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2016 (1) TMI 757 - KARNATAKA HIGH COURT

2016 (1) TMI 757 - KARNATAKA HIGH COURT - TMI - Waiver of interest under Section 234C - whether petitioner/assessee's explanation was satisfactory of acceptance for the benefit of waiver of interest charged under Section 234C by invoking clause 2(b) of the notification dated 26.06.2006, Annexure-B? - Held that:- Admittedly the Chief Commissioner without making reference to any material over manufacture, sales, production of automotive parts by the petitioner during the 1st quarter of the financi .....

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is available only to cases of windfall, since that would be too myopic. In fact discretion is invested in the Chief Commissioner to be exercised judiciously, based on facts and circumstances, since not circumscribed by any fetters. If as noticed supra, and at the cost of repetition petitioner suffered decrease in current income in the three consecutive previous years, coupled with global recession in automotive industry, an admitted fact, it was imminent for the Chief Commissioner to have exerci .....

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waiver of interest charged under Section 234C in terms of paragraph 2(b) of the notification dated 26.06.2006, Annexure-B. Compliance within four weeks from the date of receipt of a copy of this order. - WRIT PETITIONER NO. 27405 OF 2015 (T-IT) - Dated:- 15-10-2015 - MR. RAM MOHAN REDDY, J. FOR THE PETITIONER : Sri. K.P. KUMAR SENIOR ADV., FOR THE RESPONDENT : Sri. JEEVAN J NEERALGI, ADV., ORDER The rejection of petitioner's application for waiver of interest under Section 234C for the acco .....

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, (LTU), Bengaluru, by order, dated 13.03.2015, Annexure-M, in great elaboration extracting the observations of the Apex Court as well as this Court in reported opinions, rejected the request for waiver by declining to accept petitioner/assessee's submission of unpredicted or unanticipated income during the year due to which Advance Tax paid was less by observing further that:-petitioner had not brought out any other reason for its inability to forecast its sales in the said year in contrast .....

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s and total income (as returned) for the financial year 1999-2000 to 2010-2011 which is taken on record, since learned counsel for the revenue has no objection. 4. Few facts necessary for decision making are: (i) Petitioner/assessee filed return of income for the assessment year 2010-11 declaring income of ₹ 913,82,50,403/- which when processed under Section 143(1) on 28.07.2011 resulted in charging interest under Section 234C amounting to ₹ 9,18,00,814/-, due to delay in payment of .....

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claim for waiver of interest is said to be based upon the notification dated 23.05.1996 said to be on par with paragraph 2(b) of the notification dated 26.06.2006, Annexure-B, on the premise that it had paid advance tax on the basis of anticipated current income during the first quarter of the year and there was no contemplation that its current income would exceed the current income for the previous year i.e., assessment year 2009-10 (financial year 2008-09). According to the petitioner, curre .....

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Commissioner declined to accept the aforesaid plea of the petitioner by recording conclusions in paragraph 4 of the order that there was no fall in turn over during the first quarter of the year which prompted the assessee to pay less advance tax compared to earlier years and observed that on reckoning the details of sales, consumption, and production, obtained from the assessee for 3 previous years, there was no decrease in the sales during the financial year 2009-10 as compared to earlier year .....

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nted in the parliament and statistics of periodical review conducted by centre for monitoring Indian Economy on the outlook of Indian economy, industrial/automotive sector. 6. The Chief Commissioner held that macro economic parameters and the state of the global economy cannot be considered as the basis for the estimation to pay advance tax. According to the Chief Commissioner, each assessee has to make its own estimation of income for payment of advance tax based on production, sales and income .....

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t under Section 234C. 8. Having thus recorded conclusions, the Chief Commissioner extracted, in extenso (i) the observations of the five Judges Bench in Commissioner for Income Tax vs. Anjum M.H. Ghaswala, that Section 234A, B and C are mandatory in nature; (ii) the observation of this court in Dr. S.Reddappa and another vs. Uion of India and others reported in 232 ITR 62 that the nature of interest charged under the aforesaid provisions is compensatory and not penal and that Section 234C regula .....

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of interest under Section 234A, B and C of the Act extracted the observations of this Court in M/s Union Land and Buildig Society Pvt. Ltd. Vs. Union of India reported in 215 ITR 758, rejecting the submission that imperfection and legitimate expose of the provisions to criticism or challenge to its vires, on the premise, that validity of legislation, otherwise valid, could not be struck down simply because, in some extreme or freak case, it would operate so unfairly as to make it look penal or .....

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mmissioner held that the aforesaid observations were a complete answer to the arguments of the petitioner based on possible hardship in a certain situation. At paragraph IV.8 the authority observed that waiver of interest under Section 119(2)(a) of the 'Act' is not absolute requiring a consideration in the light of the circumstances mentioned therein, although Courts have held that the Circular speaks of class of incomes or class of cases, nevertheless, opined that individual cases can b .....

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business and how business is performing. The authority having examined the advance tax paid for the assessment year 2007-08 onwards till 2014-15 (till December) though observed that on a comparison in the previous years, the advance payment remained the same, nevertheless recorded a finding that it was factually incorrect to submit that substantial increase in the business income during the last quarter of the financial year 2009-10 was neither anticipated nor contemplated by the assessee. 12. .....

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fits during the last quarter of the year was unavailable, since, such increase in profits "may be" due to various internal and external conditions. 13. Sri K.P. Kumar, learned senior counsel submits that there being no dispute over applicability of notification dated 26.06.2006, Annexure-B to petitioner, an individual assessee, for waiver of interest under Section 234C of the 'Act' as noticed by the Chief Commissioner at paragraph IV.8, the question for consideration was, wheth .....

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2009-10 not at least during the first quarter of the financial year 2009-10. Learned Senior counsel hastens to add that petitioner is in the business of automobile parts, one of the global leaders and highest tax payer for over six decades, an admitted fact, and for estimation of anticipated current income for the financial year 2009-10 so as to pay advance tax took into consideration not only the reduction in the current income of the previous years, but also global recession during the financ .....

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t of waiver of interest charged under Section 234C of the 'Act' by invoking clause 2(b) of the notification dated 26.06.2006, Annexure-B?" 17. Having examined the order impugned of the Chief Commissioner and perused the pleadings, there is no more doubt that the authority meandered into aspects both in law and on facts unnecessary for decision making, more appropriately, over whether Section 234 A, B and C of the 'Act' was penal or compensatory and as to whether the said pro .....

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hat ground was unavailable. The aforesaid reason assigned is a meek response to the claim for waiver of interest by invoking the notification, Annexure-B, since it is neither the case of the petitioner nor that of the revenue that petitioner challenged the constitutionality of Section 234 A, B and C of the 'Act' more so, before the Chief Commissioner. 18. The finding of the Chief Commissioner that during the first quarter of the financial year 2009-10, petitioner should have anticipated .....

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e current income for the financial year 2009-10, atleast during the first quarter of the said year, and the advance tax paid on the basis of anticipated reduction of current income for the said year cannot be said to be figment of wild imagination, more so, since assessee is admittedly a global manufacturer of automotive parts for over six decades and more. It is common knowledge that there was a global recession during the financial years 2008-09 as noticed by the Chief Commissioner on the basi .....

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d not issue notification over cases/class of income on the basis of economic condition of the country or worldwide, in my considered opinion, was unjustified since Chief Commissioner concluded, positively, that an individual assessee's claim for waiver can be considered in terms of the notification. 20. Petitioner assessee is admittedly in the Automotive parts industry for more than six decades, and has a well established internal management system that can predict the level of profit for pa .....

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iness, and how it is performing there would be a reduction in the current income for the financial year 2009-10, atleast during the 1st quarter of the said year. 21. It is a matter of fact that it is only in the last quarter of the financial year 2009-10, petitioner saw rise in income but that by itself and nothing more, it cannot be said that petitioner anticipation of less current income for that year was not justified. Looking to the circumstances and in particular the complexities of busines .....

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urrent income for three preceeding years, the Chief Commissioner was not justified in rejecting the explanation of the petitioner over its anticipated low current income for the financial year 2009-10, at least in the 1st quarter of that year, for payment of Advance Tax. 22. Admittedly the Chief Commissioner without making reference to any material over manufacture, sales, production of automotive parts by the petitioner during the 1st quarter of the financial year 2009-10, was not justified in .....

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