THE COMMISSIONER OF INCOME TAX and ORS vs. READING and BATES EXPLORATION

ITA/17/2003HC UttarakhandUKHC01006218200320 July 2004Author: OTHER3 pages
AI SummaryPartly Allowed

What were the facts?

The Revenue, represented by the Commissioner of Income Tax, Dehradun, filed an appeal under Section 260A of the Income Tax Act, 1961, against a judgment and order dated September 6, 2001, passed by the Income Tax Appellate Tribunal (ITAT), New Delhi. The respondent is Reading & Bates Exploration Company, a non-resident foreign company that executed contracts in India during the assessment year 1991-92 and derived income from these contracts. The appeal challenges the ITAT's direction to the Assessing Officer (AO) to charge interest under Section 234B of the Income Tax Act on the tax on total income declared in the return, rather than on the assessed tax.

What did the High Court hold?

The High Court held that the imposition of interest under Section 234B was not justified without hearing and without reasons, particularly in this case. The Court noted that Section 234B imposes interest which is compensatory, not penal. It also observed that while Section 191 is not overridden by Sections 192, 208, and 209(1)(a)(d), the scheme of Sections 208 and 209 indicates that an assessee must estimate current income and calculate tax. The Court found that the assessee had to estimate their current income, and since a bonafide dispute was pending, the imposition of interest under Section 234B was not warranted. The Court answered the question in the affirmative, in favour of the assessee and against the department. The appeal was disposed of accordingly.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the learned ITAT was legally justified in directing the AO to charge interest under Section 234B of the Income Tax Act on the tax on total income declared in the return, considering that this interest is chargeable on assessed tax as defined by Explanation I below Section 234B, which was amended retrospectively from April 1, 1989. Assessee's Contention: The judgment does not record any specific contentions made by the assessee. However, the reasoning implies that the assessee argued against the levy of interest under Section 234B on the grounds that there was a bonafide dispute pending, and the scheme of Sections 208 and 209 of the Act, concerning advance tax computation, was not fully applicable due to conflicting tribunal decisions and the employer company's failure to deduct tax at source as per law. The assessee contended they could not be faulted for this. Revenue's Contention: The Revenue contended that the ITAT was not legally justified in directing the AO to charge interest under Section 234B on the tax declared in the return, arguing it should be on the assessed tax.

Which sections of the Income-tax Act were involved?

Section 260A,Section 234B,Section 191,Section 192,Section 208,Section 209(1)(a),Section 209(1)(d)

AI-generated summary — verify with the full judgment below

2004:UHC:2054

Assessment Year 1991-92

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Appeal No. 17 of 2003

The Commissioner of Income Tax, Dehradun and another

............. Appellants

Versus

Reading & Bates Exploration Co., C/o Arthur Anderson & Co., 426, World Trade Centre, Barakhamba Lane, New Delhi ...............Respondent

Mr. S.K. Posti, learned counsel for the Tax Department. Ms. Krishi Shukla, learned counsel for the respondent.

Date: 20.07.2004

Hon'ble P.C. Verma, A.C.J. Hon'ble P.C. Pant, J.

1.

This is an appeal under section 260A of the Income Tax Act, 1961 filed by the Revenue against the judgment and order dated 06.09.2001 passed by the Income Tax Appellate Tribunal, New Delhi in I.T.A. Nos. 7146/Del/1994. 2. Respondent is a non-resident foreign company namely, Reading and Bates Exploration Company which, in the year under consideration, executed contracts in India. During the year under consideration, respondent derived income from the contracts executed in India.

3.

The question raised before us is as follows:-

QUESTION:

1.

Whether on the facts and in the circ

The order continues below.

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