Interest not chargeable under Sections 234B & 234C when income assessed under Section 115J

The Court held that interest under Sections 234B and 234C is not chargeable when income is assessed under Section 115J of the Income Tax Act. The decision in Geetha Ramakrishna Mills Pvt. Ltd. was deemed incorrect, with the Court affirming the Supreme Court's ruling in Rolta India Ltd. and the Karnataka High Court's decision in Kwality Biscuits Ltd. The Tax Case Appeal was allowed in favor of the appellant/assessee, with no costs awarded against the Revenue.

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Issues Involved:
1. Levy of interest under Sections 234B and 234C while computing Minimum Alternate Tax (MAT) under Section 115J of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Levy of Interest under Sections 234B and 234C:

The primary issue in this case was whether interest under Sections 234B and 234C of the Income Tax Act could be levied while computing the Minimum Alternate Tax (MAT) under the deeming provisions of Section 115J.

Background:
The assessment for the year 1990-91 was completed by the respondent on 10.01.1995 under Section 143(3) read with Section 147 of the Act, with a total taxable income of Rs. 23,16,306/- under Section 115J. The respondent levied interest under Section 234B, which was upheld by the Commissioner of Income Tax (Appeals) [CIT (A)]. The Tribunal also upheld this decision, relying on the Division Bench decision in CIT (A) Vs. Geetha Ramakrishna Mills Pvt. Ltd., which allowed the levy of interest under Sections 234A, 234B, and 234C even if income is computed under Section 115J.

Appellant's Argument:
The appellant/assessee argued that the decision in Geetha Ramakrishna Mills Pvt. Ltd. was incorrect, citing the Supreme Court's decision in Joint Commissioner of Income Tax Vs. Rolta India Ltd., which relied on the Karnataka High Court's decision in Kwality Biscuits Ltd. Vs. CIT. The appellant contended that no interest is payable under Sections 234B and 234C as book profits under Section 115J can only be determined after the end of the financial year, making the provisions of Sections 207, 208, or 209 inapplicable.

Respondent's Argument:
The learned Standing Counsel for the Revenue argued that the Division Bench decision in Geetha Ramakrishna Mills Pvt. Ltd. was applicable, which considered and rejected the Karnataka High Court's decision in Kwality Biscuits, instead following decisions from other High Courts that supported the levy of interest.

Court's Analysis:
The Court noted the Supreme Court's decision in Rolta India Ltd., which affirmed the Karnataka High Court's decision in Kwality Biscuits, holding that interest under Sections 234B and 234C is not leviable when income is computed under Section 115J, as the entire exercise of computing income or book profits could only be done at the end of the financial year. The Supreme Court's decision clarified that Sections 234B and 234C are not applicable until the accounts are audited and the balance sheet is prepared.

Conclusion:
The Court concluded that the decision in Geetha Ramakrishna Mills Pvt. Ltd. does not lay down the correct legal principle. The Supreme Court's affirmation of the Karnataka High Court's decision in Kwality Biscuits, as well as the subsequent decision in Rolta India Ltd., overrules the Division Bench decision in Geetha Ramakrishna Mills Pvt. Ltd. Therefore, the Court held that interest under Sections 234B and 234C is not chargeable when income is assessed under Section 115J.

Judgment:
The Tax Case Appeal filed by the appellant/assessee was allowed. The substantial question of law was answered in favor of the appellant/assessee and against the Revenue. No costs were awarded.

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