TMI Blog2005 (12) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... under s. 234B and 234C by way of rectification. The AO vide order dt. 29th May, 2001 rejected the assessee's rectification application by holding that interest chargeable under s. 234B and 234C is mandatory. 3. Aggrieved, the assessee preferred an appeal before the CIT(A). The CIT(A), Salem, vide his order dt. 18th Sept., 2003 relying on the Hon'ble Karnataka High Court decision in the case of Kwality Biscuits Ltd. vs. CIT (2000) 159 CTR (Kar) 316 : (1999) 243 ITR 519 (Kar) directed the AO to delete the interest charged under s. 234B and 234C on income computed under s. 115JA of the Act. 4. Aggrieved, the Revenue is now before the Tribunal. The learned Departmental Representative, Dr. K. Anangapal argued that as per s. 207 advance tax shall be payable in respect of total income which would be chargeable to tax for the relevant assessment year immediately following the financial year. In case of total income under s. 115JA, the income so arrived will be chargeable to tax and advance tax will also be payable on that income. He further argued that as per the provisions of s. 115JA(1) of-the Act, if total income computed under this Act for the assessment year is less than thirty pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ro-tax companies pay tax". Sec. 115JAA is to provide a tax credit scheme by which MAT paid can be carried forward or setoff against regular tax payable during the subsequent five year period. As per the learned counsel of the assessee one of the requisite condition is: "When a company pays tax under MAT, the tax credit earned by it shall be an amount which is the difference between the amount payable under MAT and the regular tax. Regular tax in this case means the tax payable on the basis of normal computation of total income of the company. [vide (1997) 138 CTR (St) 81 : (1997) 224 ITR (St) 130]. 5.1 Further the learned counsel of the assessee argued that, the MAT paid, per se, is a future tax (in contrast to advance tax paid during the previous year) and is to be given credit within a span of 5 years in the computation of normal income and consequent to regular tax payable. Obviously, such a tax being MAT, no interest is payable by the Government while giving credit. (In advance tax, interest is payable by the Government under s. 215). In short, tax being a payment to the Government exchequer, as a levy it is irretrievable in character; whereas MAT is retrievable. Such a tax ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation under s. 115J is simply outside the scope of advance tax for the purpose of computation and payment of tax on the same. To sum up, the learned counsel stated: (1) The total income contemplated for payment of advance tax is different from "deemed income" of s. 115JA. (2) The basis for the computation of correct income of an assessee (all the assessees including companies but not companies having income of less than 30 per cent of the book profit) is the assessed income by way of regular assessment or an order passed by the AO under s. 210(5). (3) The dates and percentage of payment of advance tax are prescribed. 5.3 Further they argued, that, can these provisions be given effect to, to estimate the 'book profit', for a book profit remains a book profit until the end of the financial year and after that it is treated as "total income". During the previous year, there is no mandate in law to estimate the book profit. During the year, no payment of advance tax for book profit is contemplated. During the financial year, book profit is not the basis on which the dates and percentages are prescribed. In other words, as held by three Judges of the Supreme Court in CIT vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut, under s. 115JAA, no interest is payable by the Government when credit is given for the tax paid under s. 115JA. In other words, when consequential sections like 214 and 215 are not intended to be applied, the entire provisions relating to advance tax are not intended to be applied at all. As a matter of fact, the proviso to s. 115JAA(2) (no interest is payable by Government) reiterates the ratio laid down by the Supreme Court in Srinivasa Setty's case. Besides, what is contemplated in s. 115JA is tax only as is evident in s. 115JAA(1). In other words, there is absence of power to charge interest under ss. 234B and 234C. For, s. 156 contemplates passing of an order 'for levy of tax, interest or penalty'. When tax alone is contemplated for tax credit to be given in future, i.e., MAT under 115JA and 115JAA, the question of levy of interest does not arise. Sec. 115JA(4) provides for only to cover this contingency. Sec. 115JA(4) reads: Save as otherwise provided in the section, all other provisions of this Act shall apply to every assessee, being a company, mentioned in this section. All the provisions of this Act, including 115JAA shall apply to the assessee. All the other provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r than interest and penalty, paid by assessee as advance tax, credit thereof shall be given to the assessee in the regular assessment. As indicated above, Chapter XII-B itself is a special provision to certain companies. Besides the heading indicates 'deemed income relating to certain companies'. That apart, the computation under s. 115J and assessment under s. 143(3)/144 cannot coexist inasmuch as loss is computed under s. 143(3)/144 or income computed at nil. It is a settled proposition of law that special always excludes the general. In other words, the 'computation of deemed income' is not a regular assessment or determination of total income under s. 143(1)(a), wherein all the other provisions of the Act, including deductions and exemptions are given effect. Taking a case from the Supreme Court decision cited supra, the 'computation of deemed income' does not come within the scope of regular assessment to warrant levy of interest under s. 234B of the Act. It is settled proposition of law that a deeming provision cannot be extended beyond the purpose for which it is created. Beyond treating book profits as 'income', it cannot extend beyond that. Sec. 208 speaks of current incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any assessment year, then, credit in respect of tax so paid shall be allowed to him in accordance with the provisions of this section. (2) The tax credit to be allowed under sub-s. (1) shall be the difference of the tax paid on any assessment year under sub-s. (1) of s. 115JA and the amount of tax payable by the assessee on his total income computed in accordance with the other provisions of this Act: Provided that no interest shall be payable on the tax credit allowed under sub-s. (1)." It is further seen from the memo explaining provisions in Finance Bill by virtue of Finance Act, 1997 w.e.f. 1st April, 1997, the provisions of ss. 115J and 115JAA was brought on statute book. The memorandum explaining the provisions has explained the reasons for the credit allowed not to bear an interest in (1997) 138 CTR (St) 104 : (1997) 224 ITR (St) 130. The relevant portion are as under: "The Bill also proposes to insert a new s. 115JAA to provide a tax scheme by which MAT paid can be carried forward for set-off against regular tax payable during the subsequent five year period subject to certain conditions, as under: (1) When a company pays tax under MAT, the tax credit earned by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per sub-s. (4) of this section, all other provisions of this Act, save as otherwise provided in this section will apply to every assessee, being a company. That means, every assessee-company will come within the scope of s. 115JA and save as specifically provided therein will continue to be governed by other provisions of the Act. It clearly means that the provisions of ss. 234B and 234C will apply even if income is computed as per the provisions of s. 115JA. The argument of the assessee that it is only deemed income relating to certain companies, the provision itself has very clearly laid down the word "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. The argument of the learned counsel of the assessee is that the provisions of s. 115JA intended to tax income by creating a legal fiction by which "total income" is deemed to be thirty per cent of the book profit and this legal fiction cannot extend the scope of the provision beyond that and the provisions of s. 207 does not apply to this legal fiction. We do not agree with the argument of the assessee that s. 207 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Such income has been described as 'current income'. Thus, this section contemplates estimation of current income by the end of the financial year and on the basis of such estimation, the assessee is required to pay advance tax. Advance tax is payable on the current income irrespective of whether the same is computed under s. 115J or under the other provisions of the Act. In other words, the expression 'current income', on which advance tax is payable under the provisions of s. 207 does not exclude the income computed under the provisions of s. 115J. We, therefore, find no merit in the contention that the provisions of ss. 234B and 234C of the Act would not be attracted in cases where a company is assessed on the income computed under s. 115J. As already observed, the levy is automatic without any notice to the assessee. The Tribunal has cancelled the levy by placing reliance on its earlier order decided on the basis of the judgment of the Karnataka High Court in the case of Kwality Biscuits Ltd. vs. CIT (2000) 159 CTR (Kar) 316 : (2000) 243 ITR 519 (Kar). The Karnataka High Court while accepting the claim of the assessee, has observed as under: 'The liability of the assessee of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 170 : (1999) 239 ITR 862 (Gau), the Gauhati High Court has 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 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.' In the case of Kotak Mahindra Finance Ltd., similar contention raised on behalf of the assessee were repelled by the Bombay High Court and levy of interest upheld in the following terms: 'In our opinion, merely b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 an the current income. It is significant that the 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 inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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