2008 (7) TMI 378 - HC - Income Tax

Charging of interest u/s 234B and 234C ITAT directed not to to charge interest under sections 234B and 234D of the Act since the total income was determined under section 115J of the Act held that - that interest is not leviable under sections 234B and 234C of the Income-tax Act 1961 in the case of an assessment of a company on the basis of book profits under section 115J since the entire exercise of computing income under section 115J can only be done at the end of the financial year and the provisions of sections 207 208 209 and 210 cannot be made applicable until and unless the accounts are audited and the balance-sheet prepared decided in favor of assessee.

Summary

Issues involved:
Interpretation of sections 234B and 234C of the Income-tax Act for assessment year 1989-90.

Analysis:
The court addressed the issue of whether interest under sections 234B and 234C of the Income-tax Act is chargeable when income is computed under section 115J of the Act. The court rectified a typographical error in the question formulated by mentioning the correct sections. The court heard arguments from both the Revenue's counsel and the assessee's counsel. Despite being directed to hear the case along with another tax appeal, the court decided to hear this case separately due to multiple issues involved. The Tribunal's decision in favor of the assessee was based on a previous decision in the case of Deputy CIT v. Dintex Dyechem P. Ltd. and the Karnataka High Court case of Kwality Biscuits Ltd. v. CIT. The Supreme Court had dismissed appeals filed against the Karnataka High Court's decision, which stated that interest is not leviable under sections 234B and 234C when assessing a company's income based on book profits under section 115J. The court, in line with the Supreme Court's approval of the Karnataka High Court decision, ruled in favor of the assessee and against the Revenue, concluding that interest under sections 234B and 234C is not chargeable in such cases. Consequently, the appeal was dismissed by the court.