TMI Blog2009 (1) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... sh or in any other manner whatsoever, any amount out of Rs. 23,98,000 and hence no amount can be taxed under s. 41(1) of the IT Act, 1961 and the learned CIT(A) erred in holding otherwise. 5. On the facts and circumstances of the case and in law, the assessee submits that the learned CIT(A) erred in confirming the aggregate disallowance of Rs. 1,49,20,224 under s. 43B made by the AO, being the amount of employer's/employees' contribution to PF, ESI and EPS. 6. On the facts and circumstances of the case and in law, the assessee submits that the omission of cl. (c) in the first proviso to s. 43B and the omission of the second proviso to s. 43B by the Finance Act, 2003 is retrospective based on the decision of the Hon'ble Supreme Court in Allied Motors (P) Ltd. vs. CIT (1997) 139 CTR (SC) 364 : (1997) 224 ITR 677 (SC) and consequently the above payments having been made before the due date for filing the return of income, do not qualify for being disallowed under s. 43B. 7. Without prejudice to the above, the assessee submits that the object of s. 43B is not to disallow legitimate delays in contributions to PF, ESI and hence no disallowance under s. 43B is called for. 8. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following additional grounds of appeal: "1. On the facts and circumstances of the case and in law, the assessee submits that since there is no income-tax payable on the total income as computed under the Act on regular basis, the provisions of s. 115JB of the IT Act, 1961 are not attracted and the learned AO erred in computing the income and levying tax thereon under s. 115JB of the Act. 2. On the facts and circumstances of the case and in law, the assessee denies its liability to be charged interest under ss. 234B and 234C of the Act." 6. First, we will consider the issue regarding admission of additional grounds raised by assessee. Learned counsel for the assessee referred to s. 115JB and submitted that there has to be income-tax payable on the total income as computed under IT Act in respect of previous year before any charge is attracted under s. 115JB. Learned counsel for the assessee submitted that there being no dispute that in assessee's case, there is net loss under the normal computation provisions, the provisions of s. 115JB are not attracted. He submitted that the additional ground being purely legal, may be admitted as it goes to the very root of the compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idence on record and mechanically including Rs. 22,84,994 in the total income. The Tribunal declined to entertain the aforementioned additional grounds. Reference was directly made to the Hon'ble Supreme Court as to whether where, on the facts found by the IT authorities, a question of law arose (although not raised before the authorities) which bore on the tax liability of the assessee, the Tribunal had jurisdiction to examine the same? The Hon'ble Supreme Court reframed the question as under: "Where on the facts found by the authorities below a question of law arises (though not raised before the authorities) which bears on the tax liability of the assessee, whether the Tribunal has jurisdiction to examine the same?" The Hon'ble Supreme Court held that the Tribunal had jurisdiction to examine a question of law which arose from the facts as found by the IT authorities and having a bearing on the tax liability of the assessee. 9. We have considered the submissions of both the sides and perused the record of the case. In our opinion, the additional ground raised by the assessee is to be admitted in view of the decision of the Hon'ble Supreme Court in the case of NTPC becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yable under normal provisions, therefore, charge under s. 115JB cannot be attracted. He referred to the decision of the Hon'ble Bombay High Court in the case of Elphinstone Spinning Weaving Mills Co. Ltd. vs. CIT (1955) 28 ITR 811 (Bom), wherein, it was held that tax cannot be imposed by implication and plain language must prevail over object of legislature. Learned counsel referred the following passage from this judgment: "In the first instance, the plain language of the proviso indicates that the tax is to be charged on the total income and on nothing else but quite apart from it, as I have pointed out earlier, the entire scheme of the IT Act is that income-tax or super-tax is payable on the total income of the previous year and in prescribing a rate or rates applicable to the total income, which is all that s. 2 of the Indian Finance Act, 1951, purports to do in terms of the First Schedule to that Act, it cannot conceivably be held that the legislature intended to subject to tax anything other than the total income which alone attracts tax under the scheme of the Indian IT Act. Obviously, although as I have pointed out earlier total income in a given case might be calculat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se not liable to any tax i.e., zero-tax companies would escape liability. Learned Departmental Representative submitted that tax payable is consequential in nature. He submitted that if any ambiguity is caused by the term 'income-tax payable' then harmonious construction is to be done having regard to the term "less than seven and a half per cent of book profit". He referred to the decision of the Hon'ble Supreme Court in the case of Kerala State Industrial Development Corporation Ltd. vs. CIT (2003) 180 CTR (SC) 192 : (2003) 259 ITR 51 (SC) to submit that the Finance Minister's Speech can be referred to in order to find the true intention of the legislature. Learned Departmental Representative submitted that while introducing s. 115JB, it was observed as under: "43.1 In recent years, as the number of zero-tax companies and companies paying marginal tax had grown, MAT was levied under s. 115JA of the IT Act from the asst. yr. 1997-98. The efficacy of the existing provision, however, declined in view of the exclusions of various sectors from the operation of MAT and the credit system. The Act has, therefore, modified the scheme of MAT. The existing s. 115JA has been made inoperat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt has held as under: "In our opinion, merely because a provision of the Act is harsh and we dare say that all provisions which levy tax are harsh, this is no ground for discarding one of the cardinal principles of interpretation of statutes which is that if the language is clear and unambiguous, then resort cannot be had to the aims and objects or to the Minister's Speech with a view to interpret the provisions of an Act. It is only if there is any ambiguity in the language then in order to understand the intention of the legislature, aid can be taken of the proceedings in Parliament including the aims and objects of the Act. Where, however, as in the present case, the language is plain, clear and unambiguous, the question of referring to the Finance Minister's Speech in an effort to find out what is the intention of the legislature does not arise." Learned counsel referred to the decision of the Hon'ble Supreme Court in the case of Padmasundara Rao (Decd.) Ors. vs. State of Tamil Nadu Ors. (2002) 176 CTR (SC) 104 : (2002) 255 ITR 147 (SC) to submit that it is well-settled principle in law that the Court cannot read anything into a statutory provision which is plain and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the provisions of sub-s. (2) of s. 32 or sub-s. (3) of s. 32a or cl. (ii) of sub-s. (1) of s. 72 or s. 73 or s. 74 of sub-s. (3) of s. 74A, shall be allowed to be carried forward to the subsequent year or years. This amendment will take effect from 1st April, 2001, and will accordingly, apply in relation to the asst. yr. 2001-02 and subsequent years." 15. As regards second ground, learned counsel submitted that once there is no charge then there cannot be any levy of interest under ss. 234B and 234C of the Act. 16. We have considered the rival submissions and perused the record of the case. There is no quarrel with the proposition that if a charging provision fails then subject cannot be taxed. In this regard, we may reproduce the observations from the two decisions relied upon by learned counsel for the assessee: (i) CWT vs. Ellis Bridge Gymkhana. The rule of construction of a charging section is that before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section. No one can be taxed by implication. A charging section has to be construed strictly, if a person has not been brought within the ambit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er that will achieve the object of provision, avoid mischief, advance the cause of justice, provide the remedy intended by the statute, make the law workable and enforceable instead of reducing it to a redundant or dead letter and best harmonize with and effectuate the object of legislation. In the backdrop of this settled position of law, we proceed to examine the provisions of s. 115JB, which admittedly is a charging section. But, at the same time, we have to keep in mind that s. 115JB is a code by itself and, thus, contains substantive as well as procedural provisions. Therefore, which part of the section precisely creates the charge, has to be specifically identified before arriving at any conclusion. If we closely examine s. 115JB, having due regard to the punctuation, we find that there is comma between 'income-tax' and 'payable' and further there is comma before 'is less'. Therefore, full effect will have to be given to the phrase following comma after the phrase 'income-tax'. As per the terms of this section, we find that it will be attracted if income-tax payable in respect of total income computed under the Act is less than seven and one-half per cent of its book profit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Department was that this sum constituted excess dividend and was liable to pay tax. The Tribunal had referred following two questions for being answered by the Hon'ble Bombay High Court for its esteemed opinion: (i) Whether the assessee company was liable to pay additional tax. (ii) If the answer to question (i) is in the affirmative, whether the levy of the additional tax was ultra vires. The Hon'ble Bombay High Court referred to Finance Act, 1951 on which the Department relied for levying the additional income-tax on excess dividend. The Hon'ble High Court noticed that the Finance Act, 1951 by s. 2 provided that subject to the provisions of sub-ss. (3), (4) and (5) for the year beginning on the 1st day of April, 1951, income-tax was to be charged at the rates specified in Part I of the First Schedule, and sub-s. (7) of this section emphasizes the fact that for the purposes of this section and of the rates of tax imposed thereby, the expression "total income" means total income as determined for the purposes of income-tax or super-tax, as the case may be, in accordance with the provisions of the IT Act. The Hon'ble Court referred to First Schedule to which reference was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and its profits were assessable to tax and, therefore, the total income on which income-tax could be levied. It observed that the company which had income in a particular year could pay dividend which could exceed the ceiling fixed by the legislature, in which case, no question of rebate would arise with regard to those dividends, and the question of additional tax would arise under cl. (ii). Further, the question before the Court was with reference to such companies which had made no profits at all, which had no income, and which was not assessable to tax under the provisions of the IT Act but had paid dividends out of undistributed profits of preceding year and were available for the purpose of covering the amount of the excess dividend. The Hon'ble Court has observed as under: "Therefore, what the assessee company was doing in the year of assessment was that it was paying out as dividend profits which in the past year it kept back as reserve or had ploughed back into the industry, and the contention of the Department is that the assessee having paid tax at a certain rate by reason of the fact that they were not distributed as profits, the assessee should now pay the additiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he variation in income depending upon the decisions given by various authorities under the Act. 18. In view of above discussion we dismiss the additional ground raised by the learned counsel for the assessee. 19. Ground No. 1 was not pressed, therefore, the same is dismissed as not pressed. 20. Ground Nos. 2 to 4 deal with issue regarding confirmation of addition of Rs. 23,98,000 made under s. 41(1) by learned CIT(A) out of the total addition of Rs. 41,48,000 made by the AO. 21. The AO noticed from Note 20 of notes to accounts that the assessee was granted refund of Rs. 41,48,000 of customs duty as per CEGAT order, which reads as under: "Refund of Rs. 41.48 lakhs arising on account of CEGAT order is still not passed on to the company. Though the company has made application for refund of the same the customs authorities had denied the claim on account of unjust enrichment. The matter is still pending before the Collector (Appeals)." After considering the assessee's submissions and taking note of the fact that the assessee was following mercantile system of accounting and the refund had already been granted by CEGAT, the AO added Rs. 41.48 lakhs to the assessee's tota ..... X X X X Extracts X X X X X X X X Extracts X X X X
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