2017 (5) TMI 309 - HC - Income Tax

High Court: Pre-115JA/115JB Income Not Subject to Interest

The High Court ruled in favor of the assessee, holding that income computed under Section 115J before the enforcement of Sections 115JA and 115JB would ... Levy of interest under Sections 234B and 234C - income of the appellant assessed and liable to tax as per the provisions of Section 115-J of the Act - Held that:- In the instant case we are seized with the matter of the assessment for the year 1989-90 when neither of the two Sections 115JA and 115JB of the Act were in-existence what to say about Sub-Section 4 and Section 5 to the aforesaid provisions. Therefore, we are of the view that the decision of the Supreme Court in Rolta India Ltd. (2011 (1) TMI 5 - SUPREME COURT OF INDIA) would not be applicable to the present case and that the question regarding the levy of interest under Section 234B and 234C of the Act on the tax computed under Section 115J would stand covered by the decision of Kwality Biscuits Ltd.approved by the Supreme Court. [2006 (4) TMI 121 - SUPREME Court] In view of above, the question hereinabove is answered in favour of assessee and against the department and it is held income computed under Section 115J for the period prior to enforcement of Section 115JA and Section 115JB would not attract interest under Section 234B and 234C of the Act. Issues:Levy of interest under Sections 234B and 234C of the Income Tax Act, 1961 on income assessed under Section 115J for the assessment year 1989-90.Analysis:1. Levy of Interest under Sections 234B and 234C:The main issue in this case was whether the Income Tax Appellate Tribunal was justified in upholding the levy of interest under Sections 234B and 234C of the Income Tax Act on the income of the appellant assessed under Section 115J. The Tribunal had based its decision on judgments from various High Courts. The appellant relied on a Gujarat High Court decision that stated interest cannot be levied under Sections 234B and 234C on income computed under Section 115J until the end of the relevant year. The High Court agreed, emphasizing that the taxable income under Section 115J is only computable at the end of the relevant year, making it unjust to charge interest before that point. Several other High Courts also supported this view, including Karnataka, Bombay, Madhya Pradesh, and Calcutta High Courts.2. Judicial Precedents and Supreme Court Decisions:The judgment discussed various decisions from different High Courts and the Supreme Court. The Supreme Court had dismissed an appeal against the decision of the Karnataka High Court in Kwality Biscuits Ltd., affirming that interest under Sections 234B and 234C would not be chargeable on income computed under Section 115J. Additionally, a three-Judge Bench of the Supreme Court in the case of Joint Commissioner of Income Tax Vs. Rolta India Ltd. held that interest under Sections 234B and 234C shall be payable on failure to pay advance tax computed under Section 115JA/115JB, but not for non-payment of tax computed under Section 115J. The Court noted that the provisions of Section 115J were in force when neither Section 115JA nor Section 115JB existed, making the Rolta India Ltd. decision inapplicable to the present case.3. Conclusion and Decision:In conclusion, the High Court ruled in favor of the assessee, holding that income computed under Section 115J for the period before the enforcement of Section 115JA and Section 115JB would not attract interest under Sections 234B and 234C of the Act. The appeal was allowed in favor of the appellant, emphasizing the distinction between the provisions of Section 115J and Sections 115JA/115JB in relation to the levy of interest under the Income Tax Act.This detailed analysis of the judgment highlights the legal intricacies and precedents considered by the High Court in reaching its decision on the levy of interest under Sections 234B and 234C of the Income Tax Act for the assessment year 1989-90.