TMI Blog2001 (1) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 351 (Bom) (FB) and Inawo Ltd. vs. CIT (1993) 204 ITR 313 (Bom). They further pointed out that the AO has not given any direction in the assessment order for levy of such interest under s. 234B. In the absence of any specific direction no such interest under s. 234B can be validly charged directly in the demand notice. The learned counsel placed reliance on the judgment of Hon'ble Patna High Court in the case of Uday Mistanna Bhandar Complex vs. CIT (1997) 137 CTR (Pat) 376 : (1996) 222 ITR 45 (Pat). The learned counsel submitted a copy of the order passed by the Tribunal in the case of Ayush Ajay Construction Ltd. vs. ITO (2000) 69 TTJ (Ind) 579 : (2000) 111 Taxman 261 to support his contention. The learned counsel also submitted that interest charged under similar facts and circumstances has been deleted by the various Benches of the Tribunal (Ahmedabad) in the cases of Nirma Group. Copies of such orders passed by the Tribunal in the cases of Nirma Detergent Ltd., Nirma Chemical Works Ltd., Nirma Ltd., Nirma Management Services Ltd. order of the Tribunal in assessee's own case for asst. yr. 1991-92, orders in the cases of Harsiddh Specific F.T., orders in the case of Nova/Sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the paper book. 25. The learned counsel submitted that it is not proper for any Bench of the Tribunal to state that the judgment of Hon'ble Patna High Court in the case of Uday Mistanna Bhandar Complex was wrong in the absence of any contrary view by any other High Court. The learned counsel placed heavy reliance on the judgments reported in 180 ITR 722 (sic), (1983) GLH 273 (SC), CIT vs. L.G. Rama Murthi Ors. 1977 CTR (Mad) 416 : (1977) 110 ITR 453, CIT vs. Goodlass Nerolac Paints Ltd. (1990) 90 CTR (Bom) 40 : (1991) 188 ITR 1 (Bom) and CIT vs. Sterling Foods (1999) 153 CTR (SC) 430 : (1999) 237 ITR 579 (SC) to explain the rules relating to judicial discipline. Shri Soparkar, the learned Advocate invited our attention to the judgment of Hon'ble Gujarat High Court in the case of CIT vs. Maganlal Mohanlal Panchal (HUF) (1994) 210 ITR 580 (Guj) in which it was held that the Tribunal is bound to follow sole judgment of different High Court. The judgment of Hon'ble Patna High Court in the case of Uday Mistanna Bhandar Complex is the only judgment on the point in issue that no interest can be charged under ss. 234A, 234B in absence of a any specific direction in the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een submitted by the assessee themselves at p. 42 of the paper book. 29. Shri Dave placed reliance on the decision of the Tribunal in the case of Travancore Titanium Products Ltd. vs. Dy. CIT (1995) 52 TTJ (Coch) 601 : (1996) 37 ITD 16 (Coch) and the decision of the Tribunal in the case of ITO vs. M.M. Subramania Muduliar (1998) 67 ITD 136 (Mad) (SMC) to support the validity of interest charged under s. 234B. 30. Shri Dave submitted a chart in which the relevant facts in the case of Ranchi Club Ltd. vs. CIT, Udai Mistanna Bhandar Complex and Smt. Tej Kumari vs. CIT have been briefly stated. 31. He pointed out that the case of Ranchi Club Ltd. relates to asst. yr. 1991-92. The assessment order does not mention anything about the levy of interest. It has merely held that a sum of Rs. 1,58,000 described as "entrance fee" to be included in taxable income. In demand notice issued under s. 156 of the Act, the AO, however, included the sum of Rs. 78,322 being interest payable on tax due amounting to Rs. 69,434. The assessee contended that interest under s. 234A and s. 234B can be levied only on the amount of tax payable on the returned income and not on tax payable on the assessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed in respect of "entrance fee" of Rs. 1,58,000. Moreover, the Hon'ble Patna High Court has categorically held that "on these facts" it cannot be held that the assessee could anticipate that his claim for non-taxability of entrance fee received from the members will be held to be not exempt on the ground of mutuality. 33. In the case of Udai Mistanna Bhandar Complex vs. CIT the AO had not even mentioned the section under which interest was chargeable. He simply mentioned "charge interest, if any". This is clearly distinguishable with the facts of the present case where the AO has specifically mentioned that ITNS-150 is enclosed. The ITNS-150 along with calculation-sheet annexed therewith not only shows that interest has been charged under s. 234B but it also gives complete details of the mode of calculating such interest. The cases of Ranchi Club Ltd. which were referred to larger Bench in the aforesaid judgment of Hon'ble Patna High Court reported in the case of Udai Mistanna Bhandar Complex vs. CIT also did not contain the mention of specific section under which the interest was charged. The assessment order simply says "charge interest, if any" so far as it relates to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Judgment ---------------------------------------------------------------- Vidyapat Singhania vs. CIT (1977) 107 ITR 533 (All) 16-5-1973 National Products vs. CIT 1976 CTR (Kar) 179 : 18-3-1976 (1977) 108 ITR 935 (Kar) Bhikhoobhai N. Shah vs. CIT 1978 CTR (Guj) 172 : 7-9-1977 (1978) 114 ITR 197 (Guj) CIT vs. Lalit Prasad Rohini (1979) 8 CTR (Cal) 332 : 27-1-1978 Kumar (1979) 117 ITR 603 (Cal) CIT vs. Smt. Shanti Devi (1983) 139 ITR 152 (Cal) 10-11-1978 Jalan U.P. Hotel Restaurants (1981) 20 CTR (All) 173: 28-10-1980 Ltd. vs. CIT (1981) 127 ITR 660 (All) Chandra Katha Industries vs. (1982) 29 CTR (All) 317 : 14-4-1982 CIT (1982) 138 ITR 168 (All) Central Provinces Mang. Ore (1986) 58 CTR (SC) 112 : 15-1-1986 Co. Ltd. vs. CIT (1986) 160 ITR 961 (SC) ---------------------------------------------------------------- Shri Dave submitted that appeal against levy of interest is not maintainable unless the assessee can deny his liability to be assessed in toto. He submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'assessment order'. It does not prescribe any form for the purpose. Once the assessment of the total income is complete with indications of the deductions, rebates, reliefs, and adjustments available to the assessee the calculation of the net tax payable is a process which is mostly arithmetical but generally time-consuming. If, therefore, the ITO first draws up an order assessing the total income and, indicating the adjustments to be made, directs the office to compute the tax payable on that basis and then approves of it, either immediately or some time later, no fault can be found with the process, though it is only when both the computation sheets are signed or initialed by the ITO that the process described in s. 143(3) will be completed. ITNS-150 is also a form for determination of tax payable and when it is signed or initialed by the ITO, it is certainly an order in writing by the ITO determining the tax payable within the meaning of s. 143(3). It may be only a tax calculation form for Departmental purposes as it also contains columns and code numbers to facilitate computerisation of the particulars contained therein for statistical purposes, but this does not detract from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from what was so orally argued by him. The written arguments dt. 17th Dec, 2000 are reproduced below: "1. Argument: The levy of interest cannot be challenged by way of an appeal and must be challenged by a writ only. Our reply: When we are challenging the levy of interest, appeal is maintainable [See (1986) 58 CTR (SC) 112 : (1986) 160 ITR 961 (SC) : 1998 CTR (Guj) 172 : (1978) 114 ITR 197 (Guj)] The Tribunal has taken a view in favour of assessee in ITA No. 4574/Ahd/1992 in the case of Norma Detergents (P) Ltd. and the Gujarat High Court has not even admitted the Departmental appeal on this ground though specifically raised. In view of this, it is not open to the Revenue to contend that such levy is not appealable. More so when the Ahmedabad Bench of Tribunal has already taken a view in the case of Vikashara Trading Investment (P) Ltd. vs. Dy. CIT (1999) 63 TTJ (Ahd) 141 that such an order is an appealable order. The fact that the Patna High Court entertained the appeal does not mean that appeal does not lie because there is no restriction on the writ jurisdiction of the High Court that if appeal lies, the writ is not maintainable. As a matter of fact in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC) 200 as explained by the Full Bench decision of Patna High Court (2000) 164 CTR (Pat) 202. The argument that the said judgment/s is/are wrong because they do not consider the judgment of the Supreme Court in (1992) 102 CTR (SC) 788 : (1992) 191 ITR 634 (SC) cannot be accepted because: 1. The judgments of Patna High Court as also Supreme Court of Uday Mishtanna Bhandar are directly on the point. They are the only direct judgments on this issue. If that be so, this Hon'ble Tribunal is bound to follow the same. 2. Kalyan Kumar's case does not deal with the controversy of interest all. 3. The Tribunal has taken a view in favour of assessee in ITA No. 4574/Ahd/1992 in the case of Nirma Detergents (P) Ltd. wherein the judgment of the Supreme Court in the case of Kalyankumar Ray was specifically cited by the Revenue and the Tribunal has distinguished the said judgment. It may be noted that in spite of this the Gujarat High Court has not even admitted the Departmental appeal on this ground though specifically raised. This makes it clear that Kalyankumar's case has no application to the facts of the present case. 4. In view of the fact that in a large number of cases of the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compilation given by the undersigned in the course of hearing of appeal, clearly mentions this fact while summarising the cases involved in these writ petitions. The decision in the case of Kalyankumar Ray is thus very much relevant to decide the issue under consideration. 5. It is further submitted that the ratio of decision in the case of Ranchi Club Ltd. is not applicable to the facts and circumstances of the case under consideration as in the former case, the club had denied its liability to be assessed on the "entry fees" collected by the club from new members on the ground of principle of mutuality thus claiming absolute exemption under the Act of 1961. 6. In respect of the case of Nirma Detergent (P) Ltd. (ITA No. 4574/Ahd/92), kind attention of Hon'ble Members was drawn to para 28 of the order, in the course of hearing of this appeal, that the counsel of the appellant challenged the levy of interest under s. 234C and there was no argument against the observations of learned CIT(A) to the effect that charging of interest under s. 234B was consequential only. Yet, in para 30 at p. 13 of the order, Hon'ble Members involved the chargeability of interest under s. 234B which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which interest has been charged and is also accompanied by a separate sheet giving complete details of calculation of interest under s. 234B. (d) Whether interest under s. 234B, on the facts of the present case should be charged on the tax on income declared in the return of income or on the assessed income or on the assessed income after excluding the tax on additions made on the declared income, which honestly and bona fidely could not have been anticipated by the assessee during the contemporary period, when advance tax was required to be paid? 42. The additional ground sought to be raised by the assessee vide application dt. 27th Sept., 2000 relating to deletion of interest charged under s. 234B involves consideration of a legal point and, therefore, the same deserves to be entertained in view of the judgments reported in (1992) 106 CTR (Bom) 78 (FB): (1993) 199 ITR 351 (Bom) and (1994) 117 CTR (Bom) 93 : (1993) 204 ITR 312 (Bom) relied upon by the learned counsel, as well as the judgments of Hon'ble apex Court in the case of National Thermal Power Co. Ltd. vs. CIT (1999) 157 CTR (SC) 249 and Jute Corporation of India Ltd. vs. CIT Anr. (1990) 88 CTR (SC) 66 : (1991) 187 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for any assessment year under sub-s. (1) or sub-s. (4) of s. 139, or in response to a notice under sub-s. (1) of s. 142, is furnished after the due date, or is not furnished, the assessee shall be liable to pay simple interest at the rate of one and one-half per cent for every month or part of a month comprised in the period commencing on the date immediately following the due date, and,- (a) where the return is furnished after the due date, ending on the date of furnishing of the return; or (b) where no return has been furnished, ending on the date of completion of the assessment under s. 144. On the amount of the tax on the total income as determined under sub-s. (1) of s. 143 or on regular assessment as reduced by the advance tax, if any, paid and any tax deducted or collected at source. Explanation 1.- In this section, 'due date' means the date specified in sub-s. (1) of s. 139 as applicable in the case of the assessee. Explanation 2.- In this sub-section, 'tax on the total income as determined under sub-s. (1) of s. 143' shall not include the additional income-tax, if any, payable under s. 143. Explanation 3.- Where, in relation to an assessment year, an assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be refunded. (5) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989 and subsequent assessment years. 234B. Interest fox defaults in payment of advance tax. (1) Subject to the other provisions of this section, where, in any financial year, an assessee who is liable to pay advance tax under s. 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of s. 210 is less than ninety per cent of the assessed tax, the assessee shall be liable to pay simple interest at the rate of one and one-half per cent for every month or part of a month comprised in the period from the 1st day of April next following such financial year to the date of determination of total income under sub-s. (1) of s. 143 and where a regular assessment is made, to the date of such regular assessment, on an amount equal to the assessed tax or, as the case may be on the amount by which the advance tax paid as aforesaid falls short of the assessed tax. Explanation 1. In this section, 'assessed tax' means: (a) for the purposes of computing the interest payable under s. 140A, the tax o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 64 or an order of the Settlement Commission under sub-s. (4) of s. 245B, the amount on which interest was payable under sub-s. (1) or sub-s. (3) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and- (i) in a case where the interest in increased, the AO shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable and such notice of demand shall be deemed to be a notice under s. 156 and the provisions of this Act shall apply accordingly: (ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded. (5) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1999 and subsequent assessment years." (c) At the time of filing the return of income, such mandatory interest, if payable, is to be calculated on the basis of the returned income and paid along with tax on self-assessment under s. 140A at the Act. Explanation 4 to s. 234A (which relates only to levy of interest for default of delay or non-filing of the return of income and does not relate to s. 234B dealing with interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est under s. 234B already paid by the assessee under s. 140A shall be adjusted against the interest chargeable on the tax on total income determined under s. 143(1) or on regular assessment. Sub-s. (3) provides for the charge and mode of computation of interest where tax on total income determined under s. 143(1) or on regular assessments, it increased as a result of an order of reassessment or recomputation under s. 147 of the Act. Sub-s. (4) provides automatic revision of interest where the amount of tax is varied as a result of an order of rectification, appeal, revision, etc. 45. The constitutional validity of the provisions of s. 234A, 234B and 234C has been challenged by way of writ petitions before various Hon'ble High Courts which have been confirmed by all the Hon'ble Courts. (a) The Hon'ble Patna High Court in the case of Ranchi Club Ltd vs. CIT (1996) 131 CTR (Pat) 368 : (1996) 217 ITR 72 (Pat) which has been approved by the Hon'ble apex Court in their judgment reported in (2000) 164 CTR (SC) 200, on which strong reliance has been placed by the assessee's counsels, has observed as under at p. 74: "I do not think there is any substance in the challenge in the vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ystem introduced by the provisions of ss. 234A, 234B and 234C relating to payment of mandatory interest was also meant to deter the assessee from repeatedly committing default does not necessarily mean that the provisions are penal in character." "It is not possible to hold that the provisions of ss. 234A, 234B and 234C are provisions of a penal nature simply because in actual application of these provisions there may be situations where an assessee may render himself liable to payment of interest under each one of these provisions simultaneously for the same period nor can the compensatory nature of the provisions be deemed to have been lost simply because in a given situation the provisions may, on account of their simultaneous application to an assessee, raise the liability to pay interest for the overlapping period to a rate higher than two per cent, per month. So long as the basic character of the levy remains compensatory the rate of interest which is levied either by the provisions itself or on account of its dual effect in a given situation will be wholly immaterial. The fact that for refunds due to an assessee from the Department on account of excess amount of tax paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l discipline. 47. The learned counsels placed reliance on various decisions of the Tribunal in cases of Nirma Group, which are based on the judgment of Hon'ble Patna High Court in the case of Uday Mistanna Bhandar. We would, therefore, examine the question relating to applicability of the principles of law laid down by the Hon'ble Patna High Court on the facts of the present case. 48. The Hon'ble Patna High Court in the case of Uday Mistanna Bhandar Complex vs. CIT has held as under: "From a bare reading of s. 156 of the IT Act, 1961, it is clear that the notice of demand claiming interest can be issued only when there is a specific order in the assessment order, levying interest. To use the expression 'charge interest, if any' or 'charge interest as per the rules' cannot be read to mean that the AO has passed orders to "charge interest under all the aforesaid sections". The order to charge interest has to be specified and clear, as for that matter, any order to charge any tax, penalty or fine. The assessee must be made to know that the AO after applying his mind has ordered charging of interest and under which section of the Act. A notice of demand is somewhat like a decre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under s. 234B. This is further accompanied by the detailed calculation sheet giving complete details of calculation of such interest payable under s. 234B. Demand notice under s. 156 for tax and interest has been issued in consequence of such an order in writing by the AO by mention of the fact of "ITNS-150 enclosed" in the assessment order and the specific mention of levy of interest under s. 234B in ITNS-150 for levy of interest under s. 234B amounting to Rs. 12,39,696, which is also accompanied by such detailed computation sheet giving details of calculation of interest. 48.2. The facts of the case of Uday Mistanna Bhander Complex are, therefore, clearly distinguishable with the facts of the assessee's case. The facts of the present case will have to be appreciated in the light of judgment of Hon'ble Supreme Court in the case of Kalyankumar Ray's case. In view of the aforesaid facts and discussions and keeping in view the fact that interest charged under s. 234B is mandatory, automatic and compensatory in nature, the levy of interest cannot be held to be invalid. 49. The last issue, which now requires our consideration is issue No. (d) mentioned in para 41 that whether int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yr. 1981-82 in this regard and in that view the petitioner could not have submitted a fresh return showing the aforesaid sum of Rs. 1,58,000 within the taxable income which would have virtually amounted to renouncing its claim. Reliance in this connection was placed on the decision in CIT vs. Ranchi Club Ltd. (1992) 100 CTR (Pat) 295 (FB): (1992) 196 ITR 137 (Pat)(FB). If the assessment order is set aside or modified and it is held that the amount of "entrance fee" is not includible within the taxable income the levy of interest would also automatically go. But what will be the position if the order is not interfered with? The levy of interest would obviously stand. This writ petition cannot, therefore, be dismissed merely because an appeal against the assessment order has been preferred and is pending. Now the question is whether interest on the amount of tax found payable on the assessed income can be levied at this stage. From the facts mentioned hereinabove it is clear that there was no default in filing the return and payment of self-assessed/advance tax. The notice under s. 142(1) which is said to have been not complied with leading to the levy of interest, was sent afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted. On general principles also interest is payable in future only after the dues are finally determined. Where the assessee fails to file the return of income either under s. 139(1) or (4) or s. 142(1), pursuant to the notice issued thereunder, or files the same after the due date, in terms of s. 234A he is no doubt liable to pay interest. He is also liable to pay interest if he commits any default in payment of advance tax under the provisions of s. 234B. Where, however, return is filed within time but a particular item of income is in dispute as being includible within taxable income or not the mere issue of notice under s. 142 will not confer jurisdiction upon the authority to levy interest. Sec. 234A no doubt also mentions about non-compliance with notice under s. 142(1). But it would appear that s. 142(1), which refers to the stage of enquiry before assessment, envisages two types of notice. It provides for notice to those who have already submitted the return under s. 139 to produce such accounts or documents as the AO may require or to furnish information on such points or matters as the AO may require. It also provides for notice to persons who have not filed the ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was a mutual concern. The income derived by it from its house property let to its members and their guests and from the sale of liquor, etc. to its members and their guests were not taxable in its hands." 51.2. The Hon'ble High Court observed that the petitioner could not have submitted a fresh return showing the aforesaid sum of Rs. 1,58,000 within the taxable income, which would have virtually amounted to renouncing its claim. On these facts the Hon'ble High Court held that it is difficult to hold that the petitioner committed default within the meaning of ss. 234A or 234B. The Hon'ble Patna High Court further observed that the judgment of Hon'ble Supreme Court in the case of J.K. Synthetics Ltd. would squarely cover cases of the present nature, although the context in which the Hon'ble Supreme Court rendered the decision in the case of J.K. Synthetics Ltd. was somewhat different. 52. It may be imperative here to refer to the judgment of Hon'ble Supreme Court in the case of CIT vs. Sun Engineering Works (P) Ltd. (1992) 107 CTR (SC) 209 : (1992) 198 ITR 297 (SC) at p. 320 observed: "Such an interpretation would be reading that judgment totally out of context in w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative to examine the context, the relevant provisions of law and facts of the case of J.K. Synthetics. 54. The facts and decision in the case of J.K. Synthetics have been briefly stated and distinguished by the Hon'ble Supreme Court in a subsequent judgment in the case of Calcutta Jute Mfg. Co. Anr. vs. CTO (1997) 106 STC 433 (SC), as under: "10. The State is empowered by the legislature to raise revenue through the mode prescribed in the Act so the State should not be the sufferer on account of the delay caused by the taxpayer in payment of the tax due. The provision for charging interest would have been introduced in order to compensate the State (or the Revenue) for the loss occasioned due to delay in paying the tax [vide CIT vs. M. Chandra Sekhar (1985) 44 CTR (SC) 110 : (1985) 151 ITR 433 (SC): TC (1985) 1 SCC 283 and Central Provisions Manganese Ore Co. Ltd. vs. CIT (1986) 58 CTR (SC) 112 : (1986) 160 ITR 961 (SC) : (1986) 3 SCC 461. When interpreting such a provision in a taxing statute a construction which would preserve the purpose of the provision much be adopted. It is well-settled that in interpreting a taxing statute normally, there is no scope for consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d sub-s. (2a), of s. 7 if it is not paid within the period allowed". J.K. Synthetics Ltd. filed returns on the premise that the amount of freight (charged in respect of the sale of cement as per a Cement Control Order) did not form part of the sale price for the purpose of payment of sales-tax. That contention was rejected by the Court in Hindustan Sugar Mills Ltd. vs. State of Rajasthan (1979) 43 STC 13 : (1978) 4 SCC 271. On the strength of the said decision M/s J. Synthetics Ltd. was required to pay sales-tax on the sale price inclusive of the freight. The dispute then arose whether the company should pay interest from the date of filing of the returns or only from the date of determination of tax payable in the final assessment. Revenue then contended that interest became payable from the date on which the original return was filed under s. 7(2) or 7(2A) of the Rajasthan Sales-tax Act, 1954. The said contention was based on another earlier decision of a Bench of three Judges of this Court in Associated Cement Co. Ltd. vs. CTO (1981) 48 STC 466. A majority of Judges held in that case that interest would run from the date of filing of returns. Ahmadi, J. (as his Lordship then was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of s. 6B which was challenged by the appellants in the earlier writ petition before the Calcutta High Court and which finally ended up in upholding of its validity. Hence, there was no question of the assessee waiting for the determination and the turnover as there was no dispute on that aspect. The fact that appellants questioned the constitutional validity of the charging provisions cannot be equated with a dispute whether the freight paid would also form part of the sale amount. It was a highly debated dispute whether price amount would envelope the freight charges paid by the dealer and until the controversy was resolved by the Court in Hindustan Sugar Mills Ltd. vs. State of Rajasthan (1979) 43 STC 13 (SC) : (1978) 4 SCC 271 the dealers were justified in excluding the freight charges from sale price. It was for the reason the Constitution Bench refrained from mulcting the taxpayer with liability to pay interest additionally. Appellants in these cases have never disputed that they are liable to pay tax on the turnover under s. 68 of the Act even while they focussed on the vires of that provisions. 16. The tax amount which they should have paid as per s. 68 remained with the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the judgments in the cases of Ranchi Club, Smt. Tej Kumari and J.K. Synthetics Ltd. were rendered, we may once again carefully go through the relevant finding given by the Hon'ble Patna High Court in the case of Ranchi Club, as affirmed by the Hon'ble Supreme Court, as that judgment of Hon'ble Supreme Court is the final and binding judgment on the question relating to levy of interest under s. 2 34A and 234B of the Act. 56.1. The Hon'ble Patna High Court in the aforesaid case of Ranchi Club cancelled the levy of interest under s. 234A and 234B in view of the fact that it was impossible to expect the assessee to include the sum of Rs. 1,58,000 being the amount of entrance fee received from new members in its taxable income at the time of filing the return or payment of advance tax, as they were claiming it to be not liable to tax on the principle of mutuality since last 10 years and such claim of exemption was supported by judgment of Full Bench of Patna High Court in their own case reported in (1992) 100 CTR (Pat) 295 : (1992) 1996 ITR 137 (Pat)(FB). Apart from this, the Hon'ble High Court also examined the impact of Expln. 4 to s. 234A held that interest is leviable on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d there is no element of penalty. Penalty is deterrent but interest is compensatory. For penalty an opportunity of hearing in necessary. Interest has to be ordinarily reasonable and reciprocal. Interest under ss. 234A, 234B @ 2 per cent p.m. each i.e. 24 per cent p.a. under each of these sections would mean interest @ 48 per cent p.a. is chargeable per year, if there is an overlapping default of one year of delay in filing of the return and short-payment of advance-tax. Such interest of 48 per cent p.a. is not an allowable expenditure also. The rate of such interest has now been reduced to 18 per cent p.m. in each of these sections i.e. aggregate levy of interest of overlapping period under s. 234A and 234B will be 36 per cent per year w.e.f. 1st June, 1999. Such double levy of interest @ 24 per cent p.a. aggregating to 48 per cent p.a. under s. 234A and 234B for the same overlapping period of delay in filing of the return has to some extent been mitigated by the aforesaid interpretation of Expln. 4 to s. 234A made by the Hon'ble Patna High Court as affirmed by the Hon'ble Supreme Court. 58. However, in the present case, there is no default of delay in filing of the return and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of s. 210 is less than 90 per cent of the assessed tax. While examining the assessee's obligation under ss. 208 and 210, the amount of tax payable on these disputed items of additions, which were impossible of being foreseen or anticipated by the assessee at the time of making payment of advance tax will have to be excluded for purposes of levy of interest under s. 234B in view of the judgment of Hon'ble Patna High Court in the case of Ranchi Club Ltd. as affirmed by the Hon'ble Supreme Court. These judgments, in our humble view, reaffirms the well known principles of law canonized in the well-known common law dictum "Lexnoncogit ad Impossibilia" i.e. law cannot compel any one to do the impossible. 59. But the aforesaid judgment in the case of Ranchi Club or other judgments discussed hereinbefore cannot be read as interpreted to mean that in all situations and in all circumstances, interest under s. 234B cannot be levied with reference to tax assessed on regular assessment/reassessment, etc. and will necessarily have to be restricted in all cases with reference to tax on income declared in the return of income. Such an interpretation or reading of the above referred judgments ..... X X X X Extracts X X X X X X X X Extracts X X X X
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