COMMISSIONER OF INCOME TAX vs. GUJARAT ALKALIES & CHEMICALS LTD.

ITR/9/1993HC GujaratGJHC24021143199309 February 2005Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MS. JUSTICE HARSHA DEVANI5 pages
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What were the facts?

The Commissioner of Income Tax (Revenue) challenged an order of the Income Tax Appellate Tribunal (Tribunal) that cancelled interest charged under Section 217 of the Income Tax Act, 1961. The assessment year in question is 1982-83. The Income Tax Officer had charged interest of Rs. 39,57,885/- under Section 217(1)(a) in his assessment order dated March 28, 1985. The Commissioner (Appeals) confirmed this levy, stating that the assessee was obligated to file an advance tax statement even if it was 'Nil'. The assessee appealed to the Tribunal, which cancelled the interest. The High Court was asked to decide on a reference made by the Revenue.

What did the High Court hold?

The High Court held that the Tribunal was correct in cancelling the interest charged under Section 217 of the Income Tax Act. The Court reasoned that Section 209A(1)(a) requires a person whose current income is likely to exceed the amount specified in Section 208(2) to file a statement of advance tax payable. However, the computation of advance tax under Section 209, particularly Section 209(1)(a)(i) and Section 209(1)(d)(i), involves using the latest assessed income or self-assessment tax paid. In this case, the latest assessed income for AY 1977-78 was a loss, and there was no self-assessment tax paid for subsequent years. Consequently, the figure of advance tax payable was 'Nil'. The Court found no legislative intent to require the filing of a 'Nil' statement when no advance tax was payable. The entire exercise of advance tax is for ensuring tax payment. Furthermore, applying commercial principles, the Revenue could not claim interest when it was not legally entitled to any advance tax. Therefore, the question was answered in favour of the assessee.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in cancelling the interest charged under Section 217 of the Income Tax Act, 1961? Assessee's contentions: The assessee argued that the Tribunal's order was justified considering the scheme of advance tax provisions. They relied on decisions from the Bombay High Court in *Patel Aluminium Pvt. Ltd. v. Miss K.M. Tawadia* and the Calcutta High Court in *CIT v. Indian Molasses Co. (P) Ltd.* and *Director of Income-Tax (Exemption) v. Shree Sitaram Public Charitable Trust*. Revenue's contentions: The Revenue contended that even if the advance tax statement was computed as 'Nil', the obligation to file it remained. They argued that if the total income exceeded the amount specified in Section 208(2) of the Act, the obligation to submit the statement was absolute, and interest was a natural consequence. The Revenue also argued that the Tribunal erred by considering extraneous factors like the assessment for Assessment Year 1977-78, and that only the immediate previous year's income should be considered.

Which sections of the Income-tax Act were involved?

Section 217,Section 209A,Section 208,Section 209,Section 140A,Section 211

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 9 of 1993

For Approval and Signature:

HON'BLE MR.JUSTICE D.A.MEHTA and HON'BLE MS.JUSTICE H.N.DEVANI

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : YES

3.

Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the concerned : NO Mag

The order continues below.

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