TMI Blog2006 (2) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... 06 - Judge(s) : P. D. DINAKARAN., P. P. S. JANARTHANA RAJA. JUDGMENT The judgment of the court was delivered by P.P.S. Janarthana Raja J.-The present appeals are filed under section 260A of the Income-tax Act, 1961 by the Revenue, against the order passed in I.T.A. Nos. 2829/Mds/92, 2223/Mds/93, 3069/Mds/92, 2117/ Mds/93, 278/Mds/95, 2454/Mds/96, 2455/Mds/96, 867/Mds/98 by the Income-tax Appellate Tribunal, Madras, "C" Bench. On August 23, 2001, this court admitted the appeals and formulated the following substantial questions of law: "1. Whether the Tribunal was right in holding that the assessee was entitled to relief under section 32AB as the item dealt with by the assessee did not fall under the prohibited entry 10 to XI Schedule, viz. photographic apparatus and goods? 2. Whether, the Tribunal was right in law that the assessee was entitled to relief under section 80-I as there was manufacturing process in making the graphic art film of colour paper in jumbo rolls into marketable condition by the process of slitting? 3. Whether the Tribunal had material and was correct in upholding the claim for higher commission payment to associated concerns at 5 per cent, as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular reference to the activity carried on by the assessee, and in the light of the decisions above referred to, we are of the considered view that on the facts and circumstances of this case, the assessee cannot be regarded as being engaged in the business of manufacture or production of an article or thing. The question is answered in favour of the Revenue and against the assessee." The facts in the instant case are similar. Following the same, the question is answered in favour of the Revenue and against the assessee. (ii) Question No. 1: Learned counsel for the Revenue fairly stated that this question has to be answered in favour of the assessee in view of answering the second question against the assessee. In respect of the second question, we held 'that the assessee was not engaged in the manufacture or production of an article or thing and hence, the assessee was also not engaged in the manufacture of item under the prohibited entry 10 to XI Schedule, viz. photographic apparatus and goods. Hence, the question is answered in favour of the assessee and against the Revenue. (iii) Question No. 3: It deals with disallowance of a commission under section 40A(2) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered into for agency. As per the agreement terms, the agents were entitled to 6 per cent, commission on the listed price related to graphic art films sales and 5 per cent, for colour paper. One of the conditions was that the agents should undertake and bear all the marketing expenses and also such expenses including sale depots, outlets, and branches as deemed necessary. The agents were also authorised to appoint sub-dealers in the territory with the consent of the assessee-company. The agents were responsible for collection of payments in respect of the orders executed. Wherever money was not received from the customers to whom the supplies were made on the basis of the orders procured by the agents, then the agents should recover the same from such customers and the assessee-company would be entitled to recover such outstanding from the agent. In other words, there being any bad debts which resulted out of the sales canvassed by the agents, the same would be recoverable from the agent. It is also further brought to our notice that not only the business had gone up for the assessee but also the payment of commission raised by the above three firms did not result in loss of revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iddle portion. The process certainly resulted in collection of these wastes as the cuttings were made and rolled and supplied to the customers as per their specifications. The company sold the scrap to one Mr. Tippu Sultan. A search was conducted in the factory and office premises under section 132 on November 5 and 6 1992. During the course of search, an unsigned chit was found in the custody of Mr. Gopalakrishnan, general manager of the factory. In that chit, there were some rates of waste like waste of graphic art film and X-ray film, which was as under: Graphic art film - full coat Rs. 110 per kg Edge waste Rs. 70 per Kg. Medical X-ray - full coat Rs. 120 per Kg. Edge waste Rs. 80 per Kg. Based on this paper, Mr. Gopalakrishnan's statement was recorded. A sworn statement was also obtained from Mr. Tippu Sultan, scrap dealer on February 5, 1993, and on February 12, 1993. Based on the above statements, the Department worked out the quantity of the scrap and also the value thereof for the accounting years 1986-87 to 1992-93, up to the date of the search. The quantity was worked out on the basis of the percentage giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 115J which was higher as per the above details. Subsequently the Assessing Officer had issued notices with letters under section 154 on July 30, 1990, and November 11, 1991 wherein he had proposed to disallow the following deductions: Deduction under section 32AB 4,57,998 Foreign exchange loss 3,54,438 Deduction under section 80-I 3,84,737 Consequently interests under sections 234B and 234C were also 16 imposed. The assessee objected to the above rectification. The Assessing Officer had passed an order dated March 16, 1992, and disallowed all the above three items and also levied interest under section 234B in a sum of Rs. 97,657 and under section 234C in a sum of Rs. 11,614 respectively. Further he also levied additional tax under section 143(1A). Aggrieved by the order, the assessee filed an appeal to the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) had stated that since the issues were already covered in the regular order under section 143(3), he was of the view that the appeal was infructuous and hence dismissed the appeal. Aggrieved, the assessee filed an appeal before the Tribunal. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal. The only argument contended by the learned counsel for the assessee was that, in the assessment order, the officer did not pass order directing to charge interest under section 234B. It was submitted that the requirement of law is that the officer is supposed to apply his mind and pass order which should be a speaking order. In the assessment order, the Assessing Officer had charged and calculated the interest under section 234B. The only argument was that the interest was not leviable in the absence of the speaking order. He also relied on the Patna High Court judgment in the case of Uday Mistanna Bhandar and Complex v. CIT reported in [1996] 222 ITR 44. In that case, no specific order levying of interest under sections 234A, 234B and 234C was found in the assessment order, and so it was held that the interest could not be levied through notice of demand. Section 234B is operative with effect from April 1, 1989, and it makes provisions for charging of interest, for non-payment or short payment of advance tax and it is also mandatory in nature. It is only compensator)' in nature and has no element of penalty in it. It is sufficient that levying of interest is mentioned in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ult or delay in furnishing the return of income [sections 139(8) and 139(9)] and also under the various sections for default in payment of advance tax (sections 215, 216, 217, 234B and 234C). A notice of demand is somewhat like a decree in a civil suit which must follow the order. When a judgment does not specify any amount to be charged under any particular section, the decree cannot contain any such amount. Similarly when the assessment order is silent if any interest is leviable, the notice of demand under section 156 of the Act cannot go beyond the assessment order and the assessee cannot be served with any such notice demanding interest. We, therefore, do not feel any difficulty in coming to the conclusion that the notices of demand in C.W.J.C. Nos. 3609 of 1995(R), 3287 of 1995(R), 3562 of 1995(R), 3494(R) of 1995 and 3527 of 1995(R), have to be quashed so far these relate to charging of interest under section 234A, 234B or 234C of the Act. We get support for the view which we have taken from the decisions of the Calcutta High Court in Monohar Gidwany v. CIT [1983] 139 ITR 498 and CIT v. Wiliard India Ltd. [1993] 202 ITR 423 and that of the Gauhati High Court in CIT v. Namdan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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