9911796707
TMI Blog2002 (9) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... orated on October 3, 1989. It established a three star village resort called "the Heritage Village" at Manesar, District Gurgaon, Haryana, by raising loans from financial institutions and started construction of the hotel in the month of February, 1993. The hotel commenced its commercial operation with effect from March 28, 1995. During the period prior to the commencement of commercial operation, i.e., after February 1993, and before March 28, 1995, the assessee invested surplus borrowed funds with banks and companies and earned interest thereon and at the same time paid interest on borrowings to the financial institutions. For the assessment year 1993-94, the assessee filed its return of income on December 29, 1992, declaring therein nil income and claiming a refund of Rs. 95,025 as tax deducted at source. During the relevant previous year the interest earned by the assessee on the surplus funds invested was set off against interest payable by it on the borrowings and the balance interest payable was capitalised along with other pre-operative expenses. According to the assessee, this was done as per the generally accepted principles of accounting; in the light of the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer had also accepted its stand by accepting the returned income and by not taking any proceedings under section 143(2) of the Act; it was only after the decision of the Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. [1997] 227 ITR 172 that the assessment was reopened under section 148 and the interest income earned prior to the commencement of business was taxed as income from other sources; it was because of the lapse of the Assessing Officer in taking appropriate action after the return was filed that interest under section 234B was levied over a prolonged period starting from April 1, 1993, to the date of assessment, i.e., October 28, 1999, and that there was no decision of the Delhi High Court in favour of the assessee or against his stand prior to or during the relevant previous year 1993-94, it was but natural to presume that the assessee was guided by the then prevailing practice of capitalisation of interest income on the basis of the decision of the Supreme Court in Challapalli Sugars Ltd.'s case [1975] 98 ITR 167, the Chief Commissioner came to the conclusion that the assessee's petition for waiver/ reduction deserved to be considered sy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions in the class of cases or class of incomes, specified in paragraph 2 thereof for the period and to the extent the Chief Commissioner/ Director-General deem fit., subject to fulfilment of the conditions enumerated therein. Clause (d) of paragraph (2) of the said notification prescribed the following conditions for waiver/reduction of interest under section 234B of the Act: (a) "Any income was not chargeable to tax on the basis of any order passed in the case of the assessee by the jurisdictional High Court. (b) In view of such decision, the assessee did not pay income-tax in relation to such income during the previous year. (c) Subsequently such income became chargeable as per any retrospective amendment of law or a decision of the Supreme Court in the assessee's own case after the end of the previous year. (d) On account of the above, the advance tax paid by the assessee during the previous year was found to be less than the amount of advance tax payable on his current income and therefore interest under section 234B or 234C was found to be chargeable." Vide its order dated January 30, 1997, the Board further clarified that "there shall be no condition that the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e may be, to grant partial or complete waiver of interest and. the assessee having failed to point out any factual procedural irrationality or impropriety in the order, it is not a fit case for judicial review. It is urged that the scope of judicial review being limited, on the facts of the present case, this court may not like to interfere with the impugned order, even if it feels that instead of a partial waiver the interest charged should have been fully waived. In support of the last proposition, learned counsel has placed reliance on certain decisions of the Supreme Court. From the aforenoted rival stands, the first issue arising for consideration is with regard to the scope of judicial review. The question of judicial review with reference to administrative decisions has come up for consideration before the Supreme Court umpteen times. However, before we refer to these decisions, we are tempted to quote what Lord Diplock had very succinctly observed on the issue in Council of Civil Service Unions v. Minister for the Civil Service [1984] 3 All ER 935, 950; [1985] 1 AC 374 (HL), It was said that "one can conveniently classify under three heads the grounds upon which administr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have a, right to choose between more than one possible course of action upon which there is room for reasonable people to hold differing opinions as to which is to be preferred' (Lord Diplock in Secretary of State for Education and Science v. Tameside Metropolitan Borough Council [1977] AC 1014, 1064 (HL)). The court cannot substitute its judgment for the judgment of administrative authorities in such cases. Only when the action of the administrative authority is so unfair or unreasonable that no reasonable person would have taken that action, can the court intervene." (emphasis' added) In Tata Cellular v. Union of India, AIR 1996 SC 11; [1994] 6 SCC 651, while again emphasising that in judicial review the court does not sit as a court of appeal but merely reviews the manner in which the decision was made, it was said that its concern should be: (i) whether a decision-making authority exceeded its powers; (2) committed an error of law; (3) committed a breach of the rules of natural justice (4) reached a conclusion which no reasonable tribunal would have reached or (5) abused its powers. In Apparel Export Promotion Council v. A. K. Chopra [1999] 1 SCC 759; AIR 1999 SC 625, while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. The ground on which the Chief Commissioner has declined full waiver of interest, namely, that there was no direct decision of the jurisdictional High Court during or prior to the relevant financial year, supporting the stand of the assessee, cannot be said to be palpably erroneous or contrary to the Board's circulars. The impugned order reflects the application of mind by the Chief Commissioner on the relevant factors and we find it difficult to hold that no other person acting reasonably would have come to the same conclusion as the Chief Commissioner has come to. We do not find much substance in the stand of learned counsel for the petitioner that the Chief Commissioner has failed to apply the ratio of the decisions of the Supreme Court in Bokaro Steel Ltd. [1999] 236 ITR 315 and Karnataka Power Corporation [2001] 247 ITR 268. In fact it is observed in the case of Bokaro Steel Ltd. [1999] 236 ITR 315 (SC) that the issue with regard to the taxability of interest earned on borrowed funds stands concluded by the decision of the Supreme Court in Tuticorin Alkali Chemicals and Fertilizers Ltd. [1997] 227 ITR 172. Therefore, Tuticorin Alkali's case [1997] 227 ITR 172 (SC) still hol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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