and loss account in computing the book profit. After such deduction, the assessee was left with a book loss of Rs. 5.87 crore and in such circumstances, the assessee had no liability to pay any advance tax under section 208 for the assessment year 2001-02. The Chartered Accountants of the assessee in their report in Form No. 29B computing the book profits under section 115JB for the assessment year 2001-02 stated that the assessee was not liable to tax under section 115JB and such report along with its return for the assessment year 2001-02 was filed on 31-10-2001. According to the said return, the assessee did not have any taxable income either according to the normal computation provisions or under section 115JB. By the Finance Act, 2001, section 115JB was amended with retrospective effect from 1-4-2001. In view of the aforesaid retrospective amendment, the assessee was not in a position to deduct the sum of Rs. 26.51 crore withdrawn from the revaluation reserve. In such circumstances, the assessee recomputed the book profit under section 115JB for the assessment year 2001-02 on the basis that the said sum of Rs. 26.51 crore credited to the profit and loss account was not deductible. On such basis, the assessee worked out the amount of tax payable and paid the same on 31-8-2002. After taking into consideration the tax deducted at source of Rs. 19,26,983 and the sum of Rs. 1,55,62,511 paid on 31-8-2002, the assessee was not required to make any further payment. On 31-3-2004, the assessing officer passed an order under section 143(3)/115JB for the assessment year 2001-02. The assessing officer computed the tax liability under section 115JB at the same figure as shown in the assessees revised return. However, the AO charged interest under section 234B of Rs. 44,00,937 and interest under section 234C of Rs. 11,78,960, since the assessee did not pay any advance tax with reference to the liability for tax under the retrospective amended section 115JB. Being dissatisfied, the assessee preferred an appeal before the Commissioner (Appeals) who by an order dated 11-10-2004 allowed the same. The Commissioner (Appeals) held that since the amended provision did not exist in the statute during the relevant previous year, namely, the financial year 2000-01, the assessees contention that it had no liability under section 208 to pay advance tax was well-founded. The Commissioner (Appeals) held that since the interest under sections 234B and 234C was chargeable only where the assessee was liable to pay advance tax, the assessee could not be said to have been in default. Being dissatisfied, the assessing officer preferred an appeal before the Tribunal and by the order impugned herein, the said Tribunal allowed the appeal holding that the appellant was liable to pay interest under sections 234B and 234C. Held: The amended provisions of section 115JB having come into force with effect from 1-4-2001, the appellant cannot be held defaulter of payment of advance tax. As pointed out earlier, on the last date of the financial year preceding the relevant assessment year, as the book profit of the appellant in accordance with the then provision of law was nil, one cannot conceive of any 'advance tax' which in essence is payable within the last day of the financial year preceding the relevant assessment year as provided in sections 207 and 208 or within the dates indicated in section 211 which inevitably falls within the last date of financial year preceding the relevant assessment year. Consequently, the assessee cannot be branded as a defaulter in payment of advance tax; no interest under sections 234B ad 234C was to be levied on assessee.