Waiver of interest under Section 234B granted where taxpayer relied on unsettled jurisdictional precedent and acted bona fide.

Petitioner (a state-controlled cooperative) was held entitled to waiver of interest under Section 234B where non-payment of advance tax resulted from bona fide reliance on an unchallenged jurisdictional High Court decision while the legal position remained unsettled pending higher court resolution; administrative circulars permitting relief where a higher court or retrospective amendment alters the position applied; absence of mala fide intent and reliance on existing precedent were decisive, so orders rejecting waiver were set aside and relief granted.

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Issues: Whether the petitioner, who did not deposit advance tax due to a bona fide reliance on an earlier decision of the jurisdictional High Court and while the law was unsettled pending Supreme Court decision, is entitled to waiver of interest charged under Section 234B of the Income-tax Act, 1961 in terms of Section 119 of the Income-tax Act, 1961 and CBDT circulars.

Analysis: The Court examined the sequence of judicial decisions and administrative guidance: an earlier High Court decision in favour of marketing societies (including the petitioner) remained unchallenged by the Revenue qua the petitioner; the Supreme Court in 1993 took a contrary view but doubted that view in 1994 and referred the matter to a larger bench, leaving the legal position unsettled until the Supreme Court's 1998 decision which ultimately held in favour of marketing societies. The CBDT circulars dated 23.05.1996 and 30.01.1997 were considered, which permit waiver of interest where tax was not paid because of a judgment of the jurisdictional High Court and the position is later altered by a higher court decision or retrospective amendment. The Court noted the petitioner is a State-controlled cooperative with no evidence of mala fide intent to evade tax and that the petitioner acted in reliance on the existing High Court position while the law remained unclear.

Conclusion: The petitioner is entitled to waiver of interest under Section 234B of the Income-tax Act, 1961; the impugned orders rejecting the application for waiver are set aside and the petitions are allowed.

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