TaxTMI 
TaxTMI 
2007 (4) TMI 296
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....not be made the subject-matter of rectification under section 154. 3. The learned CIT(A) erred in confirming the order of Assessing Officer in recomputing the deduction under section 80HHC, by deducting unabsorbed investment allowance from the income eligible for the purpose of deduction under section 80HHC. The question involved is a debatable issue and cannot be made the subject-matter of rectification under section 154. 4., For these and other grounds to be further adduced at the time of hearing the order of the learned CIT(A) requires to be modified to the extent appealed against." 3. The first issue which arises for our consideration is regarding levy of interest under section 234B(3) of the Income-tax Act. 4. The facts in brief can be stated as follows: The assessee is a public sector company engaged in the manufacture and sale of fertilizers and chemicals. For the asst. year 1996-97, the original assessment of the assessee was completed under section 143(3) on 26-3-1999. Subsequently, re-assessment proceedings under section 147 were initiated and assessment under section 143(3) read with section 147 was completed on 18-3-2002. The Assessing Officer invoked sectio....
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.... the second assessment framed under section 143(3) read with section 147, the Assessing Officer determined the total tax including surcharge payable by the assessee at Rs. 4,73,80,327. The controversy before us is when the tax payable by the assessee is enhanced in the re-assessment proceedings, then whether the self-assessment tax paid by the assessee under section 140A is to be ignored for the purpose of computing the interest payable by the assessee under section 234B(3) of the Act. The facts of the case are not in dispute. 6. The relevant provisions of section 140A reads as under :- "140A. (1) Where any tax is payable on the basis of any return required to be furnished under section 115WD or section 115WH or section 139 or section 142 or section 148 or section 153A or, as the case may be, section 158BC, after taking into account the amount of tax, if any, already paid under any provision of this Act, the assessee shall be liable to pay such tax together with interest payable under any provision of this Act for any delay in furnishing the return or any default or delay in payment of advance tax, before furnishing the return and the return shall be accompanied by proof of p....
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....de the controversy or issue before us. 9. When subsequently re-assessment is framed or income is recomputed under section 147 and in consequence of that the amount of tax on which the assessee is liable to pay interest under section 234B(1) is increased, then the assessee is liable to pay simple interest at the rate prescribed, from the date of determination of the total income under section 143(1) or if the regular assessment is made then from the date of such regular assessment till the date of the re-assessment or re-computation under section 147. The opinion of the Assessing Officer for computing the interest payable under section 234B(1) of the Act which is in the order passed under section 154 is as under:- "4. The contentions of the assessee cannot be accepted. Section 234B(1) clearly mentions that whereas a result of an order of reassessment or re-computation under section 147 the amount on which interest was payable under section 234B(1) is increased the assessee shall be liable to pay simple interest on the amount by which the tax on the total income determined on the basis of re-assessment or re-computation exceeds the tax on the total income determined on the basi....
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....y of the assessee is to be calculated considering sub-section (2), the reference made in sub-section (3) to section 234B is to be read considering the provisions of sub-section (2). The ld. CA further argued that it is well-settled principle that interest liability is compensatory in nature and it is not penal and hence the assessee has paid the tax under section 140A that cannot be ignored while computing the interest payable under section 234B(3) of the Act. 12. Per contra, the ld. Departmental Representative supported the order of the CIT(A). 13. We have heard the rival submissions of the parties and also gave our thoughtful consideration to the relevant provisions of section 234B. As far as the liability to pay interest under section 234B(1) is concerned, it is for the non-payment of advance-tax as per the provisions of sections 208 and 210 i.e. total non-payment or short payment. Moreover, sub-section (2) to section 234B provides for the situation that if the assessee has paid the self-assessment tax as per the provisions of section 140A then while determining the amount of tax on which the assessee is required to pay the interest under section 234B(1), consideration sho....
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....est is compensatory in nature, if the assessee has paid the tax under section 140A, if he has not paid the tax at all or if there is a short payment of tax as per the income returned by him, then to the extent of the due interest and to compensate the short payment if the assessee has made the payment under section 140A, then as per the provisions of section 234B(2), interest should be computed under section 234B(1) up to the date on which the assessee has paid the said tax and also to reduce the interest if any which is paid by the assessee while paying the tax under section 140A. Even if there is no specific identity given in the payment and consolidated payment is made then first priority of adjustment will be the interest payable under the Act and balance residue if any is to be adjusted against the regular determination of tax. 16. In the case of Goodyear India Ltd. v. State of Haryana [1991] 188 ITR 402, the Hon'ble Supreme Court has held that rule or reasonable construction must be applied while construing different provisions of the statute. Literal construction should be avoided if it defeats the manifest purpose and object of the Act. The rule of harmonious constructio....
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....ified in confirming the order of the Assessing Officer passed under section 154 reducing the deduction under section 80HHC after adjusting unabsorbed investment allowance relating to the assessment year 1990-91. The assessee has claimed the deduction under section 80HHC at Rs. 27,95,18,111 without adjusting the unabsorbed investment allowance brought forward relating to the assessment year 1990-91. The Assessing Officer was of the opinion that that the unabsorbed investment allowance is deductible under section 32A(3)(ii) and hence adjustment is to be done for computing the income under the head "Profits and gains of business or profession" on which deduction under section 80HHC is allowable. The assessee relied on the decision of the Hon'ble High Court of Bombay in the case of CIT v. Brihan Maharashtra Steel Industries (P.) Ltd. [2001] 118 Taxman 508 (Bom.), but the Assessing Officer rejected the same. 20. The assessee challenged the action of the Assessing Officer before the CIT (Appeals) but the CIT (Appeals) rejected the assessee's contention and held as under:- "(iii) I have considered the objections of the appellant. It is seen that the Kerala High Court has held in the....