TaxTMI 
TaxTMI 
2009 (8) TMI 806
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....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 view that total income computed under s. 115JA of the Act is liable to advance tax and in the event of default, levy of interest under s. 234C of the Act is mandatory. The learned Departmental....
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.... 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. 115JA of the Act. The learned JM has relied upon the decision of Hon'ble Bombay High Court in the case of Snowcem Ind....
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....2 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. (2) Every assessee, being a company, shall, for the purposes of this section prepare its P&L a/c for the relevant previous year in ac....
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....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 profits derived by an industrial undertaking from the business of developing, maintaining and operating any infrastructure facility as defined in the Explanation to sub-s. (4) of s. 80-IA and subject to fulfilling the conditions laid down in that sub-section; or (vii) the amount of profits of sick indus....
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....on, 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 making advance tax payments. It may be emphasised that the new provision of s. 115JB is a self-contained code. Sub-s. (1) lays down the manner in which income-tax payable is to be computed. Sub-s. (2) provides for computation of 'book profit'. Sub-s. (5) specifies that save as otherwise provided in this section, all other provisions of this Act shall ap....
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..... 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 to grant relief, the legislative intent to the contrary notwithstanding. The principles of natural justice upon which the petitioners rely do not supplant the law, they simply supplement it. These principles have no application where a statute either by express words or by necessary implication excludes the grant of a hearing to the assessee concerned. The provisions of ss. 234A, 234B and 234C are....
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....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 book profit means the net profit as shown in the P&L a/c for the relevant previous year prepared under sub-s. (1A) as increased by various amounts given in the section. Thus, for the purpose of assessing tax under s. 115J, firstly, the profit as computed under the IT Act has to be prepared, and thereafter, the book profits as contemplated by the provisions of s. 115J are to be determined and then the tax is to be levied. The liability of the asses....
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.... 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 income as well as the determination of the assessed income accordingly, are to be made in terms of the statutory scheme comprising s. 115J of the Act. Under the setting of the statute, the levy of interest is inescapable. The scheme of the statute as referred to above, unerringly points out that an assessee under the circumstances is to pay advance tax.' 38. In the case of Kotak Mahindra Finance Ltd., similar contentions raised on behalf of the assessee were repelled ....
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....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, it cannot be regarded that it would be an impossible exercise or an insurmountable difficulty for the company assessees to estimate the profits of the company during the current year itself and there would be no difficulty at all for a company maintaining its account on the mercantile basis to estimate the profits during the current year itself and pay the advance tax on the estimated current profits. We find no logic in the view that if the company can estimate the current income after providing for all deduc....
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....sions 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 interest under ss. 234B and 234C of the Act is mandatory. Hon'ble Karnataka High Court itself in their earlier decision in the case of Union Home Products Ltd. held that the levy of interest under ss. 234B and 234C is automatic the moment it is proved that the assessee has committed a default within the comprehension of anyone of the provisions in question. Apparently, the said decision in the case of Union Home Products Ltd. was not brought to their notice. As already mentioned earlier, Hon'ble Supreme Court in a number of decisions referred to a....
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.... 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 as a whole and the observations from the judgment have to be considered in the light of the questions which were before this Court. A decision of this Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, the Courts must carefully try to ascertain the true principle laid down by the decision of this Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this Court, to support their reasonings. In Madhav Rao Ji....
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....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 construction which would render any expression superfluous or redundant. Therefore, the argument of the learned Authorised Representative that interest under s. 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. 46. The view which we have taken finds support from the decision of Hon'ble Karnataka High Court in the case of Jindal Thermal Power Co. Ltd. vs. Dy. CIT & Anr. (2006) 203 CTR (Kar) 381 : (2006) 286 ITR 182 (Kar), wherein after considering their....
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....e 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 Companies Act cannot be drawn up. If the explanation of the companies that the profits under s. 115J of the Act can only be determined after the close of the year were to be accepted, then no assessee who maintains regular books of account would be liable to pay advance tax as in those cases also, income can only be determined after the close of the books of account at the end of the year. Before parting, we would like to observe that it cannot be said that even in a case of extreme hardship, the assessee is left with no remedy to seek waiver or reduction of interest leviable under ss. 234A, 234B or 234C of the Act. Sec. 119(2) of the ....
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....on, 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 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. 234B and 234C of the Act mandatory, were brought to the notice of their Lordships. In this context Hon'ble Supreme Court cautioned in their recent decision dt. 6th March, 2009 in the case of State of Andhra Pradesh vs. M. Radha Krishna Murthy (Criminal Appeal No. 386 of 2002): "6. Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of Courts are neither to be read as Euclid's theore....
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.... 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 assessees 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 asses sees 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 Companies Act cannot be drawn up. If the explanation of the assessee that the profits under s. 115JA of the Act can only be determined after the close of the year were to be ac....
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....dent 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 precedent for another High Court nor for Courts or Tribunals outside its own territorial jurisdiction. It is well-settled that the decision of a High Court will have the force of binding precedent only in the State or territories on which the Court has jurisdiction. In other States or outside the territorial jurisdiction of that High Court it may, at best, have only persuasive effect. By no amount of stretching of the doctrine of stare decisis, can judgments of one High Court be given the status of a binding precedent so far as other High Courts or Courts or Tribunals within their territorial jurisdiction are concerned. Any such attempt will go counter to the very doctrine of stare decisis and also the various decisions of the Supreme C....
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....at 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 residuary ground No. 3, accordingly, this ground is dismissed. 7. In the result, appeal is dismissed. REFERENCE UNDER S. 255(4) OF THE IT ACT, 1961 21st April, 2009 As there is a difference of opinion, the matter is being referred to the President, Tribunal, with a request that following question may be referred to a Third Member or pass such order as the President may deem fit. "Whether on the facts and in the circumstances of the case interest under s. 234B and under s. 234C is leviable for income computed under s. 115JA of the IT Act, 1961 for the ass....
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....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. 115JA; (d) sub-s. (4) of s. 115JA specifically stipulates that all other provisions of the Act apply to an assessment made on. book profit under that section; (e) the Karnataka High Court in its later decision in Jindal Thermal Power Co. Ltd. vs. Dy. CIT & Anr. (2006) 203 CTR (Kar) 381 : (2006) 286 ITR 182 (Kar) has, after referring to its earlier judgment in Kwality Biscuits Ltd., held that s....
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....t 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 interest in light of sub-s. (4) of s. 115JA should be followed or the judgment of the Bombay High Court in Snowcem India Ltd., also rendered in the context of s. 115JA, has to be applied. Both the decisions are under s. 115JA with which we are concerned. One is of a Special Bench of the Tribunal, Ahmedabad and the other is of a High Court, though not the jurisdictional High Court. A simple answer would....
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....a 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 Department that it has made all the difference between s. 115J on the one hand and ss. 115JA and 115JB on the other, and therefore, non-advertance to the same makes it impossible for the assessee to rely on the judgment as authority on the interpretation of the sub-section. It is futile to speculate what would have been the decision if sub-s. (4) of s. 115JA had been brought to the notice of the Hon&....