TaxTMI 
TaxTMI 
1992 (10) TMI 115
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....V. Trans-Investments (P.) Ltd. v. ITO [1992] 42 ITD 242 (Hyd.). Asstt. CIT v. Lallacherra Tea Co. (P.) Ltd. [1992] 42 ITD 446 (Gauhati) and Buttwelded Tools (P.) Ltd. v. Asstt. CIT [1991] 39 ITD 432 (Mad.) (SMC) were in favour of the revenue and references have been made to different High Courts, that when the matter was seized of by the High Court concerned, the question of referring the matter to the Special Bench of the Tribunal could not arise, that sub-sections (3) and (4) of section 255 should be read conjunctively so that unless there was a difference of opinion between the Members of the Bench, a Special Bench cannot be constituted by the President and the views taken by the three Benches, referred to above, should be accepted. It was submitted that in the circumstances the constitution of the Special Bench was redundant and without jurisdiction. 2.2 Responding to this petition, it was contended on behalf of the assessee that there were no decisions of the Tribunal so far on the point raised in this case and consequently reference pending in any High Court on that issue does not arise. It was submitted that the cases referred to related to different issues. Reference was....
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....ase which has been allotted to the Bench of which he is a member and which pertains to an assessee whose total income as computed by the Income-tax Officer in the case does not exceed forty thousand rupees and the President may, for the disposal of any particular case, constitute a Special Bench consisting of three or more members, one of whom shall necessarily be a judicial member and one an accountant member. (4) If the Members of a Bench differ in opinion on any point the point shall be decided according to the opinion of the majority, If there is a majority, but if the members are equally divided, they shall state the point or points on which they differ, and the case shall be referred by the President of the Appellate Tribunal for hearing on such point or points by one or more of the other members of the Appellate Tribunal. and such point or points shall be decided according to the opinion of the majority of the members of the Appellate Tribunal who have heard the case, including those who first heard it. (5) Subject to the provisions of this Act, the Appellate Tribunal shall have powers to regulate its own procedure and the procedure of Benches thereof in all matters ar....
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....see had a prima facie case. It was observed: "The question raised in appeal is quite substantial and both the parties have much to argue in support of their respective stand. There are, therefore, circumstances to take the appeal out of turn. We accordingly direct that this appeal be fixed for hearing on 27-4-1992 for final disposal before an appropriate Bench. 8. The power and discretion to constitute a Special or larger Bench lies with the Hon'ble President of the Appellate Tribunal under section 255(3) of the Act and the assessee is at liberty to approach the President under the above provision. We need say nothing more on this." Thereafter the Bench sent in their unanimous recommendation for constituting the Special Bench. Pursuant to this, the President considered that this was a fit case to be heard by a larger Bench because there was no decided case on that issue and the matter has to be decided on first principles. Therefore, it would be appropriate for a Bench consisting of more than two Members to apply their minds to the question. The practice in such cases is to give wide publicity and Invite intervention by affected parties. It enables the Bench to have the as....
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....is argued that, on another issue raised in the appeal, an earlier decision of the Tribunal in favour of the assessee should be reversed. Moreover, the revenue was not aware of the decision of the Supreme Court which has a bearing on the constitution of a Special Bench and that such an objection had been taken earlier before another Special Bench in the case of Dy. CIT v. Shree Lalit Fabrics (P.) Ltd. [1992] 41 ITD 119(Chd.) and had been rejected pointing out that it is the power of the President to allocate the work and cannot be questioned by the Members constituting the Bench. Yet, the same objection has been raised once again with the petition carrying an innuendo. 2.8 The learned standing counsel repeatedly stated that he was taking the objections "on instructions" but he did not reveal the authority who had instructed him to take the objection. We do not know whether it was the Departmental Representative or the Assessing Officer or the Commissioner of Income-tax, who is the only person empowered by section 253(2) to direct the Income-tax Officer to appeal to the Tribunal. However, this petition has been signed by Shri S. Halder, A.A.C., Central Circle XII, Calcutta. We do ....
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.... a Tribunal on the identical facts is allowed to come to a conclusion directly opposed to the conclusion reached by another Bench of the Tribunal on an earlier occasion, that will be destructive of the institutional integrity itself. That is the reason why in a High Court, if a single judge takes a view different from the one taken by another judge on a question of law, he does not finally pronounce his view and the matter is referred to a Division Bench. Similarly, if a Division Bench differs from the view taken by another Division Bench, it does not express disagreement and pronounce its different views, but has the matter posted before a Fuller Bench for considering the question. If that is the position even with regard to a question of law, the position will be a fortiori with regard to a question of fact. If the Tribunal in the present case wanted to take an opinion different from the one taken by the earlier Bench, it should have placed the matter before the President of the Tribunal so that he could have referred the case to a Full Bench of the Tribunal, consisting of three or more Members for which there is provision in the Act itself." While this passage recognises the ....
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.... of both quoted and unquoted shares. These shares were not revalued in the year ended 31-3-1986, along with other fixed assets. 3.3 However, in the next year in the balance sheet as at 31-3-1987 the assessee revalued all the quoted shares at market value with the result the value shown was Rs.42,29,55.027 as against Rs.2,89.83,006 shown as at 31-3-1986.The differecce in revaluation of these shares Which worked out to Rs.39,39,52,870 was taken to Capital Reserve account. However, it continued to retain the value of the remaining unquoted investments at cost. Note No. 5(a) on the balance sheet stated: "Method of valuation of investments which were being valued at cost has been changed to Market Rate in the case of quoted investments. As a result of such revaluation Rs.39,39,52,870 have been ferred to Capital Reserve." The Balance Sheet showed a sum of Rs.4,67,361 added to the Capital Reserve by way of capital gain on sale of fixed assets. 3.4 Even by the time the Balance Sheet was annexed to the Auditors Report dated 12-11-1987, the assessee had already sold shares in Grasim Industries Ltd., Hindustan Aluminium Corporation and Tungabhadra Industries Ltd. on 13-5-1987 and ....
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....nbsp; Rs. Rs. Rs. Rs. Rs. Rs. ---------------------------------------------------------------------------------------- Capital Reserves. Revaluation of 11,30,86,612 - - 2,35,22,622 53,70,610 8,41,93,380 Fixed Assets (a) &n....
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....----------------------- 63,79,98,973 69,79,357 6,00,234 2,35,22,622 1,02,43,767 61,18,15,175 ---------------------------------------------------------------------------------------- (a) Depreciation charged on revalued assets. (b) Adjustment relating to fixed assets sold/discarded. (c) Adjusted due to lower realisation on sale of certain investments. (d) Including Rs.32,57,05,162 realised during the year on sale of certain investments. (e) Includes Rs.1,50,800 capital subsidy on D.G. set and Rs.2,434 capital gain on sale of fixed assets. (f) Utilised for acquiring the new plant and machinery. (g) Transferred to General Reserve to the extent reserve created in 1976-77. ---------------------------------------------------------------------------------------- 3.6 It will be seen from the above that the revalued shares though at market rate, fetched only Rs.33,77,71,264 on sale and the difference of Rs.44,23,157 was debited to the capital reserve account so that the balance in that account stood at the end of the year at Rs.38,95,29,713. It will also be noted that ....
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....ed Chartered Accountant, there was nothing wrong with the same. The assessee also expressed the apprehension that the proposal of the Assessing Officer was motivated with a view to prepare a ground for subjecting to tax more than Rs.5 crores under section 115J for the assessment year 1988-89. The Income-tax Officer thereafter made the assessment order on 19-3-1990. He observed that the assessee had changed the method of accounting with reference to the investment in order to inflate the cost of shares and eventually understate the book profits to overcome the incidence of higher taxation under section 115J of the Act for the year in which the shares have been sold. He, therefore, stated that the change of method of valuation of quoted shares was not acceptable and proceeded to compute the total income of that year. The assessee thereupon appealed to contend that the Assessing Officer was not justified in rejecting the revaluation of the shares. The CIT (Appeals) in his order dated 1-3-1991 dismissed this ground of appeal stating: "I feel that observations of the Assessing Officer has no effect in computation of income for the year. This is an academic dispute as far as computati....
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....; Rs. 31,66.58,646 -------------------- 30 per cent thereof Rs. 9,49,97.594" ------------------------------------------------------------------- 5.2 By letter dated 22-3-1991, the assessee replied to this proposal by contending that the capital gain was to be considered only under the provisions of section 45 and, therefore, the question of any change in the method of valuation for consideration under section 145, which has relevance only for computation of income from business, ....
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.... the tax under section 115J should be only on the book profit as shown by the assessee and the ITO had no power to modify the same. The Assessing Officer who was present before the CIT (Appeals) contended that the book profit shown was not in accordance with the provisions of the Companies Act and, therefore, it was required to be recomputed. The CIT (Appeals) held by his order dated 21-1-1992 that under clause 3(xii)(a) of Part II to Schedule VI of the Companies Act, the profit on investment has to be shown in the profit and loss account and that would include also the capital profit. He then concluded that the book profit taxable under section 115J was not just as shown by the assessee but as should be shown in accordance with the provisions of the Companies Act. He was of the view that the assessee had tailored its accounts in order to escape the mischief of section 115J and, therefore, such a colourable device could be ignored in imposing tax under section 115J. Contentions of the assessee: 7. Before us, it was contended on behalf of the assessee that the tax under section 115J could be imposed only on the book profit as shown by the assessee and, therefore, the Assessing....
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....provision had noted the phenomenon of "zero-tax" companies and that was the reason why the provision was introduced to compel the companies to pay some tax even if it was otherwise exempt. According to the revenue, such a dubious method of tax planning should not be entertained and ignoring the revaluation made by the assessee, the profit on sale of investments was required to be brought to tax under section 115J. The arguments of the Revenue proceeded on the premises that the assessee knowing fully well that it would be caught within the mischief of section 115J, if it credited the profit on sale of investments to the profit and loss account, adopted a carefully devised and well executed plan of revaluing the shares in one year to generate a Capital Reserve and then sell the in another year, to take the resultant profit to the reserve account, thereby avoid crediting the profit on the sale of investments to the profit and loss account. This being a device adopted with the sole purpose, of defeating the provisions of section 115J. the Revenue is entitled to go behind the facade of these transactions and to discover the truth to bring to surface the real situation. It also submitted....
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.... following, namely:-- (i) clause (iii) of sub-section (1) of section 35; (ii) clause (ia) of sub-section (2) of section 35; (iii) sub-section (2A) of section 35, to the extent to which the deduction under the said sub-section exceeds the sum paid by the assessee; (iv) sub-section (2B) of section 35, to the extent to which the deduction under the said sub-section exceeds the expenditure incurred by the assessee; (v) section 35C; (vi) section 35CC; (vii) section 35CCA; (vii) section 35CCB; (ix) clause (i) of sub-section (2) of section 33; (x) clause (ii) of sub-section (2) of section 33A; (xi) sub-section (1) or, as the case may be, sub-section (1), read with clause (i) of sub-section (2) of section 33A; (xii) clause (ii) of sub-section (3) of section 32A: (xiii) sub-section (1), or, as the case may be, sub-section (1), read with clause (i) of sub-section (3) of section 32A; (xiv) section 80G; (xv) clause (b) of sub-section (2) of section 80GGA; (xvi) clause (c) of sub-section (2) of section 80GGA; (xvii) section 80HH; (xvii) section 80HHA; (xix) section 80HHB; (xx) section 80HHC; (xxi) section 80-I; (xxii) section 80J....
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....VA was inserted in the Act so that all profitable companies pay some tax. This does not seem to have helped and is being withdrawn. I now propose to introduce a provision whereby every company will have to pay a 'mininum corporate tax on the profits declared by it in its own accounts. Under this new provision, a company will pay tax on at least 30 per cent of its book profit. In other words, a domestic widely held company will pay tax of at least 15 per cent of its book profit. This measure will yield a revenue gain of approximately Rs.75 crores." Consequently, section 80VVA was omitted by Section 40 of Finance Act 1987 and section 115J was introduced by section 43 of Finance Act, 1987. 9.3 The provisions of section 115J are as follows: "(1) Notwithstanding anything contained in any other provision 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, 1988 (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 charg....
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....tal income of such assessee chargeable to tax shall be deemed to be an amount equal to thirty per cent of such book profit. For the purposes of the Aforesaid provision. 'book profit' means the net profit as shown in the profit and loss account for the relevant previous year prepared in accordance with the provisions of Parts II and III of the Sixth Schedule to the Companies Act, 1956, subject to adjustments. It has also been provided that the aforesaid provision shall not affect the determination of the amounts to be carried forward to the subsequent year or years under 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 or sub-section (3) of section 80J. This amendment will take effect from 1st April, 1988, and will, accordingly, apply in relation to the assessment year 1988-89 and subsequent years." 9.4 The memorandum explained the provisions in the Bill : "New provisions to levy minimum tax on 'Book profits' of certain companies. 37. Under the existing provisions of the Income-tax Act, certain deductions are allowed in the compu....
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....-89 and subsequent years. (Clauses 40 and 43)." 9.5 There was an amendment in section 115J by section 19 of Finance Act, 1989, as follows: "19. Amendment of section 115J.-- In section 115J of the Income-tax Act,-- (i) after sub-section (1) and before the Explanation, the following sub-section shall be inserted, namely:-- '(1A) Every assessee, being a company, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act. 1956 (1 of 1956).': (ii) in the Explanation,-- (a) in the opening portion, for the words and figures 'prepared in accordance with the provisions of Parts II and III of the Sixth Schedule to the Companies Act, 1956 (1 of 1956)'. the words, brackets, figure and letter 'prepared under sub-section (1A)' shall be substituted; (b) in clause (i), for the words 'profit and loss account; or', the following shall be substituted and shall be deemed to have been substituted with effect from 1st day of April, 1988, namely:-- 'Profit and loss account: Provided that, where this section is applicable to an assessee in an....
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....n from reserves or provisions, if any, such amount is credited to the profit and loss account. Some companies have taken advantage of this provision by reducing their net profit by the amount withdrawn from the reserve created or provision made in the same year itself, though the reserve when created was not added to the book profit. Such adjustments lead to undue lowering of profit and consequently the quantum of tax payable gets reduced. With a view to counteract such a tax avoidance device, it is proposed to reduce the 'book profit' by the amount withdrawn from reserves or provisions only in two situations, namely:-- (i) if the reserves have been created or provisions have been made before 1st day of April, 1988; or (ii) if the reserves have been created or provisions have been made after 1st day of April, 1988, and have gone to increase the book profits in any year when the provisions of section 115J of the Income-tax Act were applicable. This amendment will take effect from 1st day of April, 1988, and will, accordingly, apply in relation to the assessment year 1988-89, and subsequent years. (Clause 19)." Relevant provisions of the Companies Act: 10. Since sectio....
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....e working of the company. Consequently, it cannot be directly concerned with changes in the capital structure. In particular, the profit and loss account is concerned with items of income and expenditure and, therefore, any profit by realisation of capital asset would not be an item of Income. The revenue sought to bring the capital profit within items (xi) and (xii) of Part II, extracted above. However, item (xi) refers only to income from investment and therefore it cannot be taken as profit derived by sale of investments. The revenue then relied upon item (xii) to contend that profit on Investment would have to be exhibited in the Profit & Loss account under that item. The contention of the assessee was that that item related to trade investments only and not other investments. In the alternative It was submitted that even a disclosure of a profit or investment under that item would be confined to the extent not adjusted from any previous provision or reserve. The rejoinder of the revenue was that it will refer only to the provision or reserve created in the year itself and not with reference to a provision or reserve of the earlier year. We find that item (xi) makes a distincti....
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....ntion was drawn to the statement in Spicer & Pegler's "Book-keeping and Accounts", (17th Edition), page 311. indicating that the realised capital surplus could be passed through the profit and loss account or alternatively directly charged to the account in which the surplus is credited in the balance sheet. We find that the assessee has consistently followed the practice of crediting sale proceeds of capital assets to the asset a/c and shown in the balance sheet directly Rs.4,67,361 as on 31-3-1987 and Rs.2,434 as on 31-3-1988. In the present case the shares having been already revalued in the earlier year at Rs.34,21,94,376 and the price feteched being Rs.33,77,71,220 being less than that, the shortfall of Rs.44,23,157 was deducted from the revaluation reserve account. Thus it is clear that entries made by the assessee in the capital reserve account with reference to the realisation by sale of shares was correct and was in accordance with the requirements of item (xii) of Part II of Schedule VI of the Companies Act. As I matter of sound accepted accounting practice, the assessee was entitled to treat the accretion to fixed asset when realised as a capital reserve particularly whe....
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....? 13. The contention of the revenue was that if the book profit shown by the assessee is not in accordance with the provisions of the Companies Act or if it had been manipulated to show less than the amount which was required to be shown in the profit and loss account, the Assessing Officer had the power to re-cast the profit and loss account. The contention of the assessee was that the tax was on the book profit as shown by the assessee and whatever is shown has to be accepted without question. This proposition is too widely stated, for, obviously it cannot take into account a case of fraud or misrepresentation or a case where the profit and loss account was not prepared in accordance with the provisions of Part II and Part III of the Sixth Schedule to the Companies Act, 1956. If the profit and loss account prepared by the assessee is fraudulent or misleading giving figures which are found to be false and even though such profit and loss account was approved by the Board of Directors of a Company, still the Assessing Officer would be entitled to verify and satisfy himself whether the profit and loss account so prepared was in accordance with the provisions of Part II and Part I....
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....unt was not prepared in accordance with Part II and Part III of the Sixth Schedule to the Companies Act. In a case where the profit and loss account was prepared in accordance with the provisions of Part II and Part III of the Sixth Schedule to the Companies Act, the Assessing Officer will have no power to disturb the book profit except as stated in section 115J. We are therefore of the opinion that the Assessing Officer is bound to proceed with the computation only on the basis of the book profit as shown in the profit and loss account unless it is discovered that the profit and loss account is not drawn up in accordance with the provisions of the Companies Act, 1956. The accounting practice of the assesses: 14. The revenue reiterated the view of the authorities below that the assessee had changed its method of accounting only in the preceding year and, therefore, the Assessing Officer was entitled to re-cast the accounts. There appears to be some confusion in the minds of the authorities below on this aspect which was probably due to the inaccurate wording use by the assessee in the published accounts for the accounting year 1986-87. It was stated in the notes that the 'method....
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....st for some years and the value is written up or written down on revaluation at market rate on a particular date, there is no change in the method of accounting so as to require the company to again revalue the investments at market rate on subsequent annual valuation dates. What will be shown in the subsequent years will be only the revised book value. Method of accounting is an essential and integrated process to ascertain the income or loss after the end of the previous year within the meaning of section 145 of the Income-tax Act, and it does not apply to revaluation of fixed assets or investments. Thus, in the present case the assessee had revalued the fixed assets as on 31-3-1986 and the quoted Investments as on 31-3-1987. Consequently, the revised value was shown as the book value in the subsequent years. The authorities below were in error in mixing up revaluation of investments with the change in the method of accounting for a particular year and assuming that the assessee had gone back to the earlier method in the subsequent years. They were also in error in proceeding on the basis that only the shares which were sold have been revalued, for, we find as a matter of fact th....
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...., an equal amount was to be added except in a situation where the reserve had been created before 1-4-1988 or where the reserve has been created after 1-4-1988 but had gone to increase the book profit in any year when the provisions of section 115J were applicable. It will be seen that the revaluation reserve was created by the assessee before 1-4-1988 and is, therefore, saved by this amendment. Thus we find that not only because the opening balance depends upon the assessments of the earlier year but also because of the amended provisions of section 115J, the Assessing Officer cannot disturb the value of the revaluation reserve in the Balance-sheet. 15.2 It is also to be noted that item 3(xii)(a) of Part II of the Schedule VI of the Companies Act provided that profit or loss on investments should be shown (i.e.) credited to the Profit and Loss A/c only to the existent that remained unadjusted from any previous provision or reserve. Since in this case, reserve in the preceding year had been validly created, approved by the share-holders, as well as by the authorities under the Company Law, the profit on sale of investments cannot but be credited to capital reserve account. Credi....
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....e, but genuine and permissible under the relevant Laws. We also find as a matter of fact that the assessee had revalued all the assets in a scheme of revaluation in which the fixed assets were revalued first in the earlier year and the shares were valued in the next year. Much was made of the fact that the revaluation was made after the shares have been sold and after the Finance Act had come into force indicating that the assessee was well aware of the implications of the fresh impost under section 115J. Apart from the fact that it is a mere summerise and a pure conjecture, there is, on the other hand, significantly the amendment providing that reserves created prior to 1-4-1988 should not be adjusted which came into the statute much after the revaluation was made by the assessee. Hence, we are unable to accept the proposition that the revaluation made by the assessee in the earlier year could be ignored as a scheme or a colourable device. Treatment of capital accretion in accounting practice: 17. Even if we accept the claim of the Revenue that the assessee should not have revalued the assets in the earlier year but should have brought the sale proceeds Into account in the curr....
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....eemed to be the income of the previous year in which the transfer took place." This charge, is however, waived where the consideration for the transfer of the asset is re-invested as provided in section 54E, which is as follows:-- "54E. Capital gains on transfer of capital assets not to be charged in certain cases.-- (1) Where the capital gains arises from the transfer of capital asset, not being a short-term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset), and the assessee has, within a period of six months after the date of such transfer, invested or deposited the whole or any part of the net consideration in any specified asset (such specified asset being hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,-- (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45, (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so ....
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....s exempt on fulfilling certain conditions. Under Chapter VI, certain deductions are given in respect of incomes which are chargeable. Under Part D of Chapter IV, certain allowances are given, such as investment allowance or allowance for scientific research. There will thus be seen that there is a basic dichotomy between receipts which are not taxable at all and receipts which are taxable but subject to exemption on fulfilling certain conditions - See also A.V. Fernandez v. State of kerala 8 STC 561. 19.2 In the case of capital gains, it is a receipt which is not taxable at all, but for a deeming provision. Even the deeming provision is subject to exclusion in respect of certain receipts which fulfil certain conditions such as re-investment. Therefore, capital receipts which do not have the character of income cannot be liable to income-tax by adding it to the book profit. To understand this proposition, let us take the case of a company which has got agricultural income. In drawing up its P & LA/c, it is bound to show the profit from the agricultural operations also as part of its profits. But can a tax be levied under section 115J on the agricultural income which is not to for....
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....clause does not lift the capital gains from the sixth head in section 6 and place it under the fourth head. It only introduces a limited fiction, namely, that capital gains accrued will be deemed to be income of the previous year in which the sale was effected. The fiction does not make them the profits or gains of the business. It is well settled that a legal fiction is limited to the purpose for which it is created and should not be extended beyond its legitimate field." 19.3 Secondly, capital gain is deemed to be income only under section 45. A deeming provision can be applied only to the extent to which the Legislature had intended it and cannot be extended to any other provision. What is deemed to be income under section 45 cannot be deemed to be income for the purpose of section 115J, for the simple reason that 'Book Profits' cannot include the deemed income. More so, when because of the operation of section 54E, the item, in question, is saved from that deeming provision. 19.4 Thirdly, the legislative history shows that the tax under section 115J was with reference to the business profit as it was in replacement of section 80VVA which sought to reduce the deductions av....
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.... the fiction created by section 115J cannot be extended to the levy of interest under section 215 and relied on the decision of the Delhi Bench of the Tribunal in the case of Steel Authority of India Ltd. v. Dy. CIT [1991] 38 ITD 193. The CIT (Appeals), however, held that the Act nowhere stated that the income detemined under section 115J will not form part of the income subject to advance tax and accordingly confirmed the levy of interest In the further appeal before us it was contended on behalf of the assessee that since this issue has been decided in favour of the assessee by a Bench of the Tribunal, it should be followed. On the other hand, it was contended on behalf of the Revenue that since the matter is before, a Special Bench, that decision of the Tribunal should be re-considered. Accordingto the Revenue. the definition of 'assessed tax' in section 215 clearly referred to the total income determined in the assessment and, therefore, the levy of interest should be upheld. 20.2 The revenue which had initially objected to the hearing of the appeal by a Special Bench strangely requires the Special Bench to reverse the decision of the Delhi Bench of the Tribunal on this poin....
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....y, shall be refunded. (4) In such cases and under such circumstances as may be prescribed, the Income-tax Officer may reduce or waive the interest payable by the assessee under this section. (5) In this section and sections 217 and 273. 'assessed tax' means the tax determined on the basis of the regular assessment (reduced by the amount of tax deductible in accordance with the provisions of sections 192 to 194, section 194A, section 194C, section 194D and section 195 so far as such tax relates to income subject to advance tax and so far as it is not due to variations in the rates of tax made by the Finance Act enacted for the year for which the regular assessment is made. (6) Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purpose of this section and sections 216, 217 and 273." This section provides for an automatic levy of interest wherever the advance tax paid is less than 75 per cent of the assessed tax. Consequently, no appeal has been provided against the levy of interest under this section. But the Supreme Court has held in the case of Cen....
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....n is automatic unlike sections 216, 217 and 139(8) where any underestimate of current income can be condoned for sufficient cause shown. In the circumstances, on a combined reading of the provisions of sections 208 and 215, it is clear that the assessee is required to pay advance tax taking into account the application of section 115J. The decision of the Delhi Bench appears to be incorrect and we must hold that in case the assessment is to be completed by applying the provisions of section 115J and if there is a shortfall in the payment of advance tax with reference to the income so determined, the assessee would be liable to pay interest under section 215. Disallowance of interest: 21. In computing the total income, the Assessing Officer has disallowed the following interest payments:-- --------------------------------------------------------------- (i) Interest payable to Customs Department on import of Raw Material .... Rs. 6,85,066 (ii) Interest payable to Customs Department on ESSW Yarn .... Rs. 3,06,922 ....