M/s Snghi Industries Ltd., Hyderabad v. DCIT, Hyderabad

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI G.C. GUPTA VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO.456/H/2010 ASSESSMENT YEAR 2005-06 M/S SANGHI INDUSTRIES LTD. RR DISTRICT HYDERABAD (PAN AAECS 5510 Q) VS THE DY. CIT CIRCLE 3 (1) HYDERABAD (APPELLANT) (RESPONDENT) ITA NO.457/H/2010 ASSESSMENT YEAR 2007-08 M/S SANGHI INDUSTRIES LTD. RR DISTRICT HYDERABAD (PAN AAECS 5510 Q) VS THE DY. CIT CIRCLE 3 (1) HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.A. SAI PRASAD RESPONDENT BY : SHRI K.V.N. CHARYA O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER: THESE TWO APPEALS PREFERRED BY THE ASSESSEE ARE D IRECTED AGAINST THE COMMON ORDERS PASSED BY THE CIT(A) IV HYDERABAD DATED 15.1.2010 AND PERTAINS TO THE ASSESSMENT YEARS 2005 -06 & 2007-08. SINCE ISSUES INVOLVED IN THESE TWO APPEALS ARE COMM ON IN NATURE THEY ARE CLUBBED TOGETHER HEARD TOGETHER AND DISPOSED OFF V IDE THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE RAISED THE COMMON GROUNDS IN BOT H THE APPEALS WHICH ARE AS FOLLOWS: ITA NOS.456 & 457/H/2010 M/S SANGHI INDUSTRIES LTD. RR DISTRICT 2 2 1. THE CIT(A) IS NOT JUSTIFIED IN REJECTING THE ASSESS EES CONTENTIONS AND CONFIRM THE ORDER OF THE ASSESSING OFFICER LEVYING INTEREST U/S 234B AND 234C. 2. FOR THE ABOVE AND ANY GROUND OR GROUNDS THAT MAY BE URGED DURING THE COURSE OF HEARING THE ASSESSEE PRAYS TH AT THE HONBLE INCOME TAX APPELLATE TRIBUNAL BE PLEASED TO DIRECT THE ASSESSING OFFICER TO DELETE THE INTEREST U/S 234B A ND 234C FOR THE ASSESSM ENT UNDER APPEAL. 3. AFTER HEARING BOTH THE PARTIES WE ARE OF T HE OPINION THAT THE ISSUE INVOLVED HEREIN IS SQUARELY COVERED BY THE JU DGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF JCIT VS. ROLTA INDIA LTD. (196 RAXMAN 594) (S.C) WHEREIN IT WAS HELD AS FOLLOWS: SECTIONS 115J & 115JA ARE SPECIAL PROVISIONS. SEC TION 207 ENVISAGES THAT TAX SHALL BE PAYABLE IN ADVANCE DURI NG ANY FINANCIAL YEAR ON CURRENT INCOME IN ACCORDANCE WITH THE SCHEM E PROVIDED IN SECTIONS 208 TO 219 (BOTH INCLUSIVE) IN RESPECT OF THE TOTAL INCOME OF THE ASSESSEE THAT WOULD BE CHARGEABLE TO TAX FOR TH E ASSESSMENT YEAR IMMEDIATELY FOLLOWING THAT FINANCIAL YEAR. SECTION 215(5) DEFINES WHAT IS ASSESSED TAX I.E. TAX DETERMINED ON THE BASIS OF REGULAR ASSESSMENT SO FAR AS SUCH TAX RELATES TO INCOME SU BJECT TO ADVANCE TAX. IN THE INSTANT CASE THE EVALUATION OF THE CU RRENT INCOME AND THE DETERMINATION OF TH ASSESSED INCOME HAD TO BE MADE IN TERMS OF THE STATUTORY SCHEME COMPRISING SECTION 115J/115JA. HE NCE LEVYING OF INTEREST WAS INSEPARABLE. THE ASSESSEE WAS BOUND T O PAY ADVANCE TAX UNDER THE SAID SCHEME OF THE ACT. SEC. 115J AND 11 5JA ARE SPECIAL PROVISIONS WHICH PROVIDE THAT WHERE IN THE CASE OF AN ASSESSEE THE TOTAL INCOME AS COMPUTED UNDER THE ACT IN RESPECT O F ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR IS LESS THAN 3 0 PERCENT OF THE BOOK PROFITS THE TOTAL INCOME OF THE ASSESSEE SHAL L BE DEEDED TO BE AN AMOUNT EQUAL TO 30% OF SUCH BOOK PROFIT. THE OBJEC T IS TO TAX ZERO TAX COMPANIES. SECTION 115JA WAS INSERTED BY THE FINANCE ACT 199 6 W.E.F. 1.4.1997. AFTER INSERTION OF SECTION 115JA SECTION 115JB WAS INSERTED BY THE FINANCE ACT 2000 W.E.F. 1.4.2001. IT IS CLEAR FRO M READING OF SECTION 115JA AND 115JB THAT THE QUESTION WHETHER A COMPAN Y IS LIABLE TO PAY TAX UNDER EITHER PROVISION DOES NOT ASSUME IMP ORTANCE BECAUSE SPECIFIC PROVISION(S) IS/ARE MADE IN THE SECTION SA YING THAT ALL OTHER PROVISIONS OF THE ACT SHALL APPLY TO THE MAT COMPAN Y. SIMILARLY AMENDMENTS HAVE BEEN MADE IN THE RELEVANT FINANCE A CT PROVIDING FOR PAYMENT OF ADVANCE TAX UNDER SECTIONS 115JA AND 115JB. SO FAR AS INTEREST LEVIABLE U/S 234B IS CONCERNED THE SEC TION IS CLEAR THAT IT ITA NOS.456 & 457/H/2010 M/S SANGHI INDUSTRIES LTD. RR DISTRICT 3 3 APPLIES TO ALL COMPANIES. THE PRE REQUISITE CONDIT ION FOR APPLICABILITY OF SECTION 234B IS THAT THE ASSESSEE IS LIABLE TO P AY TAX U/S 208 AND THE EXPRESSION ASSESSED TAX IS DEFINED TO MEAN TH AT THE TAX ON THE TOTAL INCOME DETERMINED U/S 143(1) OR U/S 143(3) AS REDUCED BY THE AMOUNT OF TAX DEDUCTED OR COLLECTED AT SOURCE. THU S THERE IS NO EXCLUSION OF SECTION 115J/115JA IN THE LEVY OF INTE REST U/S 234B. THE EXPRESSION ASSESSED TAX IS DEFINED TO MEAN TH E TAX ASSESSED ON REGULAR ASSESSMENT WHICH MEANS THE TAX DETERMINED ON THE APPLICATION OF SECTION 115J/115JA IN THE REGULAR AS SESSMENT. THE KARNATAKA HIGH COURT HAD IN THE CASE OF JINDAL THERMAL POWER CO. LTD. VS. DCIT (2006) (154 TAXMAN 547) HAS HELD THAT SECTION 115JB IS A SELF CONTAINED CODE PERTAINING TO MAT WHICH IMPOSED LIABILITY FOR PAYMENT OF ADVANCE TAX IN RESPECT OF TAX THEREFORE WHERE SUCH COMPANIES DEFAULTED IN PAYMENT OF ADVANCE TAX IN RESPECT OF PAYABLE U/S 115JB THEY WERE LIABLE TO PAY INTEREST U/S 234B AND 234C. THUS IT CAN BE CONCLUDED THAT INTEREST U/S 234B AND 234C SHALL BE PAYABLE ON FAILURE TO PAY ADVANCE TAX IN R ESPECT OF TAX PAYABLE U/S 115JA AND 115JB. FOR THE AFORE STATED REASONS CIRCULAR NO.13 OF 2001 DATED 9.11.2001 ISSUED BY THE CBDT HAS NO APPLICATION. MOREOVER IN ANY EVENT PARA 2 OF THAT CIRCULAR ITSE LF INDICATES THAT A LARGE NUMBER OF COMPANIES LIABLE TO BE TAXED UNDER MAT PROVISIONS OF SECTION 115JB WERE NOT MAKING ADVANCE TAX PAYMENTS. IN THE SAID CIRCULAR IT HAS BEEN CLARIFIED THAT SECTION 115JB IS A SELF CONTAINED CODE AND THUS ALL COMPANIES WERE LIABLE FOR PAYME NT OF ADVANCE TAX U/S 115JB AND CONSEQUENTLY PROVISIONS OF SECTIONS 234B AND 234C IMPOSING INTEREST ON DEFAULT IN PAYMENT OF ADVANCE TAX WERE ALSO APPLICABLE. 4. RESPECTFULLY FOLLOWING THE ABOVE JUDGEMENT OF THE HON'BLE SUPREME COURT WE DECIDE THE ISSUE IN FAVOUR OF THE REVENUE AND THE GROUNDS TAKEN BY THE ASSESSEE IN ITS APPEALS ARE DI SMISSED. 5. IN THE RESULT THE APPEALS OF THE ASSESSEE IN ITA NOS.456/H/2010 & 457/H/2010 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 21. 2.2011 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 21 ST FEBRUARY 2011 ITA NOS.456 & 457/H/2010 M/S SANGHI INDUSTRIES LTD. RR DISTRICT 4 4 COPY FORWARDED TO: 1. M/S CH. PARTHASARATHY & CO. 1-1-298/2/B/3 1 ST FLOOR SOWBHAGYA AVENUE ST. NO.1 ASHOK NAGAR HYDERABAD-2 0. 2. THE DY. CIT CIRLE 3(1) HYDERABAD 3. CIT(A)-IV HYDERABAD. 4. CIT HYDERABAD 5. THE D.R. ITAT HYDERABAD. NP