TaxTMI 
TaxTMI 
2009 (8) TMI 806
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....sidering judgments of various High Courts including earlier judgment of Bombay High Court in the case of CIT vs. Kotak Mahindra Finance Ltd. (2003) 183 CTR (Bom) 491 : (2004) 265 ITR 119 (Bom), held that the law binding would be the judgment of CIT vs. Kwality Biscuits Ltd. (2006) 205 CTR (SC) 122 : (2006) 284 ITR 434 (SC). The counsel of the assessee further stated that the judgment of Hon'ble Bombay High Court in the case of Snowcem India Ltd. vs. Dy. CIT relates to s. 115JA. Therefore, following the said judgment of Hon'ble Bombay High Court, the interest of Rs. 16,71,383 under s. 234B and of Rs. 2,24,083 under s. 234C of the Act charged under ss. 234B and 234C respectively be cancelled. 4. The learned Departmental Representative, on the other hand, supported the impugned orders of the authorities below. He placed reliance on the decision of the Tribunal, Ahmedabad Bench 'B' (Special Bench) in the case of Asstt. CIT vs. Ashima Syntex Ltd. (2009) 120 TTJ (Ahd)(SB) 721 : (2009) 117 ITD 1 (Ahd)(SB), wherein after considering various judgments of different High Courts and after analyzing the provisions contained in sub-s. (4) of s. 115JA, Special Bench took the vi....
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....ppeals, in our opinion, the law binding on us would be the judgment in Kwality Biscuits Ltd.." We, therefore, following the decision of Hon'ble Bombay High Court in the case of Snowcem India Ltd. vs. Dy. CIT hold that interest under ss. 234B and 234C is not leviable in case of computation of income under s. 115JA. Accordingly, the interest of Rs. 16,71,383 under s. 234B and of Rs. 2,24,083 under s. 234C of the Act is cancelled. 6. In the result, the appeal of the assessee is allowed. A.N. PAHUJA, A.M.: 20th April, 2009 I have gone through the order of the learned Brother and have also discussed the issue with him, but am not able to persuade myself to agree with the conclusion drawn by him, in the light of view taken in the decision of the jurisdictional Special Bench on this issue in the case of Asstt. CIT vs. Ashima Syntex Ltd. (2009) 120 TTJ (Ahd)(SB) 721 : (2009) 117 ITD 1 (Ahd)(SB), to which I was a party. 2. The facts have been stated by the learned JM and, therefore, do not require any further elaboration. The only issue is whether the assessee was liable to interest under ss. 234B and 234C of the Act on the income determined in terms of provisions of s. 1....
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....l in the cases of Piccadily Agro Ind. Ltd. vs. Asstt. CIT (2007) 12 SOT 544 (Del), Amtek Auto Ltd. vs. Addl. CIT (2007) 112 TTJ (Del) 464 and Escapade Resorts (P) Ltd. vs. Asstt. CIT (2007) 107 TTJ (Coch) 871 : (2007) 107 ITD 323 (Coch) while the learned Departmental Representative placed reliance on the decision dt. 17th Oct., 2008 of the jurisdictional Special Bench in the case of Asstt. CIT vs. Ashima Syntex Ltd. 4. At the outset, we may have a look at the relevant provisions of s. 115JA of the Act, which read as under: "115JA. Deemed income relating to certain companies.-(1) Notwithstanding anything contained in any other provisions of this Act, where in the case of an assessee, being a company, the total income, as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 1997 but before the 1st day of April, 2001 (hereafter in this section referred to as the relevant previous year) is less than thirty per cent of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to thirty per cent of such book profit. ....
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....he book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this Explanation; or (ii) the amount of income to which any of the provisions of Chapter III applies, if any such amount is credited to the P&L a/c; or (iii) the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. Explanation-For the purposes of this clause,- (a) the loss shall not include depreciation; (b) the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation, is nil; or (iv) the amount of profits derived by an industrial undertaking from the business of generation or generation and distribution of power; or (v) the amount of profits derived by an industrial undertaking located in an industrially backward State or District as referred to in sub-s. (4) and sub-s. (5) of s. 80-IB, for the assessment years such industrial undertaking is eligible to claim a deduction of hundred per cent of the profits and gains under sub-s. (4) or sub-s. (5) of s. 80-IB; or (vi) the amount of profi....
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....s, for determining liability on account of advance tax, first step is that current income has to be estimated. Sec. 209 deals with the computation of advance tax based on rates in force for the financial year, as contained in the Finance Act. The provisions of ss. 207 to 209 contemplate estimation of current income and on the basis of such estimation, the assessee is required to pay advance tax. There is nothing in these provisions that advance tax is not payable on the current income if the current income is computed under s. 115JA or any other provision of the Act. That means, the expression "current income", on which advance tax is payable under the provisions of s. 207 of the Act, does not exclude the income computed under the provisions of s. 115JA of the Act. The Circular No. 13 of 2001, dt. 9th Nov., 2001 [(2001) 171 CTR (St) 45] issued by the CBDT in the context of provisions of s. 115JB of the Act and relied upon by the 1eamed CIT(A), supports this view. The relevant extracts from the said circular read as under: "2. Instances have come to the notice of the Board that a large number of companies liable to tax under the new MAT provisions of s. 115JB, are not makin....
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....of the considered view that in the light of aforesaid provisions of sub-s. (4) of s. 115JA of the Act, in the event the assessee defaults in payment of advance tax on his current income, levy of interest under ss. 234B and 234C of the Act is mandatory. Such levy is automatic without any notice to the assessee as held by the Hon'ble Karnataka High Court in Union Home Products Ltd. & Ors. vs. Union of India (1995) 129 CTR (Kar) 217 : (1995) 215 ITR 758 (Kar). The Hon'ble High Court held: "In the first place, the very purpose behind the introduction of ss. 234A, 234B and 234C is to take away from the authorities concerned the discretion of reducing or waiving the levy of interest which was earlier exercisable by them. In other words, the impugned provisions do not envisage the grant of any hearing or the grant of any relief to the assessees concerned insofar as the levy of interest is concerned. The levy is automatic the moment it is proved that the assessee has committed a default within the comprehension of anyone of the provisions in question. That being so it is difficult to accept the argument that the authorities must grant such a hearing and exercise the power ....
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....hout any notice to the assessee. 34. The learned Authorised Representative on behalf of the taxpayer vehemently placed reliance on the decision of the Hon'ble Karnataka High Court in the case of Kwality Biscuits Ltd. vs. CIT, in the context of provisions of s. 115J of the Act, which was later affirmed by the Hon'ble Supreme Court in Kwality Biscuits Ltd.'s case. Hon'ble Supreme Court held in their decision that: 'The appeals are dismissed.' 35. Earlier, the Hon'ble Karnataka High Court in the aforesaid decision while accepting the claim of the assessee, observed: 'Under s. 115J, where the total income of the company is less than 30 per cent of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to 30 per cent of such book profit. It is thus, by way of deeming fiction that this income has been considered to be deemed income. The P&L a/c has to be prepared in accordance with the provisions of Parts II and III of Sch. VI of the Companies Act. In the Explanation under s. 115J(1A), it is provided that for the purposes of this section b....
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....#39;ble Court held that when a deeming fiction is brought under the statute, it is to be carried to its logical conclusion, but without creating further deeming fiction, so as to include other provisions of the Act, which are not specifically made applicable. 37. However, the Hon'ble Guwahati, Madras, Madhya Pradesh and Bombay High Courts which took a view that even in cases covered by s. 115J of the Act, the assessees are liable to pay advance tax. In the case of Assam Bengal Carriers Ltd. vs. CIT (2000) 162 CTR (Gau) 170 : (1999) 239 ITR 862 (Gau), the Hon'ble Gauhati High Court observed as under: 'Sec. 207 of the Act envisions that tax shall be payable in advance, during any financial year on current income in accordance with the scheme provided in ss. 208 to 219 (both inclusive) in respect of the total income of the assessee. that would be chargeable to tax for the assessment year immediately following that financial year. Sec. 215(5) of the Act spelled out what is the 'assessed tax', i.e., the tax determined on the basis of the regular assessment so far as such tax relates to income subject to advance tax. The evaluation of the current inc....
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....he starting point is the P&L a/c for the relevant previous year which should be drawn in accordance with the provisions of the Companies Act and to the net profit as shown in the P&L a/c, certain amounts which are found in the Explanation to s. 115J are added to arrive at the book profit. There is no doubt that the entire exercise under s. 115J of the Act is required to be made and can be made only on the basis of the net profit arrived at on the basis of the P&L a/c. However, the question remains whether it is not possible for the assessee to estimate the profit of the current year. It is axiomatic that all assessees who are chargeable to income-tax are required to estimate current income and pay advance tax on the current income. The companies have all along been estimating current income prior to the insertion of s. 115J of the Act and paying the advance tax on the current income. It is significant that company assessees have been estimating the total income after providing for the deductions admissible under the IT Act. The shift now is that a company has to estimate its profit and pay advance tax on the basis of the estimate of the profits of the company. We are of the view, i....
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....ext of provisions of s. 115J of the Act, Hon'ble Gauhati, Madras, Madhya Pradesh and Bombay High Courts have taken a consistent view in favour of the Revenue. Only Hon'ble Karnataka and Gujarat High Courts took a contrary view. On a perusal of decision of Hon'ble Karnataka High Court in Kwality Biscuits Ltd.'s case, Hon'ble High Court, inter alia, held that when a deeming fiction is brought under the statute, it is to be carried to its logical conclusion, but without creating further deeming fiction, so as to include other provisions of the Act which are not specifically made applicable. In the case under consideration the provisions of s. 115JA specifically stipulate in sub-s. (4) that all other provisions of the Act shall apply. Thus, even in terms of the aforesaid decision of the Hon'ble Karnataka High Court, interest under ss. 234B and 234C of the Act is leviable, since now the deeming provisions itself stipulate applicability of provisions of ss. 234B and 234C of the Act. With due respect, there is nothing to suggest in the decision in the case of Kwality Biscuits Ltd. as to whether the Hon'ble High Court or Supreme Court considered that the interes....
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...., so as to include other provisions of the Act, which are not specifically made applicable. In the context of levy of interest under ss. 234B and 234C of the Act in the case under consideration, provisions of sub-s. (4) of s. 115JA specifically stipulate applicability of all other provisions of the Act. Thus, the said decision in a way supports the case of Revenue in the case under consideration. As is apparent. the aforesaid decisions in the case of Kwality Biscuits Ltd. and Associated Crown Closures (P) Ltd. were not rendered in the context of provisions of s. 115JA of the Act nor the relevant decisions of Hon'ble apex Court, holding levy of interest under ss. 234A, 234B and 234C of the Act mandatory, were brought to the notice of their Lordships. In this context, Hon'ble Supreme Court in the case of CIT vs. Sun Engineering Works (P) Ltd. (l992) 107 CTR (SC) 209 : (l992) 198 ITR 297 (SC) observed: 'It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this Court. divorced from the context of the question under consideration and treat it to be the complete 'law' declared by this Court. The judgment must be read a....
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....liability for payment of advance tax and s. 209 deals with its computation based on the rates in force for the financial year, as are contained in the relevant Finance Act. 45. In our opinion, all other provisions of Act including the provisions relating to payment of advance tax are applicable even when the income is computed under s. 115JA of the Act. Sec. 115JA has a specific provision in the shape of sub-s. (4) which reads as under: 'Save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company, mentioned in this section.' It is well-settled that all words of a statute are to be given effect, and the legislature is presumed not to use words that are superfluous or redundant. It is also in consonance with the principle of harmoniously interpreting to make the statute workable and giving a meaning to all the provisions of the statute without making anyone of them redundant. If the interpretation as sought by learned Authorised Representative on behalf of the taxpayer is applied that would make provisions of sub-s. (4) of s. 115JA otiose and redundant. It is not permissible to adopt a ....
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....nd 234C for interest on defaults in payment of advance tax and deferment of advance tax would also be applicable where the facts of the case warrant.' 47. Similarly Hon'ble Punjab & Haryana High Court, in CIT vs. Upper India Steel Mfg. & Engg. Co. Ltd. (2004) 192 CTR (P&H) 385 : (2005) 279 ITR 123 (P&H), in the context of levy of interest under ss. 234B and 234C of the Act while determining income in terms of provisions of s. 115JA of the Act, held: 'We fully concur with the view expressed in the aforesaid judgments. The Madras High Court has correctly pointed out that for the purpose of payment of advance tax, all asses sees including companies, are required to make an estimate of their current income. Even before the introduction of the provisions of s. 115J of the Act, companies had been estimating their total income after providing deductions admissible under the Act. In fact, all assessees who maintain books of account have to undertake this exercise for the purpose of payment of advance tax. If a P&L a/c can be drawn up on estimate basis for the purpose of the IT Act, it is not understood as to why a similar P&L a/c on estimate basis under the Co....
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....rance of judicial opinion should be respected. I am of the opinion that the decision of Hon'ble Bombay High Court in the case of Snowcem India Ltd., following the view taken by the Hon'ble Karnataka High Court in the case of Kwality Biscuits Ltd. later affirmed by the Hon'ble Supreme Court, cannot be straightaway applied without analyzing the facts and the context in which these decisions were rendered, especially when Hon'ble Karnataka High Court in the case of Kwality Biscuits Ltd. themselves held that when a deeming fiction is brought under the statute, it is to be carried to its logical conclusion, but without creating further deeming fiction, so as to include other provisions of the Act, which are not specifically made applicable. In the context of levy of interest under ss. 234B and 234C of the Act in the case under consideration, provisions of sub-s. (4) of s. 115JA specifically stipulate applicability of all other provisions of the Act. Thus, the said decision in a way supports the case of Revenue in the case under consideration. At the cost of repetition, it is reiterated that the aforesaid decisions in the case of Kwality Biscuits Ltd. were not rendered in....
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....le apex Court, reliance by the learned Authorised Representative on the decision in the case of Snowcem India Ltd., rendered in a different context, without specifically adverting to the provisions of sub-s. (4) of s. 115JA of the Act and the aforesaid CBDT Circular No. 13 or even the direct decisions of Hon'ble Karnataka High Court in the case of Jindal Thermal Power Co. Ltd. or of Hon'ble Madras High Court in the case of CIT vs. Geetha Ramakrishna Mills (P) Ltd. or of Hon'ble Punjab & Haryana High Court in CIT vs. Upper India Steel Mfg. & Engg. Co. Ltd., is totally misplaced. Even otherwise the decision of a High Court does not have binding force outside the State. [Dr. T.P. Kapadia vs. CIT (1973) 87 ITR 511 (Mys), CIT vs. Thana Electricity Supply Ltd. (1993) 112 CTR (Bom) 356 : (I994) 206 ITR 727 (Bom), Geoffrey Manners & Co. Ltd. vs. CIT (I996) 136 CTR (Bom) 169 : (I996) 221 ITR 695 (Bom), CIT vs. Vardhman Spinning,(1997) 139 CTR (P&H) 322 : (1997) 226 ITR 296 (P&H), N.R. Paper & Board Ltd. & Ors. vs. Dy. CIT (1998) 146 CTR (Guj) 612 : (1998) 234 ITR 733 (Guj)]. 4.6 In view of the foregoing, it may be reiterated that for the purpose of payment of advance tax, all....
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....anyone of them redundant. If the interpretation as sought by learned Authorised Representative on behalf of the assessee is applied that would make provisions of sub-s. (4) of s. 115JA otiose and redundant. It is not permissible to adopt a construction which would render any expression superfluous or redundant. Therefore, the argument of the learned Authorised Representative that interest under ss. 234B and 234C of the Act cannot be levied on deemed book profits is not tenable since the deeming provisions of s. 115JA specifically stipulate in sub-s. (4) that all other provisions of the Act shall apply. 4.8 I am also of the opinion that a decision of a Special (Large) Bench of the Tribunal must be held to be a binding precedent for Division Benches otherwise the very purpose of constituting them will get frustrated. A decision of the Special Bench can be distinguished or disregarded if there is any contrary view of the jurisdictional High Court or of the Supreme Court. In this context, we may refer to following observations of the Hon'ble Bombay High Court in the case of CIT vs. Thana Electricity Supply Ltd.: "(d) The decision of one High Court is neither binding pre....
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....at judgment." 4.10 Here we may point out that Hon'ble Supreme Court in Mattulal vs. Radhe Lal (1975) 1 SCR 127, specifically observed that where the view expressed by two different Division Benches of Supreme Court could not be reconciled, the pronouncement of a Division Bench of a larger number of Judges had to be preferred over the decision of a Division Bench of a smaller number of Judges. 5. In view of the foregoing, especially in view of direct decisions of Hon'ble Karnataka High Court in the case of Jindal Thermal Power Co. Ltd. and Hon'ble Madras High Court in the case of Geetha Ramakrishna Mills (P) Ltd. as also of Hon'ble Punjab & Haryana High Court in the case of Upper India Steel Mfg. & Engg. Co. Ltd. It is held that the total income computed under the provisions of s. 115JA of the Act, is liable to advance tax and in the event of default in relevant provisions of payment of advance tax, levy of interest under ss. 234B and 234C of the Act is mandatory. In this view of the matter, the findings of learned CIT(A) are affirmed. Therefore, ground Nos. 1 and 2 in the appeal are dismissed. 6. No additional ground having been raised in terms of the resid....
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....judgment of the High Court was rendered on 5th Jan., 2009, subsequent to the order of the Special Bench which was rendered on 17th Oct., 2008. 4. The learned AM in his dissent saw no reason to depart from the decision taken by the Special Bench in Ashima Syntex Ltd. He has given several reasons for the same. They are as under: (a) the provisions of sub-s. (4) of s. 115JA are similar to the provisions of sub-s. (5) of s. 115JB which have been explained in Circular No. 13, dt. 9th Nov., 2001 by the CBDT; (b) the levy of interest is automatic and mandatory and has to be charged without reference to the assessee; (c) the Special Bench decision takes note of the observations of the Karnataka High Court in Kwality Biscuits Ltd. to the effect that s. 115J contained only a fiction that 30 per cent of the book profit of the company shall be deemed to be its total income but did not contain a further fiction "so as to include other provisions of the Act, which are not specifically made applicable" and further goes on to say that the further fiction is created by sub-s. (4) of s. 115JA and therefore, the interest can be levied on the book profit in case the assessment is made under s. 115J....
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....ee to pay advance tax on the same during the relevant accounting year cannot be accepted because (a) in that case no assessee who maintains regular books of account would be liable to pay advance tax because in that case also the income can be determined only after the books are closed at the end of the year; (b) any hardship caused to the assessee in determining or estimating his book profit for purposes of paying advance tax cannot be taken note of since the levy of interest is automatic and mandatory and (c) the provisions of ss. 207 to 209 of the Act do not exclude the income determined under s. 115JA from the purview of current income that is subject to advance tax and (d) even before the introduction of MAT provisions such as s. 115J, companies were paying advance tax by estimating their income and by drawing up an estimated P&L a/c. 6. For the above reasons, the learned AM held that the order of the Special Bench in Ashima Syntex Ltd. should be followed and the levy of interest be upheld. 7. I have considered the rival arguments presented before me by both the sides. It all boils down to this, namely, whether the order of the Special Bench upholding the levy of interes....
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....ut having been informed about certain statutory provisions that are directly relevant. A judgment rendered without noticing a previous binding precedent or a relevant statutory rule is considered to have been rendered 'per incuriam'. It is even said that such a judgment need not be given effect to by a lower Court. In the present case, the attention of the Bombay High Court in Snowcem India Ltd. was not drawn to sub-s. (4) of s. 115JA, as has been pointed out by the learned AM in his dissent. The High Court therefore had no occasion to examine the question whether the decisions of the Karnataka High Court and the Supreme Court in Kwality Biscuits Ltd., rendered in the context of s. 115J which did not have a sub-section similar to sub-s. (4) of s. 115JA would still be applicable as binding precedent in a case which arises under s. 115JA. This aspect has also been highlighted by the learned AM. The argument on behalf of the assessee before me was that the section in its entirety was before the Bombay High Court in Snowcem India Ltd., which includes sub-s. (4). I am unable to accept this argument because the sub-section is considered crucial and it is the contention of the Dep....