C.I.T., BARODA-I, vs. CAMPHOR & ALLIED PRODUCTS LTD.

Facts

The assessee, Camphor & Allied Products Ltd., is a company that underwent amalgamation. For Assessment Year 1989-1990, the accounting period was split due to the amalgamation. The assessee filed a return showing a total loss. The Deputy Commissioner of Income Tax invoked Section 115J to compute a book profit of Rs. 22,55,909/-. The assessee appealed to the Commissioner of Income Tax (Appeals), who partly allowed the appeal. The Revenue then appealed to the Income Tax Appellate Tribunal (ITAT), which also partly allowed the appeal on July 9, 2003. The Revenue has now filed this Tax Appeal before the High Court challenging the ITAT's order.

Held

The High Court held that the Tax Appeal is squarely covered by the decision of the Hon'ble Supreme Court in Commissioner of Income Tax v. Kwality Biscuits Ltd., which confirmed the view taken by the High Court of Karnataka in Kwality Biscuits Ltd. v. C.I.T. The Court also noted that this Court had taken the same view in other similar appeals. Therefore, the High Court found no reason to take a different view. The Court concluded that all questions were answered in favour of the assessee, and the Income Tax Reference was disposed of accordingly. The operative direction was to dispose of the appeal in favor of the assessee, implying the deletion of interest under Sections 234B and 234C was upheld.

Key Issues

1. Whether the Tribunal has substantially erred in law in directing the deletion of interest charged under Sections 234B and 234C of the Income-tax Act, 1961, solely on the ground that the income was determined by invoking the provisions of Section 115J of the Act for assessment year 1989-90? Assessee's Contention: The judgment does not record any specific contentions made by the assessee. However, the High Court's decision implies the assessee's position was that the deletion of interest under Sections 234B and 234C was justified. Revenue's Contention: The Revenue argued that the Tribunal erred in law by deleting the interest charged under Sections 234B and 234C merely because Section 115J was invoked. The Revenue relied on the decision of the Supreme Court in Commissioner of Income Tax v. Kwality Biscuits Ltd. (284 ITR 434) and the Karnataka High Court in Kwality Biscuits Ltd. v. C.I.T. (243 ITR 519), as well as this Court's own decisions in Tax Appeal No. 391/1999 and Tax Appeal No. 390/1999.