2015 (1) TMI 1068 - HC - Income Tax

High Court upholds interest levy on Company for non-payment of advance tax under Section 115JB

The High Court upheld the Tribunal's decision to levy interest on a Company under Section 115JB of the Income Tax Act for non-payment of advance tax, ... Levy of interest U/s. 234B and 234C - assessee did not have any taxable income under regular provisions of the I.T.Act and tax was levied only upon invoking deemed income created by the legal fiction as per provisions of Sec.115 JB of I.T. Act - Held that:- Supreme Court in Joint Commissioner of Income Tax v. Rolta India Ltd. [2011 (1) TMI 5 - SUPREME COURT OF INDIA], took the view that even an assessee covered by the provisions of Sections 115JA and 115 JB of the Act is under obligation to pay advance tax and delay or failure to pay that, would entail in levy of interest. The view taken by the Tribunal totally accords with this. - Decided against assessee. Issues:1. Interpretation of Sections 234B and 234C of the Income Tax Act regarding levy of interest on delayed or non-payment of advance tax.2. Permissibility of raising additional grounds in appeals.3. Applicability of interest under Sections 234B and 234C to a Company covered by Section 115JB of the Income Tax Act.Analysis:Issue 1: Interpretation of Sections 234B and 234CThe appellant, a Company governed by Section 115JB of the Income Tax Act, filed returns for the assessment year 2001-2002 showing Nil income. The Assessing Officer imposed interest under Sections 234B and 234C for non-payment of advance tax. The appellant contended that as the liability to pay tax arises only after finalization of the books of account, there was no requirement to pay advance tax. The appellant cited a Karnataka High Court case supporting this argument. However, the Supreme Court in a different case held that even companies under Section 115JA and 115JB are obligated to pay advance tax, and failure to do so would result in the levy of interest. The High Court concurred with the Tribunal's decision based on the Supreme Court's interpretation, dismissing the appeal.Issue 2: Permissibility of raising additional groundsThe appellant sought to raise additional grounds challenging the levy of interest under Sections 234B and 234C. The High Court emphasized that additional grounds can only be raised if there is a new development in law or discovery of a fact not known earlier. Since the appellant had the opportunity to raise these grounds in previous appeals but failed to do so, the High Court rejected the request to introduce additional grounds at a later stage.Issue 3: Applicability of interest to Section 115JB CompaniesThe primary question raised in the appeal was whether interest under Sections 234B and 234C could be imposed on a Company covered by Section 115JB when no taxable income was reported under regular provisions of the Income Tax Act. The High Court clarified that the obligation to pay advance tax and the consequent interest applies to all assesses, including those falling under Section 115JB, as determined by the Supreme Court's interpretation in a relevant case. Consequently, the High Court upheld the Tribunal's decision to levy interest on the appellant.In conclusion, the High Court dismissed the appeal, emphasizing the obligation of all assesses, including Section 115JB Companies, to pay advance tax and the corresponding interest under Sections 234B and 234C as interpreted by the Supreme Court. The High Court also reiterated the limited scope for raising additional grounds in appeals, especially when such grounds could have been raised in earlier stages of the appeal process.