TMI Blog2009 (8) TMI 806X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 16,71,383 under s. 234B and of ₹ 2,24,083 under s. 234C of the Act, wherein the income has been taxed on the basis of book profit under s. 115JA. 3. At the time of hearing, the learned Authorised Representative of the assessee pointed out that recently Hon'ble Bombay High Court in the case of Snowcem India Ltd. vs. Dy. CIT (2009) 221 CTR (Bom) 594 : (2009) 18 DTR (Bom) 58, after considering 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 ₹ 16,71,383 under s. 234B and of ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firmed by the Supreme Court. That would not be the case in which event only SLPs had been dismissed in which event it would be said that the Supreme Court chose not to interfere with the judgment of the Karnataka High Court. In such an event the doctrine of merger would not apply. Once the judgment of the Karnataka High Court in Kwality Biscuits Ltd. has been affirmed by the Supreme Court by dismissing the appeals, 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 ₹ 16,71,383 under s. 234B and of ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of s. 115J of the Act, Hon'ble High Court held that interest under ss. 234B and 234C of the Act is not leviable in the case of income computed under s. 115JA of the Act. The learned counsel on behalf of the assessee also placed reliance on the decisions in the cases of CIT vs. Kwality Biscuits Ltd. and Kwality Biscuits Ltd. vs. CIT (2000) 159 CTR (Kar) 316 : (2000) 243 ITR 519 (Kar) as also various decisions of the Tribunal 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 res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is applicable to an assessee in any previous year (including the relevant previous year), the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1st day of April, 1997 but ending before the 1st day of April, 2001 shall not be reduced from the book profit unless the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act stipulate that the assessee shall estimate his current income for the relevant financial year in terms of provisions of s. 209(2) of the Act, such current income can be last assessed income or returned income, whichever is higher. In terms of these provisions, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicable where facts of the case warrant. 4.2. The provisions of sub-s. (4) of s. 115JA of the Act, mentioned above are similar to the provisions of sub-s. (5) of s. 115JB referred to in the aforesaid circular issued by the CBDT. I am 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 prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merit in the contention that the provisions of s. 234C of the Act would not be attracted in cases where a company is assessed on the income computed under s. 115JA of the Act. As already observed, the levy is automatic without 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmined under s. 115J and; secondly, that a hardship is caused to the assessee because the liability to pay tax on the book profits is determined only at the end of the financial year. The Hon'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 &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (P) Ltd. (2003) 181 CTR (Mad) 442 : (2003) 263 ITR 307 (Mad) observed as under: 'It is true that for the applicability of s. 115J of the Act, the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the aforesaid decisions, in respect of levy of mandatory interest under ss. 234B and 234C of the Act even in the context 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght 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. 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 con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t any rate or rates which may be prescribed by the Finance Act every year and s. 207 deals with 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Finance Act, 2000, and consequently the provisions of ss. 234B and 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court has held that preponderance 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 Kwalit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 precedent for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 residuary ground No. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 721 : (2009) 117 ITD 1 (Ahd)(SB). The 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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear making it impossible for the assessee 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 Spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on the point, has been rendered without 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 cruc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view taken by the learned AM, In this view of the matter. I do not consider it necessary to burden this order with a discussion of the authorities cited on behalf of the assessee as to the applicability of the provisions relating to advance tax on companies that are required to pay tax on their book profit. The views expressed by the decisions have in substance been dealt with by the Special Bench in its order in Ashima Syntex Ltd. I have to merely follow the Special Bench order on those aspects of the case (i.e., the merits of the levy of interest) which I respectfully do. 10. For the reasons stated above, I respectfully agree with the views expressed by the learned JM and answer the point of difference in the affirmative. 11. The appeal will now be placed before the Bench which originally heard it for passing orders in conformity with my decision. A.N. PAHUJA, A.M.: 21st Aug., 2009 As there was a difference of opinion between the learned JM and AM, the following question was referred to a Third Member: Whether on the facts and circumstances of the case, the interest under s. 234B and under s. 234C is leviable for income computed under s. 115JA of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
