Judgment
As delivered
REPORTABLE
IN THE SUPREME COURT OF INDIACIVIL APPELLATE JURISDICTIONCIVIL APPEAL NO.135 OF 2011(arising out of S.L.P. (C) No. 25746 of 2009)
Jt. C. I. T., Mumbai ...Appellant(s)
versus
M/s Rolta India Ltd. ...Respondent(s)
withCivil Appeal No.136 of 2011 @ S.L.P. (C) No. 18367 of 2010,Civil Appeal No. 459 of 2006 and Civil Appeal No. 7429 of2008.
JUDGMENT
S.H. KAPADIA, CJI
Leave granted.
2. A short question which arises for determination in this
batch of cases is - whether interest under Section 234B can be
charged on the tax calculated on book profits under Section
115JA? In other words, whether advance tax was at all
payable on book profits under Section 115JA?2
3. The lead matter in this batch of cases is Joint CIT v.
Rolta India Ltd. (Civil Appeal arising out of S.L.P. (C) No.
25746/09).
4. Assessee furnished a return of income on 28.11.1997
declaring total income of Rs. Nil. On 28.3.2000, an order
under Section 143(3) was passed determining the total income
at nil after set off of unabsorbed business loss and
depreciation. The tax was levied on the book profit worked out
at Rs. 1,52,61,834/- determined as per the provisions of
Section 115JA. The interest under Section 234B of Rs.
39,73,167/- was charged on the tax on the book profit as
worked out in the order of assessment. Aggrieved by the said
order, the assessee went in appeal before CIT (A). The appeal
on the question in hand was dismissed. On charging of
interest under Section 234B the appeal was dismissed by the
Tribunal on the ground that the case fell under Section 115JA
and not under Section 115J, hence, judgment of the
Karnataka High Court in the case of M/s Kwality Biscuits Ltd.
was not applicable. At one stage the Bombay High Court
decided the matter in favour of the Department but later on by3
way of review it took the view following the judgment of
Karnataka High Court in the case of Kwality Biscuits Ltd. that
interest under Section 234B cannot be charged on tax
calculated on book profits, hence, the CIT has come to this
Court by way of Civil Appeal(s).
5. We quote hereinbelow Sections 234B and 234C of the
Income Tax Act, 1961 (in short "the Act"):
"Interest for defaults in payment ofadvance tax.
234B. (1) Subject to the other provisions ofthis section, where, in any financial year, anassessee who is liable to pay advance taxunder section 208 has failed to pay such taxor, where the advance tax paid by suchassessee under the provisions of section 210 isless than ninety per cent of the assessed tax,the assessee shall be liable to pay simpleinterest at the rate of one and one-half percent for every month or part of a monthcomprised in the period from the 1st day ofApril next following such financial year to thedate of determination of total income undersub-section (1) of section 143 and where aregular assessment is made, to the date ofsuch regular assessment, on an amount equalto the assessed tax or, as the case may be, onthe amount by which the advance tax paid asaforesaid falls short of the assessed tax.4
Explanation 1.--In this section, "assessed tax"
means,--
(a) for the purposes of computing the interestpayable under section 140A, the tax on thetotal income as declared in the return referredto in that section;
(b) in any other case, the tax on the totalincome determined under sub-section (1) ofsection 143 or on regular assessment,
as reduced by the amount of tax deducted orcollected at source in accordance with theprovisions of Chapter XVII on any incomewhich is subject to such deduction orcollection and which is taken into account incomputing such total income.
Explanation 2.--Where, in relation to anassessment year, an assessment is made forthe first time under section 147, theassessment so made shall be regarded as aregular assessment for the purposes of thissection.
Explanation 3.--In Explanation 1 and in sub-section (3) "tax on the total income determinedunder sub-section (1) of section 143" shall notinclude the additional income-tax, if any,payable under section 143.
(2) Where, before the date of determination oftotal income under sub-section (1) of section143 or completion of a regular assessment, tax5
is paid by the assessee under section 140A orotherwise,--
(i) interest shall be calculated in accordancewith the foregoing provisions of this section upto the date on which the tax is so paid, andreduced by the interest, if any, paid undersection 140A towards the interest chargeableunder this section;
(ii) thereafter, interest shall be calculated atthe rate aforesaid on the amount by which thetax so paid together with the advance tax paidfalls short of the assessed tax.
(3) Where, as a result of an order of re-
assessment or re-computation under section147, the amount on which interest waspayable under sub-section (1) is increased, theassessee shall be liable to pay simple interestat the rate of one and one-half per cent forevery month or part of a month comprised inthe period commencing on the day followingthe date of determination of total income undersub-section (1) of section 143 and where aregular assessment is made as is referred to insub-section (1) following the date of suchregular assessment and ending on the date ofthe re-assessment or re-computation undersection 147, on the amount by which the taxon the total income determined on the basis ofthe re-assessment or re-computation exceedsthe tax on the total income determined undersub-section (1) of section 143 or on the basisof the regular assessment aforesaid.
(4) Where, as a result of an order under section154 or section 155 or section 250 or section6254 or section 260 or section 262 or section263 or section 264 or an order of theSettlement Commission under sub-section (4)of section 245D, the amount on which interestwas payable under sub-section (1) or sub-section (3) has been increased or reduced, asthe case may be, the interest shall beincreased or reduced accordingly, and--
(i) in a case where the interest is increased, theAssessing Officer shall serve on the assessee anotice of demand in the prescribed formspecifying the sum payable and such notice ofdemand shall be deemed to be a notice undersection 156 and the provisions of this Act shallapply accordingly;
(ii) in a case where the interest is reduced, theexcess interest paid, if any, shall be refunded.
(5) The provisions of this section shall apply inrespect of assessments for the assessmentyear commencing on the 1st day of April, 1989and subsequent assessment years.
Interest for deferment of advance tax.
234C. (1) Where in any financial year,--
(a) the company which is liable to pay advancetax under section 208 has failed to pay suchtax or--
(i) the advance tax paid by the company on itscurrent income on or before the 15th day of7
June is less than fifteen per cent of the tax dueon the returned income or the amount of suchadvance tax paid on or before the 15th day ofSeptember is less than forty-five per cent of thetax due on the returned income or the amountof such advance tax paid on or before the 15thday of December is less than seventy-five percent of the tax due on the returned income,then, the company shall be liable to pay simpleinterest at the rate of one and one-half percent per month for a period of three months onthe amount of the shortfall from fifteen percent or forty-five per cent or seventy-five percent, as the case may be, of the tax due on thereturned income;
(ii) the advance tax paid by the company on itscurrent income on or before the 15th day ofMarch is less than the tax due on the returnedincome, then, the company shall be liable topay simple interest at the rate of one and one-half per cent on the amount of the shortfallfrom the tax due on the returned income:
Provided that if the advance tax paid by thecompany on its current income on or beforethe 15th day of June or the 15th day ofSeptember, is not less than twelve per cent or,as the case may be, thirty-six per cent of thetax due on the returned income, then, it shallnot be liable to pay any interest on the amountof the shortfall on those dates;
(b) the assessee, other than a company, who isliable to pay advance tax under section 208has failed to pay such tax or,--
8(i) the advance tax paid by the assessee on hiscurrent income on or before the 15th day ofSeptember is less than thirty per cent of thetax due on the returned income or the amountof such advance tax paid on or before the 15thday of December is less than sixty per cent ofthe tax due on the returned income, then, theassessee shall be liable to pay simple interestat the rate of one and one-half per cent permonth for a period of three months on theamount of the shortfall from thirty per cent or,as the case may be, sixty per cent of the taxdue on the returned income;
(ii) the advance tax paid by the assessee on hiscurrent income on or before the 15th day ofMarch is less than the tax due on the returnedincome, then, the assessee shall be liable topay simple interest at the rate of one and one-
half per cent on the amount of the shortfallfrom the tax due on the returned income:
Provided that nothing contained in this sub-section shall apply to any shortfall in thepayment of the tax due on the returned incomewhere such shortfall is on account of under-estimate or failure to estimate--
(a) the amount of capital gains; or
(b) income of the nature referred to in sub-
clause (ix) of clause (24) of section 2,
and the assessee has paid the whole of theamount of tax payable in respect of incomereferred to in clause (a) or clause (b), as thecase may be, had such income been a part of9
the total income, as part of the remaininginstalments of advance tax which are due orwhere no such instalments are due, by the31st day of March of the financial year:
Explanation.--In this section, "tax due on thereturned income" means the tax chargeable onthe total income declared in the return ofincome furnished by the assessee for theassessment year commencing on the 1st day ofApril immediately following the financial yearin which the advance tax is paid or payable,as reduced by the amount of tax deductible orcollectible at source in accordance with theprovisions of Chapter XVII on any incomewhich is subject to such deduction orcollection and which is taken into account incomputing such total income.
(2) The provisions of this section shall apply inrespect of assessments for the assessmentyear commencing on the 1st day of April, 1989and subsequent assessment years."
6. At the outset, it may be stated that Sections 234B and
234C do not make any reference to Section 115J/115JA.
Section 234B lays down that where advance tax is required to
be paid under Section 208 and there is a failure on that if the
amount of advance tax paid under Section 210 is less than
90% of the assessed tax, then, in that case the assessee is
liable to pay interest. Section 234C refers to interest for1
deferment of advance tax. It says that if the assessee has to
pay advance tax on its current income on or before 15th of
June and the tax paid is less than 15% of the tax due on the
returned income or the amount of the advance tax paid on or
before 15th of September is less than 45% of the tax due on the
returned income or the amount of such advance tax paid on or
before 15th of December is less than 75% of the tax due on the
returned income, then the assessee shall be liable to pay
interest at the specified rate on the amount of the shortfall
from 15% or 45% or 75%, as the case may be, of the tax due
on the returned income.
7. In our view, Section 115J/115JA are special
provisions. Section 207 envisages that tax shall be payable in
advance during any financial year on current income in
accordance with the scheme provided in Sections 208 to 219
(both inclusive) in respect of the total income of the assessee
that would be chargeable to tax for the assessment year
immediately following that financial year. Section 215(5) of
the Act defined what is "assessed tax", i.e., tax determined on
the basis of regular assessment so far as such tax relates to1
income subject to advance tax. The evaluation of the current
income and the determination of the assessed income had to
be made in terms of the statutory scheme comprising Section
115J/115JA of the Act. Hence, levying of interest was
inescapable. The assessee was bound to pay advance tax
under the said scheme of the Act. Section 115J/115JA of the
Act were special provisions which provided that where in the
case of an assessee, the total income as computed under the
Act in respect of any previous year relevant to the assessment
year is less than 30% of the book profit, the total income of the
assessee shall be deemed to be an amount equal to 30% of
such book profit. The object is to tax zero-tax companies.
8. Section 115J was inserted by Finance Act, 1987 w.e.f.
1.4.1988. This section was in force from 1.4.1988 to
31.3.1991. After 1.4.1991, Section 115JA was inserted by
Finance Act of 1996 w.e.f. 1.4.1997. After insertion of Section
115JA, Section 115JB was inserted by Finance Act, 2000
w.e.f. 1.4.2001. It is clear from reading Sections 115JA and
115JB that the question whether a company which is liable to
pay tax under either provision does not assume importance 1
because specific provision(s) is made in the section saying that
all other provisions of the Act shall apply to the MAT Company
(Section 115JA(4) and Section 115JB(5)). Similarly,
amendments have been made in the relevant Finance Acts
providing for payment of advance tax under Sections 115JA
and 115JB. So far as interest leviable under Section 234B is
concerned, the section is clear that it applies to all companies.
The pre-requisite condition for applicability of Section 234B is
that assessee is liable to pay tax under Section 208 and the
expression "assessed tax" is defined to mean the tax on the
total income determined under Section 143(1) or under
Section 143(3) as reduced by the amount of tax deducted or
collected at source. Thus, there is no exclusion of Section
115J/115JA in the levy of interest under Section 234B. The
expression "assessed tax" is defined to mean the tax assessed
on regular assessment which means the tax determined on the
application of Section 115J/115JA in the regular assessment.
9. The question which remains to be considered is
whether the assessee, which is a MAT Company, was not in a
position to estimate its profits of the current year prior to the 1
end of the financial year on 31st March. In this connection the
assessee placed reliance on the judgment of the Karnataka
High Court in the case of Kwality Biscuits Ltd. v. CIT reported
in (2000) 243 ITR 519 and, according to the Karnataka High
Court, the profit as computed under the Income Tax Act, 1961
had to be prepared and thereafter the book profit as
contemplated under Section 115J of the Act had to be
determined and then, the liability of the assessee to pay tax
under Section 115J of the Act arose, only if the total income as
computed under the provisions of the Act was less than 30%
of the book profit. According to the Karnataka High Court, this
entire exercise of computing income or the book profits of the
company could be done only at the end of the financial year
and hence the provisions of Sections 207, 208, 209 and 210
(predecessors of Sections 234B and 234C) were not applicable
until and unless the accounts stood audited and the balance
sheet stood prepared, because till then even the assessee may
not know whether the provisions of Section 115J would be
applied or not. The Court, therefore, held that the liability
would arise only after the profit is determined in accordance
with the provisions of the Companies Act, 1956 and, therefore, 1
interest under Sections 234B and 234C is not leviable in cases
where Section 115J applied. This view of the Karnataka High
Court in Kwality Biscuits Ltd. was not shared by the Gauhati
High Court in Assam Bengal Carriers Ltd. v. CIT reported in
(1999) 239 ITR 862 and Madhya Pradesh High Court in Itarsi
Oil and Flours (P.) Limited v. CIT reported in (2001) 250 ITR
686 as also by the Bombay High Court in the case of CIT v.
Kotak Mahindra Finance Ltd. reported in (2003) 130 TAXMAN
730 which decided the issue in favour of the Department and
against the assessee. It appears that none of the assessees
challenged the decisions of the Gauhati High Court, Madhya
Pradesh High Court as well as Bombay High Court in the
Supreme Court. However, it may be noted that the judgment
of the Karnataka High Court in Kwality Biscuits Ltd. was
confined to Section 115J of the Act. The Order of the Supreme
Court dismissing the Special Leave Petition in limine filed by
the Department against Kwality Biscuits Ltd. is reported in
(2006) 284 ITR 434. Thus, the judgment of Karnataka High
Court in Kwality Biscuits stood affirmed. However, the
Karnataka High Court has thereafter in the case of Jindal
Thermal Power Company Ltd. v. Dy. CIT reported in (2006) 1
154 TAXMAN 547 distinguished its own decision in case of
Kwality Biscuits Ltd. (supra) and held that Section 115JB,
with which we are concerned, is a self-contained code
pertaining to MAT, which imposed liability for payment of
advance tax on MAT companies and, therefore, where such
companies defaulted in payment of advance tax in respect of
tax payable under Section 115JB, it was liable to pay interest
under Sections 234B and 234C of the Act. Thus, it can be
concluded that interest under Sections 234B and 234C shall
be payable on failure to pay advance tax in respect of tax
payable under Section 115JA/115JB. For the aforestated
reasons, Circular No. 13/2001 dated 9.11.2001 issued by
CBDT reported in 252 ITR(St.)50 has no application. Moreover,
in any event, para 2 of that Circular itself indicates that a
large number of companies liable to be taxed under MAT
provisions of Section 115JB were not making advance tax
payments. In the said circular, it has been clarified that
Section 115JB is a self-contained code and thus, all
companies were liable for payment of advance tax under
Section 115JB and consequently provisions of Sections 234B
and 234C imposing interest on default in payment of advance 1
tax were also applicable.
10. For the aforestated reasons CIT succeeds in the civil
appeal arising out of S.L.P. (C) No. 25746 of 2009 (Jt. CIT v.
Rolta India Ltd.) as also in the civil appeal arising out of S.L.P.
(C) No. 18367 of 2010 (CIT-3 v. Export Credit Guarantee
Corporation of India Ltd.). Consequently, Civil Appeal No. 459
of 2006 (Nahar Exports v. CIT) and Civil Appeal No. 7429 of
2008 (Lakshmi Precision Screws Ltd. v. CIT) stand dismissed
with no order as to costs.
.......................................CJI (S. H. Kapadia)
...........................................J. (K.S. Panicker Radhakrishnan)
...........................................J. (Swatanter Kumar) New Delhi;
