TMI Blog2003 (4) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 260A of the Income-tax Act, 1961. This appeal is a cross appeal to Income-tax Appeal No. 77 of 2002 (Kotak Mahindra Finance Ltd. v. Deputy CIT [2004] 265 ITR 114 (Bom)), which appeal was preferred by the assessee whereas, the present appeal is preferred by the Department. Facts: The assessee is a leasing and financing company having its income from lease rent, bill discounting and service charges. During the course of hearing before the Assessing Officer, certain issues were raised. One of the issues was concerning depreciation. The assessee was allowed normal depreciation on trucks, buses and motor vans leased out to its customers. However, the assessee had claimed higher depreciation at 50 per cent. of the written down value on the said vehicles. As stated in our judgment in Income-tax Appeal No. 77 of 2002 (Kotak Mahindra Finance Ltd. v. Deputy CIT [2004] 265 ITR 114 (Bom)), the Tribunal took the view that the assessee was not entitled to higher depreciation by merely leasing out the above vehicles. That, the assessee did not run the vehicles on hire and nor does the assessee carry on the business of running them on hire. Therefore, the Tribunal took the view that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness of running them on hire. Mr. R.V. Desai submitted on behalf of the Department that in view of the above conclusion, the Tribunal should not have remanded the matter back to the Assessing Officer as the entry contemplated use of the vehicles in the business of running them on hire and since, the assessee was not in such a business, the entry had no application and, consequently, the assessee. was not entitled to higher depreciation. Mr. Irani, learned counsel appearing on behalf of the assessee, contended that one has to look at the object of the above entry. He contended that even if the word "hire" in the said entry cannot be equated to a "lease" still if the assessee proves that the lessees had used the leased vehicles in the business of running them on hire, the assessee would still be entitled to a higher depreciation. In other words, the assessee had invoked the test of end-user as laid down by the judgment of the Supreme Court in the case of CIT v. Shaan Finance (P.) Ltd. [1998] 231 ITR 308. This argument was accepted by the Tribunal. The Tribunal has remanded the matter back to the Assessing Officer to decide this issue on facts. Findings: At the outset, it may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I to the Companies Act were duly finalised on June 22, 1989. That, as per the provisions of the Income-tax Act, the assessee returned its income of Rs. 52,86,939 on which the assessee paid the total tax of Rs. 30,53,207 less tax deducted at source. In other words, on taxable income of Rs. 52,86,939, the assessee had to pay Rs. 14,55,158 as per computation under the Income-tax Act. As against Rs. 14,55,158, the assessee paid Rs. 15 lakhs by way of advance tax on March 15, 1989. However, as per the provisions of section 115J of the Income-tax Act, the taxable income stood at Rs. 73,47,279 on which the tax liability was Rs. 26,45,004 after taking into account the tax deducted at source. As stated above, as against the tax liability of Rs. 26,45,004, the assessee had paid advance tax of Rs. 15 lakhs on March 15, 1989. Therefore, there was a short payment of tax to the tune of Rs. 11,45,004. The accounts were finalised under Schedule VI to the Companies Act on June 22, 1989, and on June 29, 1989, i.e., within seven days, the assessee paid self-assessment tax of Rs. 11,64,200. In the circumstances, the above facts show that under the normal provisions of the Income-tax Act the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for payment of advance tax. He contended that under section 207, tax shall be payable in advance during any financial year in accordance with sections 208 to 219 in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following the previous year. He submitted that section 207 has equated total income of the assessee with the current income whereas, section 208 of the Income-tax Act refers to conditions of liability to pay advance tax. He contended that section 207 must be read with section 208 and, if so read, it is clear that where the assessee had a current income, the assessee is liable to pay advance tax under section 207 which in turn refers to estimation of current income by the assessee whereas, section 208 refers to computation of advance tax which has to be done under sections 208 to 219. He, therefore, contended that section 207 imposes liability for payment of advance tax whereas, section 208 refers to computation of advance tax in accordance with Chapter XVII of the Income-tax Act. He contended that the liability for payment of advance tax is in respect of the total income of the assessee during the current ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended that it is a well-settled principle of interpretation that the legal fiction should be strictly read and, if so read, the provisions of section 234B and section 234C will not apply to cases of assessment of income under section 115J of the Income-tax Act. He contended that in this case, one has to keep in mind the legislative intent. He submitted that if one reads section 207 of the Income-tax Act, it is clear that the obligation to pay advance tax arises only during the financial year and it is for this reason that advance tax is made payable during the financial year. In this connection he placed reliance on section 207 and section 208 of the Income-tax Act. Mr. Irani contended that section 207 and section 208 come under Chapter XVII-C whereas, section 115J comes under Chapter XII-B which deals with determination of tax in certain special cases. He contended that under section 115J, every assessee had to compute the total income firstly under the normal provisions of the Income-tax Act and, thereafter, the assessee had to compare the said total income with the figure of book profits and only if the total income computed under the normal provisions of the Act was less than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch receipt in capital reserves. He, therefore, contended that the question one must ask is whether as far as the book profits are concerned, did the Legislature envisage liability on the assessee under section 234B and section 234C particularly when such profits are decided after the end of the financial year. It was urged that advance tax was always on estimation of current income whereas, section 115J was on actuals. He contended that section 115J contemplates comparison between the total income computed under the Income-tax Act and the total income as per the profit and loss account prepared under Schedule VI to the Companies Act. He contended that under Schedule VI to the Companies Act there was no requirement for preparing profit and loss account on estimated basis. He, therefore, contended that the Legislature did not intend the assessee-companies falling under section 115J to prepare their profit and loss account on estimated basis. That, while estimating the current income for the purposes of payment of advance tax, the assessee has to see only the provisions of the Income-tax Act. He, therefore, contended that the provisions of section 207 to section 211 of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility for payment of advance tax. Under section 207 of the Income-tax Act, advance tax is payable during any financial year in respect of the "current income". The words "current income" are very crucial. The words "current income" refer to computation of total income under the provisions of the Income-tax Act including section 115J. Under section 207 of the Income-tax Act, the words "total income" have been equated to the expression "current income". The matter can be looked at from another angle. The interest which is leviable under section 234B and section 234C is compensatory in nature. It has no element of penalty in it. Therefore, it is clear that if there is non-payment or short payment of tax on the current income, then the assessee has to pay interest as the income has accrued to the assessee for the previous year. In our opinion, merely because the curtain rises in the cases of companies falling under section 115J after March 31, is no ground for the assessee-company not to pay interest under section 234B and section 234c. Under section 115J, every assessee-company had to compute the total income under the Act and, thereafter, compare such total income with the book profi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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