2015 (2) TMI 734 - HC - Income Tax

Court affirms interest obligation for tax default, clarifies parking charge income as taxable business income

The High Court upheld the Tribunal's decision, affirming the mandatory nature of interest under Sections 234A and 234B for default in advance tax payment. ... Interest u/s 234A and s.234B - default in payment of advance tax on account of parking charges - Held that:- In the present facts, the Appellant had not originally filed its return of income and, therefore, there was no occasion for him to make any advance payment. This nonfiling of return of income was on the basis of the Appellant's stand that in view of project completion method followed by him, the income earned on parking charges would have to be returned when the project was completed. This was not accepted as the amount received on account of parking charges was not a part of any project. Thus parking charges was brought to tax in Assessment Year 2000-01. On facts in quantum proceedings, it has been held by the Tribunal that the amount received on parking charges has nothing to do with the appellant's project and was assessable to tax in Assessment Year 2000-01. This has been accepted by the Appellant. If this be so, the Appellant was obliged to pay Advance tax and nonpayment of the same would carry with it the further burden on interest under Section 234B of the Act. This is so in view of Anjum Ghaswala (2001 (10) TMI 4 - SUPREME Court) where it is held that payment of interest is mandatory and compensatory. - Decided against assessee. Issues:1. Interpretation of Sections 234A and 234B of the Income Tax Act, 1961 regarding the liability to pay interest.2. Determination of whether income received from parking charges is part of a project or business income for Assessment Year 2000-01.3. Validity of charging interest under Section 234A and 234B for default in payment of advance tax.Analysis:1. Interpretation of Sections 234A and 234B:The appeal challenged the order of the Income Tax Appellate Tribunal (ITAT) for Assessment Year 2000-01, questioning the justification of holding the assessee liable to pay interest under Sections 234A and 234B of the Act. The Tribunal upheld the charging of interest under these sections, citing the decision in CIT v/s. Anjum M. H. Ghaswala 252 ITR 1, which deemed the levy of interest as mandatory and compensatory. The Appellant contended that interest under Section 234B should not be charged without a finding of mala fide nonpayment, referencing Prime Securities Ltd. v/s. ACIT 333 ITR 464. However, the Tribunal affirmed the interest charges, leading to the dismissal of the appeal.2. Nature of Income from Parking Charges:The case involved the classification of income received from parking charges as either part of a project or business income for Assessment Year 2000-01. Initially, the Commissioner of Income Tax (Appeals) ruled that the income from exploiting vacant land was related to project costs and should be taxed in a later assessment year based on the Supreme Court decision in CIT v/s. Bokaro Steel Ltd. (1999) 236 ITR 315. However, the Tribunal overturned this decision, determining that the parking charges were not project-related and constituted business income taxable for the relevant assessment year. This clarification influenced the obligation to pay advance tax and subsequent interest under Sections 234A and 234B.3. Charging Interest for Default in Advance Tax Payment:The Appellant's failure to file a return of income for Assessment Year 2000-01 initially led to a notice under Section 148 of the Act, resulting in the assessment of income from parking charges. The Tribunal held that the Appellant was required to pay advance tax for this income, and the subsequent nonpayment justified the charging of interest under Sections 234A and 234B. The Appellant's argument, based on Prime Securities case, was dismissed as it did not align with the circumstances of the present case where default in advance tax payment was established. The decision in Anjum Ghaswala case further supported the mandatory nature of interest payment in such scenarios, leading to the dismissal of the appeal due to the absence of substantial legal questions.In conclusion, the High Court upheld the Tribunal's decision, emphasizing the mandatory nature of interest under Sections 234A and 234B for default in advance tax payment, particularly in cases where income is deemed taxable for a specific assessment year. The judgment clarified the treatment of income from parking charges and the corresponding tax obligations, ultimately dismissing the appeal without costs.