HARANA WAREHOUSING CORP. vs. D. COMMR. OF INCOME TAX,

ITA/258/2005HC Punjab & HaryanaPHHC01074220200516 September 2010Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE AJAY KUMAR MITTAL8 pages
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What were the facts?

The assessee, Haryana Warehousing Corporation, filed returns showing nil income for assessment years 1995-96 and 1996-97, claiming exemption under Section 10(29) of the Income-tax Act, 1961. While exemption was previously available, a Supreme Court judgment on April 1, 1999, restricted exemption under Section 10(29) to income from rent of godowns and warehouses. The Assessing Officer taxed other income and charged interest under Sections 234B and 234C, amounting to Rs. 2,91,03,000. The CIT(Appeals) quashed the interest, holding the appellant not liable for advance tax. The Income Tax Appellate Tribunal reversed the CIT(A)'s order, deeming the interest mandatory as per Supreme Court rulings. The assessee appealed to the High Court.

What did the High Court hold?

The High Court held that the assessee's plea regarding the chargeability of interest under Section 234B was not accepted. The Court noted that the assessee had not raised the plea regarding the co-ordinate bench's decision before the Tribunal, nor produced the order. Furthermore, the Supreme Court in Commissioner of Income-tax v. Anjum H.M. Ghaswala (2001) 252 ITR 1 had categorically held that the levy of interest under Section 234B is mandatory. Adverting to the merits, the Court referred to its own decision in Commissioner of Income-tax (Central) Ludhiana v. Arun Kapoor (Income-tax Appeal No. 149 of 2003), which held that interest under Section 234B is payable on the income assessed, not on the income declared. Interest for deferment of advance tax under Section 234C is chargeable on the income returned. Therefore, interest under Section 234B is chargeable on the basis of assessed tax. However, interest under Section 234C was not payable as the assessee had paid advance tax on the returned income in view of the law prevailing then. The appeals were disposed of accordingly.

What were the issues?

1. Whether the Income-tax Appellate Tribunal was right in law in holding that interest under Section 234B and 234C is mandatory and cannot be quashed even though the appellant was not liable to pay advance tax during the year? (Question of law, concerning Section 234B and 234C). 2. Whether the Tribunal was justified in law in not quashing the interest charged under Section 234B and 234C even though the appellant was not liable to pay advance tax, with the liability to pay advance tax having arisen only after the Supreme Court judgment dated 1.4.1999? (Question of mixed law and fact, concerning Section 234B and 234C). 3. Whether the Tribunal was justified in law in not following the order of a Co-ordinate Bench of the Tribunal? (Question of law, concerning procedural precedent). Assessee's Contention: The Tribunal ought to have followed its own previous order for assessment years 1992-93 and 1993-94, which quashed interest on the ground that the appellant was not liable to pay advance tax. Revenue's Contention: The judgment records no specific arguments for the revenue.

Which sections of the Income-tax Act were involved?

Section 10(29),Section 234B,Section 234C,Section 260A,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appeal No. 258 of 2005 =1= IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH --- Income-tax Appeal No. 258 of 2005 Date of decision: Haryana Warehousing Corporation Panchkula --- Appellant Versus Deputy Commissioner of Income-tax Special Range, Panchkula --- Respondent CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present: Mr. Rajesh Garg, Advocate for the appellant. --- AJAY KUMAR MITTAL, J. This order will dispose of Income-tax Appeal Nos. 258 and 259 of 2005 as common question is involved in both appeals.

Income Tax Appeal No. 258 of 2005 =2= These appeals, under Section 260A of the Income-tax Act, 1961 (for short “the Act’”), have been filed by the assessee against the order dated 15.9.2004, of the Income Tax Appellate Tribunal, Chandigarh Bench “B” Chandigarh, (in short “the Tribunal”), for the assessment years 1995-96 and 1996-97. The facts have been taken from ITA No. 258 of 2005. Briefly, the facts of the case as narrated in the appeal are that Haryana Warehousing Corporation constituted under the Warehousing Corporation Act, 1962, filed

The order continues below.

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