Since the position of tax liability was not clear to the assessee, advance tax was not paid: Whether interest u/s 234A, 234B & 234C can be waived?
CHIEF COMMISSIONER OF INCOME TAX & ANR. vs. JIMMICHAN M. VARICATT
HIGH COURT OF KERALA
C.N. Ramachandran Nair & V.K. Mohanan, JJ.
Writ Appeal No. 2469 of 2009
17th December, 2009
(2009) 77 CCH 1163 KerHC
(2011) 330 ITR 0338
Legislation Referred to
Section 234B, 234C
Case pertains to
Asst. Year -,
Decision in favour of:
Revenue
Interest under s. 234B and 234C—Waiver or reduction—Confusion regarding taxability of income—Assessee is not entitled for waiver of interest payable under ss. 234B and 234C merely because he has voluntarily filed the return and paid tax—For waiver of interest payable under ss. 234B and 234C, application has to be considered with specific reference to cls. (b), (c) and (d) of Notification No. 400/234/95/IT, dt. 23rd May, 1996—Clause (e) only lays down a condition for waiver of interest under s. 234A—Satisfaction of the condition under s. cl. (e) does not entitle the assessee for waiver of interest under ss. 234B and 234C—In the instant case, assessee received compensation for surrendering tenancy rights and there was controversy as to whether this receipt is assessable and if so under what head—Since the position of tax liability was not clear to the assessee, advance tax was not paid—Accordingly, interest liability under ss. 234B and 234C is fixed at Rs. 1 lakh by taking a lenient view and the Department is directed to refund the excess amount, if any collected by it
Held :
The finding of the Single Judge with regard to entitlement of the respondent-assessee for waiver of interest payable under ss. 234B and 234C cannot be upheld merely because the assessee has voluntarily filed returns and paid tax. Clauses (a) and (e) Notification No. 400/234/95/IT, dt. 23rd May, 1996 of the notification deal with the same subject, that is circumstances for waiver of interest under s. 234A. However, for waiver of interest payable under ss. 234B and 234C, application has to be considered with specific reference to cls. (b), (c) and (d) of the notification. While cl. (a) refers to disability of an assessee from filing return on account of search and seizure and retention of books of account, cl. (e) deals with other cases where parties were disabled from filing of returns for unavoidable reasons, may be party happens to be out of India, happens to be sick and laid up, etc. However, the finding of the Single Judge that cl. (e) is a condition, satisfaction of which, entitles the assessee to claim waiver of interest under ss. 234B and 234C is not tenable, because it only lays down a condition for waiver of interest under s. 234A. Therefore satisfaction of the condition under cl. (e) does not entitle the assessee for waiver of interest under s. 234B and s. 234C
(Para 1)
The amount assessed is the compensation received by the assessee for surrendering tenancy rights to the building owner. There was controversy as to whether income itself is assessable and if so under what head. Ultimately total income of around Rs. 38 lakhs was subjected to tax on capital gains. The tax demanded is Rs. 7,66,720 and the demand of interest under various provisions of s. 234 is Rs. 4,72,174. The Chief CIT has already waived Rs. 2 lakhs payable under s. 234A. Since the position of tax liability was not clear to the assessee, naturally there was non-payment of advance tax. Therefore some leniency is called for in this case. Accordingly the interest liability under ss. 234B and 234C is fixed at Rs. 1 lakh with direction to the Department to refund excess if any collected or otherwise limit the recovery to Rs. 1 lakh under ss. 234B and 234C
(Para 2)
Conclusion :
For waiver of interest payable under ss. 234B and 234C, application has to be considered with specific reference to cls. (b), (c) and (d) of Notification No. 400/234/95/IT, dt. 23rd May, 1996; satisfaction of the condition under s. cl. (e) does not entitle the assessee for waiver of interest under ss. 234B and 234C; assessee having not paid advance tax in view of the fact that the position of tax liability vis-a-vis compensation received by him for surrendering tenancy rights was not clear, interest liability under ss. 234B and 234C is fixed at Rs. 1 lakh by taking a lenient view.
In favour of :
Revenue
Counsel appeared:
P.K.R. Menon & Jose Joseph, for the Appellants : S. Vijayan Nair, for the Respondent
C.N. RAMACHANDRAN NAIR, J.
Judgment
Appeal is filed against the judgment of the learned Single Judge holding that the respondent-assessee who was granted waiver of interest under s. 234A of the IT Act, 1961 by the Chief CIT is entitled to waiver of interest payable under ss. 234B and 234C as well on the same ground that is cl. (e) in Notification No. 400/234/95/IT, dt. 23rd May, 1996. We have heard standing counsel appearing for the Department and Sri S. Vijayan Nair, counsel appearing for the respondent-assessee. After hearing both sides, we are unable to uphold the finding of the learned Single Judge with regard to entitlement of the respondent-assessee for waiver of interest payable under ss. 234B and 234C of the Act, merely because the assessee has voluntarily filed returns and paid tax. In our view, cls. (a) and (e) of the notification deal with the same subject, that is circumstances for waiver of interest under s. 234A. However, for waiver of interest payable under ss. 234B and 234C, application has to be considered with specific reference to cls. (b), (c) and (d) of the notification. While cl. (a) refers to disability of an assessee from filing return on account of search and seizure and retention of books of account, cl. (e) deals with other cases where parties were disabled from filing of returns for unavoidable reasons, may be party happens to be out of India, happens to be sick and laid up, etc. However, the finding of the learned Single Judge that cl. (e) is a condition, satisfaction of which, entitles the assessee to claim waiver of interest under ss. 234B and 234C of the Act, in our view, is not tenable, because it only lays down a condition for waiver of interest under s. 234A of the Act. We therefore allow the appeal by reversing the judgment of the learned Single Judge and by holding that satisfaction of the condition under cl. (e) does not entitle the assessee for waiver of interest under s. 234B and s. 234C of the Act.
2. Sri Vijayan Nair, counsel appearing for the respondent-assessee, pointed out the peculiar circumstances of the case and the nature of income assessed in this case. The amount assessed is the compensation received by the assessee for surrendering tenancy rights to the building owner. There was controversy as to whether income itself is assessable and if so under what head. Ultimately total income of around Rs. 38 lakhs was subjected to tax on capital gains. The tax demanded is Rs. 7,66,720 and the demand of interest under various provisions of s. 234 is Rs. 4,72,174. The Chief CIT has already waived Rs. 2 lakhs payable under s. 234A. Since the position of tax liability was not clear to the assessee, naturally there was non-payment of advance tax. We therefore feel some leniency is called for in this case. Accordingly we fix the interest liability under ss. 234B and 234C at Rs. 1 lakh with direction to the Department to refund excess if any collected or otherwise limit the recovery to Rs. 1 lakh under ss. 234B and 234C of the Act. The relief granted by us is in addition to the waiver of interest granted by the Chief CIT under s. 234A of the Act.
3. Writ appeal is allowed by reversing the impugned judgment and WPC is allowed granting the relief as above.
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