D.C.I.T CC - XIII,KOLKATA., KOLKATA vs. M/S JAI BALAJI SPONGE LTD., KOLKATA

We find that the assessee company filed return of income on 13.11.2006 declaring a loss of Rs.17,60,786/-. The assessment was completed u/s 143(3) on 13.06.2008 determining total income of Rs.2,49,680/-. However, tax was charged on book profit which was determined at Rs.40,91,46,563/- u/s 115JB of the Act. We further find that in arriving at book profit an adjustment for Deferred Tax of Rs.10,34,37,589/- was made as per provision to Sec.115JB(2) read with Explanation (i)(h) of the Act as amended by the Finance Act, 2008 w.e.f. 01.04.2001. The Finance Act got assent of Hon'ble President of India only on 10.05.0208. On the basis of the said amendment, tax was determined u/s 115JB of the Act & interest was charged u/s 234B & 234C of the Act after giving due credit for TDS and Advance Tax. However, such liability to pay interest u/s 234B & 234C of the Act, which are penal in nature has been arrived at after adjustment of Deferred Tax as per provision of Explanation (i)(h) to Sub-section (2) as mentioned above. The amendment to the Explanation by way of adding another clause i.e. Clause (i)(h), which did not exist during the AY under consideration, has come into existence by virtue of the enactment of Finance Act, 2008, on 10.05.2008, much after the date of filing of return by the assessee on 13.11.2006. This amendment brought into existence a procedure for determination of MAT after adjustment of a new item i.e. "Deferred Tax" provision. It is this amendment that enhanced the book profit of the assessee by Rs.10,34,37,589/- resulting in payment of bigger liability of advance-tax. But by the time the amendment was brought in, the financial year was already over. Under the circumstances, the payment of advance tax before the due date was impossible and for such failure to pay advance tax, the A.O. charged interest u/s 234B & 234C of the Act. The CIT(A) reversed the order of AO and against the same revenue came in second appeal before the Tribunal.

In view of the above facts and circumstances of the case, we find that the issue now stands covered by the decision of Hon’ble jurisdictional High court in the case of 3 Jai Balaji Sponge Ltd. AY 2006-07 Emami Ltd. Vs. CIT (2011) 337 ITR 470 (Cal) wherein Hon’ble High Court after going through the judgment of Hon’ble Supreme Court in the case of JCIT Vs. Rolta India Ltd. (2011) 330 ITR 470 (SC) held that the assessee has no liability to pay any advance tax which did not exist on the date of payment of such tax or on the last date of the financial year but it arises subsequently by virtue of amendment in the Finance Act, 2008. Hon’ble High Court ruled as under: “A mere reading of those provisions leaves no doubt that the advance tax is an amount payable in advance during any financial year in accordance with the provisions of the Act in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year. Thus, in order to hold an assessee liable for payment of advance tax, the liability to pay such tax must exist on the last date of payment of advance tax as provided under the Act or at least on the last date of the financial year preceding the assessment year in question. If such liability arises subsequently when the last date of payment of advance tax or even the last date of the financial year preceding the assessment year is over, it is inappropriate to suggest that still the assessee had the liability to pay "advance tax" within the meaning of the Act."