KERALA STATE INDUSTRIAL DEVELOPMENT vs. THE CHIEF COMMISSIONR OF INCOME TAX

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WP(C)/6757/2011HC KeralaKLHC01049603201121 July 2023Author: HONOURABLE MR. JUSTICE D. K. SINGH5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Income Tax authorities did not err in rejecting the petitioner's claim for waiver of interest. The Court found that the CBDT Circular dated June 26, 2006, did not provide grounds for waiver in the circumstances presented by the petitioner, specifically where there was a failure to pay advance tax. The reasoning was that the Circular's conditions for waiver were not met. The petitioner's reliance on the Supreme Court judgment in Star India (P) Ltd v. Commissioner of Central Excise, Mumbai was deemed irrelevant as that case did not consider a similar Circular and pertained to the Central Excise Act. Therefore, the writ petition was dismissed.

What were the facts?

The petitioner, Kerala State Industrial Development Corporation Ltd. (KSIDC), filed a writ petition before the High Court of Kerala challenging orders dated March 15, 2002, by the Additional Commissioner of Income Tax and August 18, 2010, by the Chief Commissioner of Income Tax. These orders rejected KSIDC's application for waiver of interest levied under Sections 234A, 234B, and 234C of the Income Tax Act, 1961. The authorities denied the waiver based on a Circular issued by the Central Board of Direct Taxes (CBDT) on June 26, 2006. The petitioner argued that the authorities erred in rejecting their claim, while the respondents maintained that the Circular did not permit waiver in cases of failure to pay advance tax.

What were the issues?

1. Whether the Income Tax authorities erred in rejecting the petitioner's claim for waiver of interest under Sections 234A, 234B, and 234C of the Income Tax Act, 1961, based on the CBDT Circular dated June 26, 2006? (Question of law and fact) Assessee's Contention: The petitioner contended that the authorities' rejection of their waiver claim was erroneous. While not explicitly stated, the implication is that the Circular should have been interpreted to allow for waiver under their circumstances. Revenue's Contention: The revenue argued that the Circular dated June 26, 2006, does not grant the authorities the discretion to waive interest if the assessee has failed to pay the required advance tax. The authorities rejected the claim on this ground.

Which sections of the Income-tax Act were involved?

Section 234A,Section 234B,Section 234C

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH FRIDAY, THE 21ST DAY OF JULY 2023 / 30TH ASHADHA, 1945 WP(C) NO. 6757 OF 2011 PETITIONER/S: KERALA STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD., KESTON ROAD, KOWDIYAR, THIRUVANANTHAPURAM-695003, REPRESENTED BY ITS COMPANY SECRETARY AND HEAD LEGAL. BY ADV KRISHNAN HOLDING FOR ADV SRI.P.U.SHAILAJAN, SC, KSIDC RESPONDENT/S: 1 THE CHIEF COMMISSIONER OF INCOME TAX, INCOME TAX DEPARTMENT, KOWDIYAR, THIRUVANANTHAPURAM-695003. 2 THE ADDITIONAL COMMISSIONER OF INCOME TAX, (ASSESSMENT) SPECIAL RANGE, THIRUVANANTHAPURAM. 3 THE CENTRAL BOARD FOR DIRECT TAXES, GOVERNMENT OF INDIA, MINISTRY OF FINANCE, NORTH BLOCK, NEW DELHI. BY ADVS. SRI.P.K.R.MENON SR.COUNSEL GOI TAXES SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING COME UP FOR HEARING ON 21.07.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C) No.6757/2011 -2-

J U D G M E N T

This petition has been filed under Article 226 of the Constitution of India impugning the orders dated 15th March 2002 passed by the Additional Commissioner of Income Tax, Thiruvananthapuram, and the order dated 18th August 2010 passed by the Chief Commissioner of Income-tax, Thiruvananthapuram, on an application filed by the petitioner seeking waiver of interest levied under Section 234A, 234B and 234C of the Income Tax Act 1961. 2. The Assessing Authority, as well as the Chief Commissioner, have rejected the claim of the petitioner based on the Circular issued by the CBDT dated 26.06.2006. 3. The relevant part of the said Circular has been extracted in the order passed by the Chief Commissioner of Income Tax, which reads as under:

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“Where any income was not chargeable to income-tax in the case of an assessee on the basis of any order passed by the High Court within whose juri iction he is assessable to income-tax, and as a result, he did not pay income-tax in relation to such income in any previous year, and subsequently, in consequence of any retrospective amendment of law or the decision of the Supreme Court of India, or as the case may be, a decision of a larger Bench of the juri ictional High Court (which was not challenged before the Supreme Court and has become final), in any assessment or re-assessment proceedings the advance tax paid by the assessee during such financial year is found to be less than the amount of advance tax payable on his current income, and the assessee is chargeable to interest under section 234B or section 234C, and the Chief Commissioner/Director General is satisfied that this is a fit case for reduction or waiver of such interest".

4.

The submission of the learned counsel for the petitioner has been repelled by the two authorities on the ground that the said Circular does not grant freedom to the authorities to grant a waiver on interest if the assessee has failed to pay the advance tax, as is required under the Amended Act to be paid by him.

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5.

The learned Counsel for the petitioner, Mr Krishnan, relies on the judgment of the Supreme Court in Star India (P) Ltd v. Commissioner of Central Excise, Mumbai1. In the said case, however, no such Circular was considered, and the said judgment pertains to the Central Excise Act and not to the Income Tax Act 1961. 6. Having considered the provisions of the Circular dated 26.06.2006, I do not find that the Income Tax authorities, while rejecting the petitioner’s claim, have resulted in an error. In view thereof, I see no merit in this writ petition. The writ petition is rejected. Interim Order, if any, also stands vacated. DINESH KUMAR SINGH JUDGE

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1 2005 KHC 1379 -5-

Appendix — schedule of exhibits
APPENDIX PETITIONER’S EXHIBITS P1 TRUE COPY OF THE ASSESSMENT ORDER DATED 20.01.1999 FOR THE YEAR 1996-97 ISSUED BY THE 2ND RESPONDENT. P2 TRUE COPY OF ORDER DATED 26.03.1999 FOR THE YEAR 1996-97 ISSUED BY THE 2ND RESPONDENT. P3 TRUE COPY OF ORDER DATED 15.03.2002 FOR THE YEAR 1996-97 ISSUED BY THE 2ND RESPONDENT. P4 TRUE COPY OF PETITION FILED BY THE PETITIONER BEFORE THE 1ST RESPONDENT. P5 TRUE COPY OF CBDT ORDER DATED 26.06.2006. P6 TRUE COPY OF ORDER DATED 18.08.2010 ISSUED BY THE 1ST RESPONDENT.

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