DCIT (LTU-2), MUMBAI vs. RELIANCE INDUSTRIES LTD., MUMBAI

The revenue has raised the following grounds of appeal: 1. “Whether, on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was right in directing the Assessing Officer to not to levy interest u/s 234B of the Act, on the addition made in Book Profit under MAT with respect to deduction on export profit u/s 80HHC(3), ignoring the amendment made by the Finance Act 2011 to section 115JB with retrospective effect from 01.04.2005”

The Ld. DR submitted that the Ld.CIT(A) was erred in deleting the additions made by the Ld. AO towards interest u/s 234B of the Act, on the additions made in book profit under MAT provisions with respect to deductions on export profit u/s 80HHC(1B), ignoring the amendment made by the Finance Act, 2011 to section 115JB with retrospective effect from 01/04/2005.

The Ld. AR, on the other hand, strongly supporting order of the Ld.CIT(A) submitted that this issue is squarely covered in favour of the assesse by the decision of ITAT, Mumbai in assessee own case for very same AY 2005-06, vide order dated 03/06/2016, where it was categorically held that 234B interest shall not be levied on the addition made on account of retrospective amendment to the Act. He, further submitted that this issue is also covered by the decision of Hon’ble Bombay High Court, in the case of CIT vs JSW Energy Limited (2015) 379 ITR 36, where it was held that where, the assessee computed book profit, as per prevailing law, no interest u/s 234B could be levied, consequent to inclusion of various items, while computing books profit, as per Explanation to section 115JB, which has been brought on statute by the Finance Act, 2008 with retrospective effect from 01/04/2001.

We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The issue involved in the present appeal, i.e, whether interest u/s 234B of the Act, could be levied for shortfall in payment of advance tax or not, when such shortfall in payment of taxes was on account of additions made to total income, consequent to retrospective amendment made to the Act, is no longer a res-integra. The co-ordinate bench of ITAT, in assessee own case for AY 2005- 06 in vide order dated 03/06/2016 had considered an identical issue, in light of additions made by the Ld. AO towards levy of interest u/s 234B of the Act, on the additions made towards book profit computed u/s 115JB of the I.T.Act, 1961, on the basis of retrospective amendment to the Act, and held that the assessee should not be fastened with interest liability on additions made on the basis of subsequent amendment, since, the assessee could not have foreseen the liability, at the time of estimating his income for the purpose of payment of advance tax. We further noted that the Hon’ble Bombay High court, in the case of CIT vs JSW Energy Limited (supra) had considered an identical issue, in light of additions made to book profit computed u/s 115JB, on the basis of retrospective amendment brought in by Finance Act, 2008 with effect from 01/04/2001 and held that where, assesse computed book profit as per prevailing law, no interest u/s 234B could be levied, consequent to inclusion of various items, while computing book profit, as per Explanation to section 115JB, which has been brought on statute by Finance Act, 2008 with retrospective effect from 01/04/2001. We further noted that the Hon’ble Bombay High court, in the case of CIT vs KPMG in ITA No. 690/2017, dated 24/09/2009, has observed that a party cannot be called upon to perform an impossible Act, i.e to comply with the provision, which was not in force at the relevant time. The sum and substance of the ratios laid down by the Hon’ble High court of Bombay is that liability arising on account of retrospective amendment could not be fastened on the assessee, where the assessee could not have foreseen the liability, at the time of estimating his income for the purpose of payment of advance tax. In this case, additions was made to book profits computed u/s 115JB, towards deduction claimed on eligible profit u/s 80HHC of the Act, on the basis of retrospective amendment to Section 115JB of the Act, by omitting clause (iv) to (vii) to explanation 1 by the Finance Act, 2011 with effect from 01/04/2005. Further, at the time of payment of advance tax, said provisions were very much was on statute, and assessee was entitled to deduct amount claimed as deduction u/s 80HHC from book profit u/s 115JB of the Act. Therefore, the assessee has taken the advantage of provisions as was there in statue at the time of payment of advance tax and hence, the assesee cannot be expected to pay advance tax on the part of disputed amount. Therefore, we are of the considered view that no interest can be levied u/s 234B of the Act, for shortfall in payment of advance tax on the basis of retrospective amendment to law. The Ld.CIT(A), after considering relevant submissions of the assessee and also, by following the order of the ITAT in assessee own case for very same AY 2005-06 has rightly deleted additions made by the Ld. AO towards levy of interest u/s 234B of the I.T.Act, 1961. Hence, we are inclined to uphold the order of the Ld.CIT(A) and dismiss, appeal filed by the revenue.

In the result, appeal filed by the revenue is dismissed..