M/S LAMINA SUSPENSION vs. THE ASST COMMISSIONER OF INCOME-TAX

IN THE HIGH COURT OF KARNATAKA AT BANGALORE

DATED THIS THE 1ST DAY OF APRIL, 2013 PRESENT

THE HON’BLE MR. JUSTICE N KUMAR AND

THE HON’BLE MR. JUSTICE B. MANOHAR ITA No.3 of 2007 BETWEEN

M/S LAMINA SUSPENSION PRODUCTS LTD., 8TH FLOOR

RAMABHAVAN COMPLEX

KODIALBAIL MANGALORE 575 003

REPRESTED BY ITS

TECHNICAL DIRECTOR SRI T R SHENOY AGED ABOUT 67 YEARS SON OF SRI.GOPALAKRISHNA SHENOY ... APPELLANT

(BY SRI. S PARTHASARATHI, ADV.)

AND

THE ASST COMMISSIONER OF INCOME-TAX CIRCLE-2 (1), CENTRAL REVENUE BUILDING ATTAVAR MANGALORE

... RESPONDENT

(BY SRI E I SANMATHI, ADV.)

ITA FILED U/S.260-A OF I.T.ACT, 1961 ARISING OUT OF ORDER DATED 28-07-2006 PASSED IN ITA NO.42/BANG/2005,

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FOR THE ASSESSMENT YEARS 2000-01, PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO:

I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, II. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BEARING ITA NO.42/BANG/2005 DATED 28-07-2006, INTEREST OF JUSTICE AND EQUITY.

THIS ITA COMING ON FOR HEARING THIS DAY, N. KUMAR J., DELIVERED THE FOLLOWING:

J U D G M E N T

This appeal was admitted to consider the following substantial question of law:

“Whether the appellate authorities were correct in holding that mandatory interest under Section 234B and 234C is not leviable when assessment/intimation are completed under Section 115JA of the Act?”

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revenue and against the assessee. However, the Apex Court in the case of Star India Private Limited Vs. CCE and another reported in (2006) 6 RC 85 explaining the principles underlying the liability to pay interest has held as under:

“The liability to pay interest would only arise on default and it is in the nature of a quasi punishment. Such liability although created retrospectively could not entail punishment by payment of interest with retrospective effect. By a catena of decisions, the Supreme Court has laid down that the payment of interest for delayed payment of tax is compensatory in nature. It is a suffered liability. Though such a liability could be created retrospectively. When such a liability is retrospectively created. The assessee cannot be accused of committing default and he cannot be charged wit interest for such default. As the assessee was under no obligation on the date of the alleged default to pay tax at that particular rate, he cannot be accused of having committed default and made to pay interest as compensating

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the revenue for having not paid the money. The liability to pay advance tax on payable income tax is not disputed. In that view of the matter, the charging of interest on the difference in the advance tax cannot be sustained. Therefore, what emerges from the aforesaid discussion is : a) The assessee is liable to pay advance tax as per the amended provisions of Section 115JB for the relevant period. However, he is not liable to pay interest on the amount due as per the amended provision. b) If he has not paid the advance tax as per the provision existing prior to amendment, he is liable to pay interest on the said amount. c) He has no liability to pay interest on the difference in the tax paid”.

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In the light of the aforesaid judgment of the Apex Court, the substantial question of law is answered in favour of the assessee and against the Revenue.

Ordered accordingly.

Sd/-

JUDGE

Sd/-

JUDGE