TaxTMI 
TaxTMI 
2006 (3) TMI 95
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....itions that a Division Bench of this court has held that there is no obligation to pay advance tax in excess of assessment corresponding to the provisions of section 115J which was in force earlier and consequently there should be no levy of interest under sections 234B and 234C of the Act and if the first respondent seeks to rely as is seemingly done in view of the amendment of section 115JB effected by the Finance Act, 2002, with retrospective effect from April 1, 2001, enabling him to levy such interest. The said amendment in so far as it relates to retrospective operation for levy of interest under sections 234B and 234C of the Act with effect from April 1, 2001, is unconstitutional being contrary to articles 265 and 300A of the Constitution of India and being expropriatory. It is averred in the petition that the petitioner is engaged in power generation and supply of electricity generated to the Grid and Jindal Vijaynagar Steel Limited. The business commenced during the previous year 1999-2000 (around January 2000) relevant to the assessment year 2000-01 and the petitioner was not liable to pay tax on the total income either under the normal provisions of the Act or under s....
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.... tax payable under section 115J of the Act. It is further averred that section 115J ceased to be effective from the assessment year 1991-92. The scheme of MAT, however, was revived effective from the assessment year 1997-98 by the Finance (No. 2) Act, 1996, by insertion of a new charging section 115JA into Chapter XII-B of the Act and under the said provision where the total income computed under the provisions of the Act is found to be less than 30 per cent, of the book profit, the total income chargeable to tax shall be deemed to be an amount equivalent to 30 per cent, of the book profit and section 115JA operated up to and including the assessment year 2000-01 when it gave way to another charging section seemingly comparable to section 115JA. The new provision, viz., section 115JB was brought into the statute by the Finance Act, 2000, effective from the assessment year 2001-02. It was materially different from its predecessor in one respect-in not seeking to deem any total income but providing for tax simpliciter and this provision as initially introduced pointedly departed from its predecessor that as against 30 per cent, of the book profit being deemed to be the total income, ....
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....payable under section 115JB as advance tax and the book profit arrived at was Rs. 42,79,20,950 in relation to which the petitioner was liable to tax at 7 1/2 per cent, in terms of section 115JB and the petitioner paid the tax under section 115JB including surcharge aggregating to Rs. 3,62,66,300 as self-assessment tax under section 140A and in the absence of any obligation to pay advance tax, the petitioner did not incur any liability to penal interest under sections 234B and 234C and the second respondent examined the return of income and issued an intimation dated December 24, 2002, under section 143(1) of the Act taking the position that the petitioner was liable to interest under sections 234B and 234C and the second respondent assumed the obligation to pay MAT in advance and, therefore, proceeded to levy Rs. 43,87,341 as interest under section 234B and Rs. 27,25,364 under section 234C and the petitioner is aggrieved by the action in levying interest with retrospective effect. It is further averred that retrospectivity given to the amendment be struck down or read down since it is only the amendment with retrospective effect which has foisted interest liability on the petitione....
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....from April 1, 2001, is not correct and is liable to be rejected. It is averred that section 115JB was brought into force by including the same under the Finance Act, 2000 with effect from April 1, 2001, and would be fully applicable to the assessment year 2001-02. It was promulgated with effect from April 1, 2000 itself and the petitioner was fully aware of the provisions of the Finance Act and, therefore, the rate also came to be clearly contemplated by the Finance Act which was within the knowledge of the petitioner and by the Finance Act, 2002 certain amendment to section 115JB of the Act being incorporated with retrospective effect from April 1, 2001, and the relevant amendments which were in the nature of substitution which is under challenge in these writ petitions and the amendment is for the words "the tax payable for the relevant previous year shall be deemed to be seven and one-half per cent, of such book profit" the words "such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of seven and one-half per cent." is substituted and the Legislature has expre....
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.... payable prior to the Amendment Act and wherefor the retrospective amendment by the Finance Act, 2002 is unreasonable and expropriatory and impossible of performance and compliance. Learned senior counsel submitted that the Legislature has power to amend the Act retrospectively. However, retrospective operation of the Act is liable to be set aside as unconstitutional or read down as prospective where the same would cause unreasonable hardship to the petitioner. Learned counsel has relied upon the decisions in National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India [2003] 260 ITR 548 (SC), Shamanur Kallappa and Sons v. State of Karnataka [2004] 136 STC 132 (Karn), Star India P. Ltd. v. Commissioner of Central Excise [2006] 280 ITR 321 (SC) in support of his contention that the Finance Act, 2002, in so far as it relates to retrospective operation with effect from April 1, 2001 and enables the respondents to impose tax under sections 234B and 234C of the Act is unconstitutional and is liable to be set aside as such. On the other hand, learned counsel appearing for the respondents submitted that the petitioner does not dispute the competency of the Le....
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....nd Dr. S. Reddappa v. Union of India [1998] 232 ITR 62 (Karn), the amendment is justified and the petitioners have failed to prove that the said amendment is unconstitutional and, accordingly, the writ petitions are liable to be dismissed. In reply, learned senior counsel for the petitioner submitted that every word in a statute has to be given a meaning and since there was no deeming provision to treat book profit as total income the provision for payment of advance tax under section 207 was not applicable and every word in a statute has to be given meaning and a construction which would leave without effect any word would normally be rejected and only in view of the Amendment Act the book profit is treated as total income thereby making the payment of advance tax mandatory under section 207 of the Act and wherefore, to that extent the provisions of the Amendment Act are liable to be quashed as sought for in the writ petition. It is clear from the contentions of learned counsel appearing for the parties that the competency of Parliament to amend the provisions of section 115JB of the Act by the Finance Act, 2002 is not questioned in these writ petitions. It is also clear fro....
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....sions contained in section 115JB as amended by the Amendment Act, 2000 and the Amendment Act, 2002 are compared, it is clear that it is only by virtue of the amendment made to the section by the Amendment Act, 2002 that the book profit is treated as total income and the liability to pay advance tax would arise and but for the retrospective operation of the provisions of the amendment by the Finance Act, 2002 there was no liability to pay interest under sections 234B and 234C and when there was no liability to pay advance tax in view of the provisions that necessitated prior to the amendment which is now made retrospective with effect from April 1, 2001, the same would be unreasonable, harsh and excessive and wherefore liable to be struck down as unconstitutional. Learned senior counsel submitted that in view of the provisions of section 207, the liability for payment of advance tax would arise only in respect of total income of the assessee which would be chargeable to tax and it is only by the Finance Act, 2002 the amendment is made to deem book profit to be the total income of the assessee and prior to the amendment the provisions contained in section 115JB did not treat the book....
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....ssment year commencing on or after 1st day of April, 2001, is less than seven and one-half per cent, of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of seven and one-half per cent.'" It is clear from the abovesaid provisions of the Act that under the Finance Act, 2002 the amendment made to section 115JB(1) is as follows: "for the words 'the tax payable for the relevant previous year shall be deemed to be seven and one-half per cent, of such book profit', the words 'such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of seven and one-half per cent.' shall be substituted and shall be deemed to have been substituted with effect from the 1st day of April, 2001;" and the material on record has to be considered to find out as to whether the liability to pay advance tax under the Act had already come into force by the Amendment to the Finance Act, 2000 or the liability to pay advance tax arises only by vir....
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....such accounts including profit and loss account for such financial year or part of such financial year falling within the relevant previous year. Explanation.-For the purposes of this section, "book profit" means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2), as increased by,- (a) the amount of income-tax paid or payable, and the provision therefor; or (b) the amounts carried to any reserves, by whatever name called; or (c) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or (d) the amount by way of provision for losses of subsidiary companies; or (e) the amount or amounts of dividends paid or proposed; or (f) the amount or amounts of expenditure relatable to any income to which section 10 or section 10A or section 10B or section 11 or section 12 apply, if any amount referred to in clauses (a) to (f) is debited to the profit and loss account, and as reduced by- (i) the amount withdrawn from any reserves or provisions if any such amount is credited to the profit and loss account: Provided that, where this section is applicab....
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....r the provisions of sub-section (2) of section 32 or sub-section (3) of section 32A or clause (ii) of sub-section (1) of section 72 or section 73 or section 74 or sub-section (3) of section 74A. (4) Every company to which this section applies, shall furnish a report in the prescribed form from an accountant as defined in the Explanation below sub-section (2) of section 288, certifying that the book profit has been computed in accordance with the provisions of this section along with the return of income filed under sub-section (1) of section 139 or along with the return of income furnished in response to a notice under clause (i) of sub-section (1) of section 142. (5) 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.'" The Central Board of Direct Taxes Circular No. 13/2001 was issued on 18 November 9, 2001, regarding the liability for payment of advance tax under the new MAT provisions of section 115JB of the Act and it is abundantly made clear in the said circular that the new provision of the section 115JB as introduced by the Finance Act, 2000 is a self-contained code. ....
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....the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate 7.5 per cent." in place of the words "the tax payable for the relevant previous year shall be deemed to be at 7.5 per cent, of such book profit" and wherefore, it is clear that having regard to the provisions of section 115JB of the Act as introduced by the Finance Act, 2000 which is a self-contained code pertaining to MAT, it is clear that liability for payment of advance tax arose after the introduction of section 115JB by the Finance Act, 2000 and the liability for payment of advance tax would not arise only in view of the provisions of section 115JB(1) as introduced by the Finance Act, 2002 as it is clear from the provisions of the Finance Act, 2000 culled out above which has introduced the provisions of section 115JB that under sub-section (5) of the said section 115JB introduced by the Finance Act, 2000. Rates of income-tax under section 2(8) of the Finance Act, 2000 reads as follows: "2.(8) Subject to the provisions of sub-section (9), in cases in which income-tax has to be charged under sub-section (4) of section 172 or sub-section (2) o....
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....e rate of ten per cent, of such 'advance tax' in the case of a domestic company." It is not disputed that for the assessment year 2001-02 previous year (April 1, 2000 to March 31, 2001) the provisions of section 115JB which was introduced by the Finance Act, 2000 was applicable for the assessment year 2001-02 and it is not in dispute that the petitioner has not paid the advance tax on June 15, 2001, September 15, 2001, December 15, 2001 and March 15, 2002 nor paid the advance tax for the assessment year 2002-03. The petitioner has not paid the advance tax instalments on due dates June 15, 2000, September 15, 2000, December 15, 2000 and March 15, 2001 and for the assessment year 2002-03 (previous year was April 1, 2001 to March 31, 2002) the petitioner has not paid advance tax instalments on the due dates, i.e., on June 15, 2001, September 15, 2001, December 15, 2001 and March 15, 2002 and having regard to the above finding that the provisions of section 115JB as introduced by the Finance Act, 2000, imposed liability for payment of advance tax on the petitioner. The contention of the learned senior counsel appearing for the petitioner that liability to pay tax arose only in view ....