High Court grants waiver of interest under Section 11, ruling in favor of petitioner.

The High Court granted the petitioner's request for waiver of interest, emphasizing that the interest should not have been imposed due to the exemption granted under Section 11 of the Income Tax Act. The court quashed the order denying the waiver of interest and ruled in favor of the petitioner.

---

---

Issues involved:
The issues involved in this case are related to the exemption under Section 11 of the Income Tax Act, waiver of interest under Section 119(2)(a) of the Act, and the liability for payment of advance tax.

Exemption under Section 11 of the Act:
The petitioner obtained registration under Section 12-A(a) of the Income Tax Act and was granted exemption under Section 11 of the Act for being a charitable trust. However, following a judgment in another case, the Department issued a notice under Section 148 for assessment years 1994-95 to 1997-98, leading the petitioner to revise returns and withdraw the exemption claim. The assessment orders were passed under Section 143(3) r/w. Section 147, resulting in the levy of tax and interest. The petitioner filed waiver petitions under Section 119(2)(a) seeking relief from interest, which was rejected on the grounds of non-payment of advance taxes during those years. The petitioner argued that since there was no liability to pay tax due to the exemption under Section 11, there was no default in payment of advance tax, and therefore, interest should not have been levied.

Waiver of interest under Section 119(2)(a) of the Act:
The petitioner filed waiver petitions seeking relief from interest for assessment years 1994-95 to 1997-98. The request was denied on the basis that advance taxes were not paid during those years. The petitioner contended that as there was no tax liability due to the exemption under Section 11, the interest should not have been imposed. The Tribunal's order confirmed that there was no obligation on the petitioner to pay tax for the assessment year 1994-95, as returns were filed claiming exemption under Section 11, which were accepted by the Department. Therefore, the petitioner argued that the interest levied was unjustified.

Liability for payment of advance tax:
The liability for payment of advance tax arises only when there is a tax liability. The petitioner, having been granted exemption under Section 11 of the Act, was not required to pay tax for the assessment years 1994-95 to 1997-98. The returns filed by the petitioner claiming exemption were accepted by the Department, and no tax was due. Consequently, the petitioner was not in default of payment of tax and should not have been subjected to interest under Section 234B. The petitioner's plea for waiver of interest was based on the absence of any tax liability during those years, and the imposition of interest was deemed unjust as there was no fault on the petitioner's part.

In conclusion, the High Court allowed the petitioner's prayer for waiver of interest, emphasizing that the interest could not have been levied due to the exemption granted under Section 11 of the Income Tax Act. The impugned order rejecting the waiver of interest was quashed, and the writ petition was allowed in favor of the petitioner.

---