SAHITYA MUDRANALAYA P LTD Vs. STATE

JUDGEMENT

(1.) BY order No. 1/45/Tech. 94-SC/3865 dt. 4th Jan., 1995, the Chairman of the Income-tax Settlement Commission constituted a Special Bench in exercise of the powers vested in him under s. 245BA (5A) of the IT Act, 1961 (`the Act') . The following issue was referred to this Bench concerning the interest payable under s. 234B of the Act for defaults in payment of advance tax under each of the five situations mentioned therein:--

(2.) THE genesis of the reference are two miscellaneous applications, one dt. 7th July, 1993 filed by Gulraj Engg. Construction Co., Bombay and the other dt. 11th Sept., 1993 filed by Sahitya Mudranalaya group of assessees of Ahmedabad against the orders under s. 245D (4) of the Settlement Commission, Additional Bench, Bombay. While passing orders under s. 245D (4) r/w s. 245D (6) , the Commission had directed that the interest in respect of the asst. yrs. 1989-90 and onwards for the default of advance tax under s. 234B should be charged `in accordance with law'. THE concerned AOs interpreted this direction to mean the period of interest to be from first of April next following the financial year in which the advance tax was to be paid till the date of giving effect to the respective orders of the Settlement Commission under s. 245D (4) and demanded the interest computed on that basis. Those two miscellaneous applications were fixed for hearing before the Settlement Commission, Additional Bench, Bombay, consisting of two members. It was pleaded that the interest under s. 234B could not be charged if the advance tax paid originally was more than 90 per cent of the assessed tax. Even where it was not so, interest could be charged only up to the date of determination of the total income under s. 143 (1) of the Act or the date of regular assessment. THEre was no question of charging interest up to the date of the Settlement Commission's order under s. 245D (4) , much less up to the date of giving effect to it by the AO.

(3.) COMING to the specific issue, Shri Sathe contended that the liability to pay interest arises only if an assessee has not paid, during the relevant financial year, up to 90 per cent of the `assessed tax' as defined in Explanation 1 to s. 234B (1) . If 90 per cent or more of the `assessed tax' is paid, there will be no liability to pay the advance tax even where, on the basis of the Commission's order under s. 245D (4) , the advance tax paid turns out to be far less than 90 per cent of the `assessed tax'. Since the charging provisions in s. 234B (1) do not provide for computation of interest on the basis of the Commission's order under s. 245D (4) , no interest is chargeable in view of the ratio of the decision of the Supreme Court in CIT vs. B.C. Srinivasa Setty (1981) 21 CTR (SC) 138 : (1981) 128 ITR 294 (SC). Thus, in both the cases represented by him, no interest was chargeable because the advance tax paid or the tax deducted at source was in excess of the tax payable on the basis of the total income determined under s. 143 (1) .