C I T vs. M/S NAKODAR COOP. SUGAR MILLS LTD.

ITA/918/2008HC Punjab & HaryanaPHHC01080958200804 September 2013Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE JASPAL SINGH11 pages
AI SummaryDismissed

What were the facts?

The revenue appealed against an order of the Income Tax Appellate Tribunal (ITAT) for assessment year 1994-95. The ITAT had held that no interest under Section 220(2) of the Income Tax Act, 1961, was chargeable on a demand outstanding against the assessee, M/s Nakodar Coop. Sugar Mills Limited, for the period between a lower appellate authority setting aside the Assessing Officer's order and a higher appellate authority restoring it. The Assessing Officer had initially allowed a deduction under Section 80I, which was later rectified by the assessee. After a series of appeals, the Tribunal restored the original assessment, leading to a demand of ₹43,62,116, paid by the assessee between January 2006 and February 2007. The Assessing Officer then levied further interest of ₹12,38,136 under Section 220(2). The CIT(A) dismissed the assessee's appeal as not maintainable, but the ITAT allowed it, holding that interest was not leviable for the period when no effective demand was outstanding.

What did the High Court hold?

The High Court held that the assessee is not liable to pay interest under Section 220(2) of the Income Tax Act for the period when there was no effective demand outstanding against them. The Court found no merit in the revenue's contentions. It noted that Section 220(2) mandates interest payment only if the amount specified in a notice of demand is not paid within the stipulated period. The Court relied on the Supreme Court's decision in Vikrant Tyres Limited's case, which held that an assessee is not liable for interest under Section 220(2) for periods where no demand was due. The Court also distinguished CBDT Circular No.334, stating that while the Board is empowered to issue instructions, such circulars are not binding on courts if they contradict statutory interpretation by higher courts. The Court explicitly stated that the Circular and the Madhya Pradesh High Court's decision relying on it were contrary to the Apex Court's interpretation and thus not binding. Therefore, the Tribunal was correct in its holding.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Hon'ble ITAT is right in holding that no interest under section 220(2) of the I.T.Act is chargeable on the demand outstanding against the assessee for the period between the order of the lower appellate authority setting aside the order of the Assessing Officer and the order of the higher appellate authority finally restoring the original order of the Assessing Officer? Assessee's contentions: The assessee argued that no interest under Section 220(2) could be levied for periods when there was no valid or effective demand outstanding against them. They relied on the Supreme Court's decision in Vikrant Tyres Limited v. First ITO, (2001) 247 ITR 821, and this Court's decision in ITR No.12 of 2002, Haryana Financial Corporation, Chandigarh v. The Commissioner of Income Tax, Haryana, Rohtak. Revenue's contentions: The revenue contended that interest under Section 220(2) is chargeable even for periods when no tax was payable by virtue of an order of an authority, as long as the demand is ultimately restored. They cited CBDT Circular No.334 dated 3.4.1982 and the Madhya Pradesh High Court's decision in Pitambardas Dulichand and others v. Union of India (UOI) and others, (1999) 239 ITR 69, which held that the period for computation of interest should be reckoned from the original demand notice.

Which sections of the Income-tax Act were involved?

Section 220(2),Section 156,Section 80I,Section 154,Section 260A,Section 119

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision:04.9.2013 The Commissioner of Income Tax, Jalandhar II, Jalandhar …Appellant Vs. M/s Nakodar Coop. Sugar Mills Limited, Nakodar, District Jalandhar (Pb.) …Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE JASPAL SINGH Present: Mr. Vivek Sethi, Advocate for the revenue. Mr. M.R.Sharma, Advocate for the assessee. Ajay Kumar Mittal,J.

1.

This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 27.2.2008, Annexure A.3 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (in short, “the Tribunal”) in ITA No.454 (ASR)/2007, for the assessment year 1994-95. It was admitted on 7.7.2009 for determination of following substantial question of law:- “Whether on the facts and in the circumstances of the case, the Hon’ble ITAT is right in holding that no interest under section 220(2) of the I.T.Act is chargeable on the demand outstanding against the assessee for the period between the order of the lower appellate authority setting aside the order of

The order continues below.

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