2012 (11) TMI 1147 - AT - Income Tax

Tribunal rules interest on tax; law at payment prevails over retrospective changes

The Tribunal allowed the appeal against the order confirming interest charged under section 234B for tax payable due to a retrospective amendment. It held ... Retrospective amendment - advance tax liability - interest under section 234B - computation under section 115JB - lex non cogit ad impossibiliaRetrospective amendment - advance tax liability - interest under section 234B - computation under section 115JB - Whether interest under section 234B can be levied for A.Y. 2005-06 on account of a retrospective amendment to section 115JB which, when enacted retrospectively, increased taxable income after the date when advance tax was payable - HELD THAT: - The Tribunal accepted the assessee's contention that the law to be applied for determining advance tax liability is the law in force on the date when advance tax was required to be paid and that a subsequent retrospective amendment cannot, by itself, convert a previously non-existent obligation into an act of default. Applying the principle that a retrospective statute cannot be used to compel performance of an impossibility (lex non cogit ad impossibilia) and following the decision of the Calcutta High Court in Emami Ltd. [as cited in the record], the Tribunal held that amended provisions to section 115JB brought in retrospectively could not be invoked to treat the assessee as a defaulter in payment of advance tax for the year in question. In these circumstances levy of interest under section 234B, which presupposes a shortfall in advance tax computed under the law existing at the relevant time, was not sustainable. [Paras 6, 7]Levy of interest under section 234B set aside; appeal allowed.Final Conclusion: The Tribunal allowed the appeal for A.Y. 2005-06, holding that interest under section 234B could not be levied where the tax liability arose only by a retrospective amendment to section 115JB and the assessee had no advance tax obligation under the law as it stood when advance tax was payable. Issues involved: Appeal against order confirming interest charged u/s 234B for tax payable due to retrospective amendment.Summary:The appeal was filed against the order confirming the charging of interest u/s 234B by the Assessing Officer for tax payable due to a retrospective amendment. The assessee contended that there was no tax payable initially as per the estimated income for A.Y. 2005-06, and the retrospective amendment to section 115JB of the Act was not in force when the advance tax was due. The AO levied interest under section 234B, assuming the provision was in existence when the return was filed. The CIT(A) upheld the AO's decision, leading to the appeal.The main argument of the assessee was that a retrospective legislation cannot impose an obligation that was impossible to fulfill initially. The assessee relied on the legal maxim 'Lex Non Cogit Ad Impossibilia' and cited a decision of the Hon'ble Calcutta High Court where it was held that interest cannot be levied under sections 234B and 234C solely based on a retrospective tax liability. The assessee emphasized that there was no contradictory decision from any other court, making the Calcutta High Court's decision applicable in this case.After considering the submissions and the record, the Tribunal noted that the Calcutta High Court had ruled that amended provisions cannot be used to penalize an assessee for non-payment of advance tax due to retrospective changes in the law. The Tribunal held that the law applicable at the time of advance tax payment should determine the default, not retrospective amendments. As there was no conflicting decision, the Tribunal followed the Calcutta High Court's decision and allowed the appeal.