C.I.T. LDH. vs. M/S HERO CYCLE P. LTDH.

The Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh has referred for opinion of this Court following question of law in pursuance of order passed by this Court dated 29.11.1995 in ITC No.180 of 1994:- “Whether, on the facts and in the circumstances of the case, the ITAT was right in law in holding that in this case, no interest is chargeable under section 7C of the Companies (Profit) Surtax Act, 1964?”

The assessee company was liable to pay surtax under the provisions of the Companies (Profits) Surtax Act, 1964 (for short, ‘the Act’) and also to pay advance tax under the said provisions. Section 7C of the Act provided that if the advance surtax paid on its own estimate was below the specified percentage of the tax finally assessed, the assessee was liable to pay interest. The Assessing Officer found that surtax liable to be determined was much higher than the advance tax paid and accordingly demand for interest was raised under section 7C of the Act. The said view was upheld by the appellate authority. On further appeal to the Tribunal, it was held that bonafide failure of the assessee to anticipate the tax which may be assessed will be ground for not levying interest under section 7C of the Act. It was further observed that difference in the amount returned and the amount assessed was on account of retrospective amendment introduced to sections 224 and 228 of the Act w.e.f 1.4.1962 vide Finance Act, 1990 which related to the import entitlement, taxability of which was subject matter of different interpretation on account of divergence of judicial opinion. Similarly, second issue was relating to claim for depreciation which was finally disallowed but the view of the assessee in making claim was bonafide. The Tribunal held :- “We have considered the rival contentions and we find that the assessee had filed return claiming certain deductions and expenditure, some of which were accepted and some disallowed. As we have already seen, the question relating to receipt on sale of import entitlements was a complex and contentious issue and it was for that reason that the Government brought an amendment in the year 1990 with retrospective effect. We, therefore, find force in the argument that the claim made by the assessee was genuine, bona fide and legitimate, though it ultimately came to be disallowed with the help of retrospective amendment of law. This amendment came as late as in the year 1990. Therefore, we find that this case where the assessee could not be penalized for not filing a true statement of income and a correct estimate of advance surtax. We see a genuine claim of the assessee in the matter. We have also seen that certain claims relating to deductions and expenditures have been allowed by the Tribunal also. These reliefs also go to suggest that the assessed income was not acceptable by the assessee for certain legitimate reasons. On accounts of the reliefs given by the Tribunal, we again come to the conclusion that the returned income could not be said to be totally incorrect or unfounded. The assessee was given substantial relief regarding weighted deduction and depreciation. He did not press his claim for rectification charges, which involved substantial amount, because the assessee had received relief either in enxt assessment year or in case of another concern of the same group. Therefore, it again goes to establish that the assessee’s claim was bonafide and based on sound footing.”

We have heard learned counsel for the parties and perused the record.

Learned counsel for the revenue submits that in view of clear language of Section 7C of the Act and having regard to the fact that the levy of interest was compensatory, even if the view of the assessee in self assessment of the advance tax was bonafide, liability to pay interest will stand. He places reliance on judgment of the Hon’ble Supreme Court in CIT v. Anjum M.H.Ghaswala and others, (2001) 252 ITR 1, wherein interpreting provisions of Section 234C of the Income Tax Act, 1961 which are in pari materia with section 7C, it was held that the interest would be leviable in such situation. He also places reliance on judgment of this Court in CIT v. Upper India Steel Mfg. and Engg. Co. Limited, (2005) 279 ITR 123 and judgment of Delhi High Court in CIT v. Jindal Exports Limited and others, (2009) 314 ITR 137. 6. Learned counsel for the assessee on the other hand has relied upon judgment of the Allahabad High Court in Amrit Banaspati Co. Limited v. CIT and another, (2002) 255 ITR 111 dealing with interpretation of section 7C of the Act. The said judgment is prior to Anjum M.H.Ghaswala and cannot be preferred to view expressed by the Hon’ble Supreme Court.

In view of judgment of the Hon’ble Supreme Court in Anjum M.H.Ghaswala, the question referred has to be answered in favour of the revenue and against the assessee. We order accordingly.

The reference is disposed of. (Adarsh Kumar Goel) Judge July 16, 2010 ( Alok Singh) ‘gs’ Judge 4