THE COMMISSIONER OF INCOME TAX vs. M/S.SYNTHITA INDUSTRIAL CHEMICALS

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ITA/353/2009HC KeralaKLHC01025114200918 November 2009Bench: HONOURABLE MR.JUSTICE V.K.MOHANAN,HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeals filed by the Revenue. The Court held that the Tribunal was justified in allowing the set off of credit available under Section 115JAA against the assessed tax for the purpose of determining interest liability under Sections 234B and 234C. The Court found no reason to deviate from the view taken by the Delhi High Court in CIT v. Jindal Exports Ltd. and the Madras High Court in CIT v. Chemplast Sanmar Ltd. While acknowledging that the amended provision was not retrospective, the Court agreed with the High Courts that the amendment was clarificatory in nature. The Court reasoned that if credit is available for adjusting against tax liability, there is no reason why it should not be permitted to be set off against tax liability before determining interest. The Court also noted the absence of an express bar against assessees reckoning the credit under Section 115JAA while making advance tax payments. Consequently, the appeals were dismissed.

What were the facts?

The assessee, M/s. Synthite Industrial Chemicals Ltd., had its assessment completed by the assessing officer, who allowed set off of credit available under Section 115JAA against assessed tax for calculating interest under Sections 234B and 234C. The Commissioner of Income Tax (Revenue) invoked suo motu revisional powers under Section 263, cancelling the assessment. The assessee appealed to the Tribunal. The appeals before the High Court arise from the Tribunal's decision which upheld the assessee's entitlement to set off the credit for interest calculation purposes. The Revenue's appeals challenge this finding.

What were the issues?

1. Whether the Tribunal was justified in holding that the respondent-assessee was entitled to set off credit available in the previous year's assessment under Section 115JAA against the assessed tax for the purpose of determining interest liability under Sections 234B and 234C of the Income Tax Act, 1961. Assessee's Contention: The assessee contended that the credit available under Section 115JAA should be allowed to be set off against tax liability before determining interest under Sections 234B and 234C. They relied on the decisions of the Delhi High Court in CIT v. Jindal Exports Ltd. and the Madras High Court in CIT v. Chemplast Sanmar Ltd. Revenue's Contention: The Revenue contended that the amendment to Section 234B by the Finance Act 2006, effective from 1.4.2007, which authorized the set off of credit under Section 115JAA, was substantive and expressly made prospective, and therefore, not applicable retrospectively. The Revenue argued against the High Courts' view that the provision was clarificatory.

Which sections of the Income-tax Act were involved?

Section 115JAA,Section 234B,Section 234C,Section 263

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN WEDNESDAY, THE 18TH NOVEMBER 2009 / 27TH KARTHIKA 1931 ITA.No. 353 of 2009() --------------------- ITA.250/COCH/2003 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT: ------------------------------ THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): --------------- M/S.SYNTHITE INDUSTRIAL CHEMICALS LTD., AJAY VIHAR, M.G.ROAD, COCHIN. ADV. SRI.P.BALAKRISHNAN (E) THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 18/11/2009, ALONG WITH ITA 1226 OF 2009 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

C .N. RAMACHANDRAN NAIR & V.K. MOHANAN, JJ. -------------------------------------------- I. T. A. No. 353 & 1226 OF 2009 -------------------------------------------- Dated this the 18th day of November, 2009 JUDGMENT Ramachandran Nair, J. The only question raised is whether the Tribunal was justified in holding that the respondents were entitled to seek for set off of credit available in the previous year's assessment completed under Section 115JAA against assessed tax for the purpose of determination of interest liability under Section 234B and Section 234C of the I.T. Act. In fact, in the course of completion of assessment, the assessing officer allowed set off and worked the interest under Sections 234B and C on the net deficiency. However, the Commissioner in exercise of suo motu revisional power under Section 263 cancelled the assessment against the assessees filed appeals before the Tribunal. We notice that subsequent to the order issued by the Tribunal, there has been a decision of the Delhi High Court in CIT V. JINDAL EXPORTS LTD., (2009) 314 I.T.R. 137 (Del.), followed by the Madras High Court reported in CIT V. CHEMPLAST SANMAR LTD.,(2009) 314 I.T.R.

2 231, which are rendered based on later amendment introduced to Section 234B by Finance Act 2006 with effect from 1.4.2007. It is seen that corresponding amendment is made to Section 234A also, so that credit available can be set off against liability to pay tax under Section 140A along with return. Even though amended provision which authorises set off of credit available under Section 115JAA is not retrospective, the Delhi High Court has held that the provision is only clarificatory in nature. Standing counsel contended that the provision introduced is substantive and is expressly made prospective. However, we are unable to accept this contention for the simple reason that such an interpretation will cause heavy hardship to the parties because if credit is available for adjusting against tax liability, we see no reason why it should not be permitted to be set off against tax liability before determination of liability for interest due under Sections 234B and C. There is also no express bar against assessees reckoning the credit available under Section 115JAA while making payment of advance tax. We therefore find no ground to deviate from the view of the Delhi and Madras High Courts in the decisions above referred.

3 Consequently taking the view that the amended provision is clarificatory in nature, we dismiss the two appeals filed by the department. (C.N.RAMACHANDRAN NAIR) Judge. (V.K. MOHANAN) Judge. kk

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