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

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 Act. The petitioner's argument that the waiver confirmation was received post the advance tax payment deadline was dismissed, as the case did not align with the specified classes for interest waiver outlined in Circulars by the Central Board of Direct Taxes. However, the Court granted the petitioner permission to pay the outstanding interest in six monthly installments and exempted them from paying interest during the pendency of the case.

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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.

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