IT: Interest under section 234B can be levied on reassessment, where earlier assessment was made under section 143(1)
IT: Amount of sales tax is excludible from total turnover while computing deduction under section 80HHC
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[2013] 37 taxmann.com 252 (Punjab & Haryana)
HIGH COURT OF PUNJAB AND HARYANA
Commissioner of Income-tax (Central), Ludhiana
v.
Malwa Cotton Spinning Mills Ltd.*
HEMANT GUPTA AND MS. RITU BAHRI, JJ.
IT APPEAL NO. 15 OF 2001
MAY 22, 2013
I. Section 234B, read with sections 143 and 147, of the Income-tax Act, 1961 - Interest, chargeable as [Conditions precedent] - Assessment year 1989-90 - Whether, where assessee's return was initially processed under section 143(1), interest under section 234B could be levied on reassessment under section 147, treating it as regular assessment - Held, yes [Para 9] [In favour of revenue]
II. Section 80HHC of the Income-tax Act, 1961 - Deductions - Exporters [Computation of deduction] - Assessment year 1989-90 - Whether amount of sales tax is excludible from total turnover while computing deduction under section 80HHC - Held, yes [Para 3] [In favour of revenue]
CASES REFERRED TO
CIT v. Vardhman Polytex Ltd. [IT Appeal No. 241 of 2004, dated 21-8-2006] (para 3), CIT v. Avon Cycles Ltd. [2008] 303 ITR 345 (Punj & Har.) (para 3), CIT v. Lakshmi Machine Works [2007] 290 ITR 667/160 Taxman 404 (para 3), CIT v. Multimetals Ltd. [1991] 187 ITR 98/55 Taxman 133 (Raj.) (para 7) and CIT v. Nahar Spinning Mills Ltd. [2012] 20 taxmann.com 792/209 Taxman 143 (Punj & Har.) (para 8).
Rajesh Katoch for the Appellant. Akhsay Bhan and Alok Mittal for the Respondent.
ORDER
Hemant Gupta, J. - The present appeal under Section 260-A of the Income Tax Act, 1961 (for short, 'the Act') arises out of an order passed by Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short 'the Tribunal') for the assessment year 1989-90.
2. The revenue has claimed the following substantial questions of law:—
| "(i) | Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in directing the A.O to exclude Sales Tax out of Total Turnover for computation of Deduction u/s 80HHC, if the amount had been paid in time in terms of provisions of Section 43-B? | |
| (ii) | Whether, on the facts and in the circumstances of the case in confirming the orders of the CIT(A) that interest u/s 234B was not chargeable on Re-Assessment where originally no interest had been charged?" |
3. First question of law is concluded by judgment of this Court in I.T.A. No.241 of 2004 - CIT v. Vardhman Polytex Ltd. decided on 21.8.2006, wherein it has been held that the amount of Central Sales Tax does not form part of the total turnover of the assessee for the purpose of computation of incentives under Section 80HHC of the Act. This Court has followed the said order in I.T.R. - CIT v. Avon Cycles Ltd. [2008] 303 ITR 345 (Punj & Har.). Hon'ble the Supreme Court has taken the same view in a judgment reported as CIT v. Lakshmi Machine Works [2007] 290 ITR 667/160 Taxman 404.
4. In view of the above, in respect of first substantial question of law, it is held that the amount of sales tax is to be excluded from the amount of total turnover for the purpose of computation of deductions under Section 80HHC of the Act.
5. In respect of second question of law, the provisions of Section 234B of the Act need to be extracted:—
"234B. Interest for 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 Section 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of section 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 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-section (1) of section 143 and where a regular assessment is made, to the date of such regular assessment, on an amount equal of 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 2.—Where, in relation to an assessment year, an assessment is made for the first time under section 147 or section 153A, the assessment so made shall be regarded as a regular assessment for the purposes of this section."
6. The return of the assessee was initially processed under Section 143(1) of the Act and that the re-assessment proceedings were initiated against the assessee under Section 147 of the Act. The Assessing Officer ordered the charging of interest under Section 234-B of the Act on the tax found payable during the course of assessment under Section 147 of the Act. The Commissioner of Income Tax (Appeals) initially upheld the charging of interest under Section 234 of the Act vide its order dated 27.3.1992. It appears that subsequently on 27.5.1992, on an application under Section 154 of the Act, Commissioner of Income Tax (Appeals) set aside the order of granted the interest under Section 234B of the Act.
7. The Department filed appeals against both the orders passed by the Commissioner of Income Tax (Appeals). The Tribunal found that the interest under Section 234B can be charged only during the regular assessment and not in respect of the assessment framed consequent to re-assessment proceedings. Reliance was placed upon an order passed by the Rajasthan High Court reported in CIT v. Multimetals Ltd. [1991] 187 ITR 98/55 Taxman 133. The Tribunal dismissed the appeals finding that the order of the Commissioner of Income Tax (Appeals) is in accordance with law.
8. We have heard learned counsel for the parties. In terms of Explanation 2 to Section 234B of the Act, the assessment framed in re-assessment proceedings is regarded as a regular assessment for the purpose of levy of charging of interest under Section 234B of the Act if it is framed for the first time. The Tribunal has failed to notice the fact that the Assessing Officer has framed the assessment for the first time on 30.1.1992, therefore, Explanation No.2 is applicable with full force in respect of levy of charging of interest under Section 234-B of the Act. There was no previous assessment finalized therefore, in the assessment framed in re-assessment proceedings under Section 147 of the Act would attract levy of interest under Section 234B of the Act. Reliance may be made to a judgment of this Court in CIT v. Nahar Spinning Mills Ltd. [2012] 20 taxmann.com 792/209 Taxman 143, wherein it has been held as under:—
"Keeping in view the provisions of s.234B, we do not find any illegality or infirmity in the well reasoned and well discussed order of CIT(A) because assessment framed under s.147 being not made for the first time is not a regular assessment and hence the order of CIT (A) in holding that the interest under s.234B of IT Act can only be charged in a case of regular assessment, does not call for any interference from outside and accordingly the same, in this regard is upheld. In this view of the matter, we find support from the decision of Jurisdictional High Court of Punjab & Haryana in the case of Smt. Kamla Vati v. CIT (1978) 111 ITR 248 (P&H) wherein it has been held that the assessment or reassessment made under s.147 cannot be considered to be a regular assessment. Accordingly, ground No.3 of Revenue's appeal, having no merits, is rejected."
9. In view of the above, we find that the order of Tribunal holding that Explanation No.2 is not applicable to the case of assessee is unjustified and untenable. Consequently, the order of the Commissioner of Income Tax (Appeals) on an application under Section 154 of the Act and the orders of the Tribunal are set aside.
P.SENRegards
Prarthana Jalan
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