RASHTRIYA CHEMICAL FETILIZERS LTD,MUMBAI vs. ASST CIT LARGE TAX PAYER UNIT, MUMBAI

Order लेखा लेखा सद�य लेखा लेखा सद�य सद�य ,राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार -PER RAJENDRA, AM- अनुसार Challenging the order,dated 01.12.2009 of Assessing Officer (A.O.) and 20/12/2012,of the CIT(A)-24, Mumbai the Assessee has filed the present appeal.Assessee-company engaged in the manufacture of fertilizer and chemicals filed its return of income on 21/01/1998 declaring total income at Rs.21,196/- lakhs.The Assessing Officer completed the assessment vied order dated determining the income of the assessee at Rs.21,189.25 lakhs. 2.First ground of appeal

23. The grievance projected in Ground No. 4.2 arises under the following circumstances:- The assessee paid a sum of Rs. 26 crores and another sum of Rs. 1,96,74,366/- towards tax liability for A.Y. 1998-99 in the month of April and May 1998 respectively. The Assessing Officer while completing the assessment and raising a demand for outstanding tax and interest adjusted the aforesaid payment towards interest u/s. 234B, According to the assessee, they should be adjusted towards assessed tax by deduction from the assessed tax the aforesaid payment made by the assessee and interest u/s. 234B has to be charged only on the remainder. Learned CIT(A) rejected the plea of the assessee in this regard.

24. We have heard the rival submissions. Similar issue was considered by the ITAT Ahmedabad Bench in the case of Paston Transformer Ltd. Vs. DCIT (2006) 6 SOT 673 (Ahd), wherein it was held as follows :-

2239/M/13-Rashtriya Chemicals & Fertilizers Ltd.

"The controversy under consideration related to interpretation of Explanation to sub-section (1) of section 140A, which provides that where the assessee pays only part of the amount due at the time of filing the return such payment shall first be adjusted towards interest payable, and balance if any, shall be adjusted towards the tax payable. Now, the crux of the matter is whether this adjustment is to be made at the time of making adhoc payment or at the time of filing the return of income. The revenue was of the view that it should be adjusted at the time of adhoc payment, and the assessee's case was that it should be adjusted at the time of filing return i.e. when payment under section 140A was due. The Amending Act, 1987 has amended sub-section (1) of section 140A to make it mandatory for a person to pay before furnishing the return, tax together with interest payable under any provisions of the act for delay in furnishing the return or any default or delay in payment of' advance tax. Proof of payment of such tax and interest is to be attached with the return. Further, an Explanation has been inserted in the said subsection (1) to clarify that where the assessee pays only part of the amount due at the time of filing the return, such payment first be adjusted towards the interest payable, and balance, if any shall be adjusted towards the tax payable. Section 234B and section 140A both are separate and independent sections of the Act. Section 234B(1) provides general situation of calculation of interest. The period for which interest under this section is leviable is form the 1st day of April next following financial year to the date of determination of total income under section 143(l)/regular assessment. The amount on which interest is payable is equal to the assessed tax or the amount by which the advance tax paid falls short of the assessed tax. The facts of controversy under consideration were not related to the above general calculation of interest but fell under section 234B(2). This sub- section (2) of section 234B provides the calculation of interest where tax is paid by the assessee under section 140A or otherwise before the date of determination of total income u/s. 143(l)/completion of regular assessment. The interest would be calculated as per general calculation provided in section 234B(1). The important thing provided is that simple interest under section 234B(1) is to be calculated at the prescribed date. The difference in calculation of interest in section 234B(1) and in section 234B(2) is that in section 234B(2) the simple interest is to be calculated up to the date on which the tax is so paid. In accordance with section 140A, an assessee is required to pay tax under section 140A where any tax is payable on the basis of any return required to be furnished under section 139 or section 142 or as the case may be, section 158BC, after taking into account the amount of tax, if any already paid under any provision of this Act. Thus, at the time of filing return the tax payable under section 140A is due and one required to calculate tax payable on the basis of the return to be furnished. At the time of filing return of income, Explanation to section 140A is required to be considered. The newly inserted (w.e.f, 1.4.1989) Explanation to section 140A(1) takes care of a situation where the amount paid by the assessee under section 140A(1) falls short of the aggregate of the tax and interest as mentioned therein. In such a situation, the amount, so paid is first to be adjusted towards the interest payable and the balance if any, is to be adjusted towards the tax payable. Therefore, the adjustment towards interest payable under section 234B(2) is to be considered only at the time of filing return of income, i.e., when payment of self assessment tax under section 140A is required to be made. Before that, interest under section 234B is independently required to be calculated only in accordance with the provisions provided in section 234B(2)(i). If at the time of filing return it is found short after adjustment of interest out of tax paid under section 140A, further interest is required to be calculated in accordance with section 234B(2)(ii), on balance amount which is assessed to tax minus advance tax and adhoc payment. 2 2239/M/13-Rashtriya Chemicals & Fertilizers Ltd. Therefore the approach of the revenue for calculation of interest under section 234B was not correct. Hence, the Assessing Officer was directed to calculate interest under section 234B as foresaid."

3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA) and made elaborate submissions. After considering the available material, he held every tax payment under the Act was required and made under specific section, that advance tax was paid u/s.201-215, that the tax deducted at source was paid under chapter XVII of the Act,that SAT was paid u/s.140, that interests u/s.215, 220 and 234B was payable after taking into consideration the payment under those sections, that there was no category called ad hoc payment under the Act. He referred to the case of Jindal Exports Ltd. 314 ITR 137) of the Hon’ble Delhi High Court and held that interest was payable to the assessee under chapter XIX of the Act and u/s.234D on the funds, that none of the sections refer to any category called otherwise, that words otherwise mentioned in section 234B (2) is in Contradistinction to payments made u/s.140A, that the payments made on 30/04/0998 and 30/05/1998 were nothing but SAT, that interest u/s.234B was required to be calculative accordingly, that the order of the tribunal in the case of Patson Transformers Ltd.(supra) was quoted by the assessee out of context, that the facts of the case of the assessee were different finally held AO had rightly calculated the interest u/s.234B. 4.Before us,the Authorised Representative (AR) stated that the assessee had used the challans called SAT-challans, that at that point of time no challans were available for ad hoc payments, that the payment made by the assessee should be taken towards tax and not against interests as done by the AO, that provisions of section 234B (ii) were not properly analysed and applied.He referred to the income tax computation of 19/01/2001 and relied upon the case of Tulsyan NEC Ltd.(330 ITR 226) and stated case relied upon by the F AA was not applicable to the facts of the case under consideration, that FAA had wrongly upheld the order of AO.

2239/M/13-Rashtriya Chemicals & Fertilizers Ltd. 4.1.The Departmental Representative (DR) stated that there was no provision of ad hoc payments as per Act, that payment was made under the head SAT. He referred to the case of Roshanlal S Jain (309 ITR 174). He further stated that delay was attributable to the assessee, that the interest to be paid to the assessee was calculated correctly. 5.In his rejoinder, the authorised representative stated that the basic issue was that as to whether the AO had given effect to the order of the Tribunal correctly, that the facts of the case of Roshanlal S Jain were totally different, that in that matter payment was not made for section 234B interest. 6.We have heard the rival submissions and perused the material on record. We find that while deciding the appeal on 12/06/2009, the Tribunal had referred to the order of the Patson Transformers Ltd.(supra).It was specifically mentioned that interest was required to be calculated in accordance with section 234B (2)(i), on balance amount which was assessed to tax minus advance tax and ad hoc payment. In our opinion, that there was no ambiguity in the order of the Tribunal. It had mentioned ad hoc payment had to be taken into consideration while calculating the interest u/s.234B of the Act. One of the main issues raised before the Tribunal at that time was levy of interest u/s.234B. The Tribunal had referred to the order of Patson Transformers Ltd.(supra).The AO was supposed to follow the said order while giving effect. If he was not satisfied with the directions the matter should have been agitated before the Hon’ble Bombay High Court, he had no option to not to follow the directions of the Tribunal. Whether the payment under the head ad hoc payment could be considered or not was not to be decided by the AO. But, he as well as the FAA has not followed the directions of the Tribunal in that regard. 7.We would also like to deal with the cases relied upon by the DR. In the case of Bhagat construction company Ltd.,the issue of nature of ad hoc tax has not been discussed at all.It lays down certain rules about section 234B,but does not deal with the issue before us.In the matter of Roshanlal S Jain( supra),the provisions of section 234B(2)(i) have not been deliberated upon.In short,the cases relied upon by the DR are of no help. 8.Considering the above,we hold that the AO had not followed the order of the Tribunal,that he was specifically directed to consider the ad hoc payment,that he should not have adjusted the payments in question (Rs.26 crores and Rs. 1.99 crores) against the payments of interest u/s. 234B of the Act.Ground no.1 is decided in favour of the assessee.