2015 (7) TMI 8 - HC - Income Tax

Court upholds denial of interest waiver under Income Tax Act, allows installment payments

M/s Union Air Products Pvt Ltd Versus Assistant Commissioner of Income Tax, Circle-1 (3), Range-1, Ernakulam, Chief Commissioner of Income tax, Kochi

The Court upheld the second respondent's decision to reject the petitioner's request for waiver of interest under Sections 234B and 234C of the Income Tax ... Waiver of the interest charged under Sections 234B and 234C - second respondent in exercise of the powers conferred on him by the Central Board of Direct Taxes under Clause (a) of Sub Section 2 of Section 119 rejected representation of assessee holding that he is authorised to waive interest only in the class of cases and incomes specified in the circulars issued for that purpose by the Central Board of Direct Taxes and that the case of the petitioner does not come under the such specified class - Held that:- The second respondent is empowered and authorised to waive interest payable by the petitioner under Sections 234B and 234C of the Act only if the case of the petitioner falls under any of the three classes of cases referred to. Going by the averments in the writ petition, the case of the petitioner would not come under classes (a) and (c). Coming to class (b), there is nothing on record show as to when the financial institutions have intimated to the petitioner their decision to waive the interest charged on the petitioner. In the absence of any material as to the time at which the petitioner received intimation concerning the waiver of interest granted by the financial institutions, unable to consider the question as to whether the case of the petitioner would fall under class (b) referred to above. Coming to the request made by the petitioner for payment of the balance amount due by way of interest in instalments, it is noticed that the petitioner had already remitted the tax levied on them. In the said circumstances, it is of the view that the petitioner can be permitted to pay the balance amount due, less the interest already paid by them in six monthly installments commencing from 1st of February, 2015. Since the matter is pending before this Court from 8.4.2008, the petitioner shall be absolved from the liability to pay interest for the period during which the writ petition was pending before this Court, and it is ordered accordingly. Issues:Challenge to order under Section 119 of the Income Tax Act for waiver of interest under Sections 234B and 234C.Analysis:The petitioner, a company, challenged an order passed by the second respondent under Section 119 of the Income Tax Act, seeking waiver of interest charged under Sections 234B and 234C. The petitioner had incurred losses and its unit became a sick industry, leading to financial institutions waiving interest on term loans. The petitioner's net profit increased due to the reversal of interest, triggering book profit tax under Section 115JB. The petitioner requested waiver of interest under Sections 234B and 234C, which was rejected by the second respondent citing lack of authority to waive interest as per circulars issued by the Central Board of Direct Taxes.The petitioner argued that the waiver confirmation was received after the advance tax payment deadline, thus justifying the waiver. Reference was made to a Karnataka High Court decision stating that book profit determination occurs after the assessment year, absolving the petitioner from interest payment. Alternatively, the petitioner sought installment payment due to the unit's continued sickness.Section 119(1) and 119(2)(a) of the Act empower the Central Board of Direct Taxes to issue orders for interest waiver under Sections 234A, 234B, and 234C. The second respondent can waive interest only based on guidelines specified by the Board. Circulars by the Board outline specific cases for interest waiver, none of which applied to the petitioner's situation. The Court found the second respondent's decision valid, as the petitioner's case did not fall under the specified classes for interest waiver.Regarding installment payment, the Court allowed the petitioner to pay the remaining interest in six monthly installments, starting from a specified date. The Court also exempted the petitioner from paying interest for the period the writ petition was pending before the Court, considering the prolonged duration of the case.In conclusion, the Court disposed of the writ petition, permitting installment payment of the remaining interest and exempting the petitioner from interest payment during the pendency of the case before the Court.