BRINDAVAN BEVERAGES LIMITED, REP. BY ITS MANAGING DIRECTOR, S.N. LADHANI Vs. THE DEPUTY COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is an appeal of the revenue under Section 260A of the Income Tax Act, 1961 (for short 'the Act') directed against the order dated 31.03.2005 passed by the Income Tax Appellate Tribunal, Bangalore in ITA No. 863/3ang/2002 on the premise that the following two substantial questions of law which arises out of the order of the Tribunal has been wrongly decided by the Tribunal. Whether the Tribunal was correct in holding that interest under Section 234B of the Act cannot be levied against the assessee as the computation of income has been made under Section 115JA of the Act. Whether the Tribunal was correct in taking into consideration irrelevant circumstances like 'bonafides of the assessee', 'whether the default was committed deliberately', in failing to pay advance tax under Section 208 of the Act when Section 234B interest is levied automatically as there is no discretion.

(2.) THE assessee is a company, assessment year is 1997 -98 and the only dispute between the assessee and the revenue is the levy of interest under Sections 234B and 234C of the Act on the premise that the levy of interest under these two provisions was not justified in the case of the assessee for the assessment year in question as the tax liability of the assessee for the assessment year in question had been artificially boosted in view of the special deeming provisions of Section 115JA of the Act; that even as per the assessee's return filed for the assessment year in question the actual tax liability on normal computation was only Rs. 39,955/ -, but in the wake of the provisions of Sub -section [1] of Section 115JA of the Act, this tax liability got itself converted to Rs. 87,44,357.45/ - and this liability in terms of the provisions of Section 115JA of the Act is directly linked to the ascertainment of book profits of the assessee, more so in terms of the computation provided under Section 115JA[1] of the Act and when that was possible only at the end of the accounting period, the assessee was not even aware of this liability in terms of Section 115JA[1] of the Act till the closing of the accounts for the year and that there cannot be any requirement in law for either payment of advance tax installments or even on filing of the return as the liability for payment of tax in terms of Section 115JA[1] of the Act would arise only after the passing of the assessment order by the assessing officer and after the expiry of the period for payment of tax as assessed by the assessing officer and therefore when there was no possibility of the assessee being called upon to pay advance tax as contemplated under Section 208 of the Act, the question of levy of interest either under Section 234B or under Section 234C of the Act also did not arise as the levy of interest under these two provisions of law is only on the failure of the assessee to conform to the requirements of Sections 208 and 210 of the Act and as in the case of the assessee there being no requirement under Sections 208 and 210 of the Act the liability for interest under Sections 234B and 234C of the Act also is not attracted and therefore any levy of interest is illegal and not warranted.

(3.) THE first appellate authority allowed the appeal on this aspect of the matter purporting to follow the decision of this Court in the case of Kwality Biscuits Ltd. Vs. Commissioner of Income Tax, (2000) 243 ITR 519 KAR and with the Income Tax Appellate Tribunal having dismissed the appeal of the revenue being of the view that the decision of this Court in Kwality Biscuits' case [supra] covered the issue, the revenue is in appeal as against the order of the Appellate Tribunal only on this question.