TMI Blog2006 (11) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the course of assessment proceedings, the assessee s counsel contended that without prejudice to the contention that there would be negative book profit after reducing the amount of incentive and neither any tax nor interest was chargeable, no interest under sections 234B and 234C was chargeable in respect of income to be computed under section 115JA of the Act. This contention of the assessee is not acceptable. The Hon ble Gauhati High Court in Assam Bengal Carriers Ltd. v. CIT [2000] 162 CTR (Gau.) 17/[1999] 239 ITR 862 , the Gauhati High Court has held that even where the provisions of section 115J are invoked, the liability to pay interest under sections 234B and 234C would arise. As already pointed out provisions of sections 115JA and 115J are similar and moreover a new section 115JA(4) has been added in the new provisions and this section provides for applicability of all other provisions of the Income-tax Act, provided nothing otherwise has been provided in section 115J. The ld. CIT(A), Panchkula has also upheld the levy of interest under sections 234B and 234C to the income computed under section 115JA in her appellate order for the assessment year 1997-98 in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the Hon ble Supreme Court has dismissed the appeal filed by the deptt. against the judgment of Karnataka High Court in the Kwality Biscuits Ltd. v. CIT [2000] 243 ITR 519. The effect of dismissal of the appeal is that the order of the High Court from which the appeal arose stands merged with that of Supreme Court as has been held in V.M. Salgaocar Bros. (P.) Ltd. v. CIT [2000] 243 ITR 383. Thus it is urged that the levy of interest under sections 234B and 234C be directed to be deleted. On the other hand the ld. DR supported the order of authorities below. He has further placed reliance on the decision in the case of Lumax Industries Ltd. v. Dy. CIT [2006] 282 ITR (AT) 180 5 (Delhi) upholding the interest levied under section 115JA. A reliance has also placed upon the decision of Punjab Haryana High Court in the case of CIT v. Upper India Steel Mfg. Engg. Co. Ltd. [2005] 279 ITR 123 . 17. We have heard the parties and have perused the record of the case as well as the cases referred to above. The issue involved is about the applicability of the provisions of sections 234B and 234C in relation to assessment of income finalized in terms of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly if the income computed under the provisions of the Act is less than 30 per cent of its book profits computed in the manner laid down under section 115J. The Hon ble Karnataka High Court in the case of Kwality Biscuits Ltd. v. CIT [2000] 243 ITR 519 was seized with the similar dispute but in relation to the provisions of section 115J. The provisions of sections 115JA and 115J do not have any material difference inasmuch as both the sections provide for legal fiction by way of which a specified percentage of the book profits, as computed under the Companies Act, 1956, is deemed as income of the assessee on certain events. The Hon ble Karnataka High Court held that having regard to the provisions of section 115J, since the entire exercise of computing the income or in other words the book profit can be made only at the end of financial year, the provisions of section 207, 208, 209 or 210 dealing with the liability to advance tax could not be made applicable. The reasoning which weighed with the Hon ble High Court to come to the aforesaid conclusion was that having regard to the operating mechanics of section 115J, unless and until the accounts are audited and balance sheet pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( supra ) while dissenting with the decision of Karnataka High Court in the case of Kwality Biscuits Ltd. ( supra ) has observed as under : "All the assessees including companies are required to make an estimate of their current income. Even before the introduction of the provisions of section 115J, companies had been estimating their total income after providing for 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 profit and loss account can be drawn up on estimate basis for the purpose of the Income-tax Act, 1961, then a similar profit and loss account can also be drawn up on estimate basis under the Companies Act, 1956. The expression current income , on which advance tax is payable under the provisions of section 207, does not exclude the income computed under the provisions of section 115J. While processing the returns of the assessee for the assessment years 1997-98 and 1998-99 declaring the income computed under the provisions of section 115J, the Assessing Officer charged interest under sections 234B and 234C. The assessee contended before the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax in respect of such income, it is liable to pay interest under sections 234B and 234C in view of the provisions of sub-section (4) of section 115JA. Even as regards the debatability of this issue, the Delhi F Bench of the Income-tax Appellate Tribunal in a case of Insilco Ltd. (04) 85 TTJ 538 cited by the learned Departmental Representative has held that the issue relating to charging of interest under section 234B while determining the income of the assessee under section 115JA on the basis of the book profit is not a debatable issue and the Assessing Officer was right in making prima facie adjustment in respect of such interest under section 143(1)( a ). To the similar effect is the decision of the Delhi E Bench of Income-tax Appellate Tribunal in the case of Som Distilleries Breweries Ltd. v. Joint CIT [ITA No. 4047 (Delhi) of 2000, dated June 1, 2004] to which one of us (Accountant Member) is party wherein it was held that it was incumbent upon the assessee-company to estimate its total income under the Income-tax Act or its book profit for the purpose of computation of its income under section 115JA and to pay advance tax of such income and having failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputed under section 115JA of the Act. Similarly, in the case of Bhushan Steels Strips Ltd. v. Dy. CIT [2004] 91 TTJ (Delhi) 108 it has been held that when income is computed under section 115JA, the interest under sections 234B and 234C of the Act is not leviable. 24. Thus, there are two views on the issue; one is in favour of the revenue and the other in favour of the assessee. We find guidance from the judgment of Hon ble Supreme Court in the matter of CIT v. Vegetable Products Ltd. [1972] 88 ITR 192 . Hon ble Supreme Court has laid down a principle that "if two reasonable constructions of a taxing provisions are possible, that construction which favours the assessee must be adopted." This principle has been consistently followed by the various authorities as also by the Hon ble Supreme Court itself. Therefore, looking to the nature of the provisions with which we are presently concerned, we are inclined to adopt the interpretation which is in favour of the assessee. We, therefore, reverse the order of the lower authority and hold that no interest under sections 234B and 234C is chargeable while computing the income of the assessee in terms of section 115J of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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