COMMISSIONER OF INCOME TAXD vs. KANCHANJANGA INVSTMENT PVT.LTD..

ITR/176/1995HC GujaratGJHC24022499199507 November 2001Author: HONOURABLE MR. JUSTICE MOHIT S. SHAH,HONOURABLE MR. JUSTICE D.A.MEHTA4 pages
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What were the facts?

This is an Income Tax Reference initiated by the revenue against an order of the Income-tax Appellate Tribunal (ITAT) for assessment years 1983-84 and 1984-85. The ITAT had deleted additions made by the Assessing Officer (AO) concerning interest receivable from M/s. Sercon P. Ltd. and M/s. SMCEPL. Additionally, the ITAT directed the AO to allow credit for Tax Deducted at Source (TDS) for the calculation of interest under Section 215, even though the TDS amount had not yet been credited to the Central Government. The High Court heard arguments from both the revenue and the assessee.

What did the High Court hold?

For the first two questions concerning the deletion of additions on account of interest receivable from M/s. Sercon P. Ltd. and M/s. SMCEPL, the High Court, relying on its previous orders in similar references between the same parties (Income Tax Reference No. 63 of 1985, dated 28-2-2000; Income-tax Reference No. 195 of 1984, dated 20-9-1999; Income-tax Reference No. 290 of 1985, dated 8-1-2000; Income-tax Reference No. 25 of 1988, dated 11-1-2001; and Income-tax Reference No. 127 of 1989, dated 4-10-2001), remitted the case back to the Tribunal to pass appropriate orders considering the observations made in Income-tax Reference No. 195 of 1984. For the third question regarding TDS credit for Section 215 interest calculation, the High Court followed its decision in CIT vs. Ranoli Investment P. Ltd., 235 ITR 433. The Court held that 'assessed tax' for Section 215 purposes should be reduced by the amount of tax deductible under Sections 192 to 194D and 195. The liability to deduct tax arises at the time of credit of income, and if not deducted then, it remains payable by the assessee directly. However, the principle established in Ranoli Investment P. Ltd. supports the view that tax deductible at source should be reduced from the tax determined on regular assessment before calculating interest under Section 215. Therefore, the answer to question No. 3 was in favour of the assessee.

What were the issues?

1. Whether the Appellate Tribunal was correct in law and on facts in deleting the addition on account of interest receivable from M/s. Sercon P. Ltd.? 2. Whether the Appellate Tribunal was correct in law and on facts in deleting the addition in respect of the amount of interest receivable from M/s. SMCEPL? 3. Whether the Appellate Tribunal was correct in law and on facts in directing the Assessing Officer to allow credit of the amount of TDS for calculation of interest u/s. 215, although the amount of TDS had not been credited to the Central Government? Assessee's contentions: Not recorded. Revenue's contentions: The revenue contended that the ITAT erred in deleting the additions related to interest receivable and in allowing credit for TDS not yet deposited with the government for calculating interest under Section 215. The revenue likely argued that the interest was accrued and taxable, and TDS credit should only be granted upon actual deposit with the government. For the first two issues, the revenue relied on previous orders of the High Court in similar references between the same parties.

Which sections of the Income-tax Act were involved?

Section 215,Section 194A,Section 209,Section 191,Section 190,Section 198,Section 199,Section 200,Section 202,Section 203,Section 205

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 176 of 1995

For Approval and Signature:

Hon'ble MR.JUSTICE M.S.SHAH and Hon'ble MR.JUSTICE D.A.MEHTA

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

2.

To be referred to the Reporter or not? : NO 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 Civil Judge? : NO

The order continues below.

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