ORDER
R.S. Syal, A.M.
This appeal by the assessee is directed against the order passed by the CIT (A) on 18-10-2004 in relation to the assessment year 2001-2002.
2. First ground deals with the denial of the benefit of deduction claimed by the assessee under section 80-IA of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’), amounting to Rs. 3,32,43,204 which was claimed on the net income shown by virtue of execution of work on Built-Operate-Transfer (hereinafter referred to as the BOT) basis.
A. Factual scenario
Facts leading to this dispute are that the assessee filed its return showing income of Rs. 11,13,360. As the income-tax payable on the total income as computed under the Act was less than 7.5 per cent of its book profits, the assessee paid tax @ 7.5 per cent of the book profits under section 115JB of the Act. During the year, the assessee derived income from payment of road on contract basis, execution of work on BOT basis and providing funds on interest. It had shown toll tax receipts of Rs. 6,93,06,756 from the execution of work on BOT basis and after claiming operating and maintenance expenses at Rs. 3,60,63,552, showed a profit of Rs. 3,32,43,204. This amount was claimed as deductible under section 80-IA(4)(i) of the Act. On being called upon to show the eligibility of deduction, it was stated on behalf of the assessee that the firm M/s Chetak Enterprises, a partnership firm, which was being assessed to tax for the last several years, continued to remain as a partnership firm upto 28-3-2000. The said firm was converted into company, namely, M/s Chetak Enterprises (P) Ltd., under Part IX of the Companies Act, 1956, and certificate of incorporation was issued by the Registrar of Companies, Jaipur, on 28-3-2000. Regarding the eligibility for deduction under section 80-IA(4)(i), it was stated that the company had been sanctioned a tender for the construction of road for 10 kms. It was put forth that the designate authority, Chief Engineer (Roads), Rajasthan, Jaipur, sanctioned the tender and made direction to the Ex. Engineer, PWD, Chittorgarh, for the construction of the road effective from 15-12-1999. It was explained that as per the terms and conditions, the time period to hand over the road so constructed was 30 months and 21 days and the assessee was to construct the road and to start collection of toll tax. It was pointed out that the construction of the road was completed on 27-3-2000, by way of incurring expenditure of Rs. 3,43,24,533, which amount was shown as BOT work-in-progress. Thereafter, the road was inaugurated on 1-4-2000 and from the same date, the company started collection of toll tax and by the year end, the total collection was at Rs. 6.93 crores against which, operational and maintenance expenses of Rs. 3,60,63,551 were claimed and profit from BOT was shown at Rs. 3.32 crores which was claimed as deduction under section 80-IA(4)(i). Necessary agreements were also filed with the assessing officer. The assessing officer perused the relevant material and show-caused the assessee as to why the deduction claimed under section 80-IA(4)(i) may not be disallowed as the firm M/s Chetak Enterprises who obtained the contract and completed the work, ceased to exist on 28-3-2000 and the said firm did not qualify for the said deduction for non-fulfilment of mandatory requirements. It was claimed by the assessee that M/s Chetak Enterprises (P) Ltd., Udaipur, was earlier being assessed to tax in the status of registered firm consisting of four partners, the constitution of which underwent change with effect from 1-4-1999, as a result of which three more partners were admitted to the firm. It was submitted that Shri Hukmichand Jain, the managing partner of the firm, made an agreement dated 1-12-1999 with the Chief Engineer (Road), PWD, Jaipur, for the execution of work on BOT basis. It was claimed that, though this agreement was executed by Shri Hukmichand in the capacity of managing partner of the firm, but the firm was converted into company under the name and style M/s Chetak Enterprises (P) Ltd., Udaipur, under Part IX of the Companies Act, 1956. Copy of memorandum was also furnished to the assessing officer. It was explained that as soon as the said partnership firm was converted into a company, an intimation was given to the Chief Engineer (Roads), PWD, Government of Rajasthan, who accepted the conversion of the firm into company. It was claimed that by virtue of the conversion of the said firm into company as per Part IX of the Companies Act, 1956, the assessee obtained the status of tenderer so as to execute the agreement entered into by the erstwhile firm. The assessing officer negatived the claim of deduction under section 80-IA(4)(i) on two counts; viz.
(i) The bid for the said work was made by the firm M/s Chetak Enterprises. The work order was issued to the said firm. Agreement for construction of the said road on BOT basis was signed by the Government of Rajasthan with the said firm and the work was also completed on 27-3-2000 for which certificate was issued in favour of the firm on 31-3-2000. Hence, the mandatory requirement of sub-clause (a) of section 80-IA(4)(i), being the company owning the infrastructure facility was not complied with.
(ii) No agreement in terms of sub-clause (b) of section 80-IA(4)(i) was made by the assessee-company with the Government of Rajasthan for collection of toll tax on 1-4-2000 in supersession of original agreement dated 1-12-1999 signed by the Government of Rajasthan with the firm M/s Chetak Enterprises.
It was also held that proviso to sub-clause (c) of section 80-IA(4)(i) was not applicable. The assessing officer further held that the decision of the Indore Bench of the Tribunal in the case of Ayush Ajay Construction Ltd. v. ITO (2001) 79 ITD 213 (Ind), cited by the assessee, was not acceptable as it was not clear whether the department had finally accepted that order or not. In the first appeal, the learned CIT (A) echoed the action of the assessing officer. He distinguished the aforesaid order of the Indore Bench by holding that in that case a tripartite agreement was entered into which was not so in the instant case.
B. Assessee’s view point
Before us, the learned counsel for the assessee strenuously argued that the authorities below were not justified in denying the deduction as the assessee came into being in terms of Part IX of the Companies Act. It was further contended that the learned CIT (A) failed to consider the proviso below sub-clause (c) of section 80-IA(4)(i) in the right perspective while rejecting the assessee’s claim in this regard. He took us through the relevant pages of the paper book to bring home the point that the assessee was entitled to deduction. His further submissions were the reiteration of the arguments made before the authorities below.
C. Departmental stand
In the opposition, the learned Departmental Representative relied on the impugned order and contended that the assessee was not entitled to deduction because the same was available only to the companies registered in India, whereas the agreement for construction of road and collection of toll tax was entered into by the State Government with the firm M/s Chetak Enterprises. He emphasised that since the aforesaid conditions entitling the assessee to deduction under this section remained uncomplied with, the learned CIT (A) rightly negatived the assessee’s claim.
D. Statutory provision
It would be apposite to consider the relevant portion of section 80-IA as under:
“(4) This section applies to ……
(i) any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfils all the following conditions, namely:….
(a) it is owned by a company registered in India or by a consortium of such companies;
(b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility;
(c) it has started or starts operating and maintaining the infrastructure facility on or after the 1-4-1995:
Provided that where an infrastructure facility is transferred on or after the 1-4-1999 by an enterprise which developed such infrastructure facility (hereinafter referred to in this section as the transferor enterprise) to another enterprise (hereinafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place.”
E Finding
(i) Section 80-IA(4)(i), sub-clause (a)
(a) The first and the foremost factor which weighed with the assessing officer for not allowing deduction is that the eligible enterprise was owned by the firm M/s Chetak Enterprise, whereas the sub-clause (a) stipulates that it should be owned by a company registered in India.
The facts as set out above, clearly indicate that the erstwhile firm M/s Chetak Enterprises entered into an agreement with the Government of Rajasthan and continued to incur expenses on the construction of road, which amounted to Rs. 3.43 crores as on 27-3-2000 when the road was completed. On 28-3-2000 the said firm was converted into company, M/s Chetak Enterprises (P) Ltd., Udaipur, under Part IX of the Companies Act. A perusal of the main objects of the memorandum of association of the assessee-company indicates to the effect that: “On conversion of the partnership firm into a company limited by shares under these presents to acquire by operation of law under Part IX of the Companies Act, 1956, as going concern and continue the partnership business now being carried on under the name and style of M/s Chetak Enterprises including all its assets, movables and immovables, rights, debts and liabilities in connection therewith”. On conversion of the firm into company on 28-3-2000, intimation in this regard was given to the Chief Engineer (Road), PWD, Rajasthan, Jaipur, who noted the change, cancelled the registration of the firm and granted a fresh registration code to the assesseecompany. The road was inaugurated on 1-4-2000 and toll tax was collected by the assessee-company. The assessing officer has not doubted the compliance with the other conditions as enshrined under section 80-IA(4)(i). In his opinion, the deduction is available only to an enterprise which is owned by a company registered in India and since the construction of road was done by the firm, the assessee-company was not entitled to deduction.
At this juncture, it would not be out of place to consider the meaning and effect of conversion of partnership firm into a, company under Part IX of the Companies Act, 1956. Circular No. 5/99, dated 19-5-1999 vide file 17/45/98CL V and Press Release dated 5-8-1999 issued under the Companies Act authorised the Registrar of Companies to continue to register partnership firms under Part IX of the Companies Act as joint stock companies, provided the other conditions prescribed under the Companies Act, 1956, are fulfilled. It has further been clarified that a partnership firm cannot be prevented from being registered as a company under Part IX of the Companies Act, 1956, subject to the fulfilment of other requirements of company law. Section 575 of the Companies Act provides that all properties, movable and immovable (including actionable claims) belonging to or vested in a company at the date of its registration in pursuance of this part, shall, on such registration, pass to and vest in the company as incorporated under this Act. It, therefore, becomes clear that the property acquired by a promoter can be claimed by the company after its incorporation without any need for conveyance. The vesting being statutory, no registered instrument of transfer is necessary. The Honble Andhra Pradesh High Court in the case of Valli Pattabhirama Rao v. Ski Ramanuja Ginning & Rice Factory (P) Ltd. (1986) 60 Comp. Cases 568 (AP), has held that if the constitution of the partnership firm is changed into that of a company by registering it under Part IX of the present Act, there shall be statutory vesting of title of all the properties of the previous firm in the newly incorporated company without any need for a separate conveyance. Thus, when a partnership firm is treated as company under the statutory provisions of Part IX of Companies Act, the company succeeds the firm and all the properties of the firm vest in the company on the firm being treated as a company under this part of the Act. On the vesting of all the properties of the firm statutorily in the company, the firm gets replaced with the company. It can be explained by a simple example, in which Miss A Sharma, on being wedded with Mr. Kapoor, becomes Mrs. A Kapoor. Though her surname has undergone change as a result of marriage, (equivalent to conversion under Part IX of the Companies Act) from Sharma (equivalent to partnership firm before conversion) to Kapoor (equivalent to company after conversion), yet the person A (equivalent to the enterprise) remains the same. Except for the fact that now she comes to be known as Mrs. A. Kapoor to the outside world, the qualities and disqualities (equivalent to assets and liabilities) which were hitherto possessed by miss. A Sharma continue to remain with Mrs. A. Kapoor.
The Hon’ble Bombay High Court in CIT v. Texspin Engineering & Manufacturing Works (2003) 263 ITR 345 (Bom), was considering the applicability of section 45(1) of the Act on the conversion of firm into company under Part IX of the Companies Act. After considering the entire gamut of the provisions, both under the Companies Act and the Income Tax Act exhaustively, it held as under :
“In the present case, we are concerned with the partnership firm being treated as a company under the statutory provisions of Part IX of the Companies Act. In such cases, the company succeeds the firm. Generally, in the case of a transfer of a capital asset, two important ingredients are; existence of a party and a counter party and, secondly, incoming consideration qua the transferor. In our view, when a firm is treated as a company, the said two conditions are not attracted. There is no conveyance of the property executable in favour of the limited company. It is no doubt true that all properties of the firm vest in the limited company on the firm being treated as a company under Part IX of’ the Companies Act, but that vesting is not consequent or incidental to a transfer. It is a statutory vesting of properties in the company as the firm is treated as a limited company. On the vesting of all the properties statutorily in the company, the cloak given to the firm is replaced by a different cloak and the same firm is now treated as a company after a given date. In the circumstances, in our view, there is no transfer of a capital asset as contemplated by section 45(1) of the Act.”
Similar view has been taken consistently by the various Benches of the Tribunal including the Amritsar Bench in the case of Sachdeva & Sons (EOU) v. Dy. CIT (2004) 82 ITR (Asr) 847 in the context of the chargeability of capital gains on conversion under Part IX of the Companies Act.
The sum and substance of the above discussion is that on conversion of a firm into a company under Part IX of the Companies Act, 1956, the firm ceases to exist and gets substituted with the company and all the assets and liabilities of the erstwhile firm become the assets and liabilities of the company. Reverting to the facts of the instant case, it is gathered from the main object of the company that the earlier firm named as M/s Chetak Enterprises was genuinely converted under Part IX of the Companies Act into company as going concern acquiring all the assets, rights and liabilities of the erstwhile firm.
(b) The assessing officer denied the benefit of deduction by coming to the conclusion that the enterprise is not owned by a company registered in India in terms of sub-clause (a) We shall proceed to examine and evaluate the relevant position in this regard. First of all, it is observed that this section refers to an ‘enterprise’ carrying on eligible business. Sub-clause (a) provides that such an enterprise should be owned by a ‘company’. When the words “enterprise” and “company” are read in setting in which they are placed in the section, it becomes palpable that these have not been used interchangeably. The primary condition is that it should be an ‘enterprise’ carrying on eligible business. The “enterprise” need not necessarily be a company, which is carrying on the business of developing or operating and maintaining any infrastructure facility. Sub-clause (a) provides that such an ‘enterprise’ should be owned by a ‘company’ in order to be eligible for deduction under this section. A conjoint reading of clause (i) with sub-clause (a) divulges that an ‘enterprise’ (company or non-company) should be doing eligible business, but in order to be eligible for deduction under this section, it is imperative that such ‘enterprise’ should be owned by a company. The relevant condition for ‘enterprise’ being owned by a company has necessarily to be fulfilled when the question of claiming deduction under this section arises. So long as the deduction is not claimed, ‘enterprise’ may have any legal form. It is only at the time when deduction under section 80-IA is claimed that the necessary condition of the company owning such enterprise should be fulfilled. There is no quarrel over the facts that the eligible enterprise for execution of work on BOT basis was owned by a firm, M/s Chetak Enterprises upto the completion of the construction of road and till then the deduction was neither available nor it was claimed. As on 1-4-2000, namely, the beginning of the previous year relevant to the assessment year under consideration, the said enterprise stood vested into company and it is only the assessee-company, which collected toll tax and claimed deduction under this section. In our considered opinion, no fault can be found with the assessee-company because at the material time, at which deduction was claimed, the “enterprise’ was owned by a “company” registered in India.
(c) There is still another important dimension of this case. It is noted that the erstwhile partnership firm in its first communication to the Chief Engineer on 23-10-1998, at the time of replying to the notice inviting bids, made it categorically clear that “the firm will be converted into a limited company under Chapter IX of the Companies Act; 1956. As such, you are requested to allow us change in constitution as accordingly change of name in agreement after converting firm into company with the existing partners as its directors”. This letter is available at p. 5 of the paper book. The Chief Engineer vide letter dated 27-8-1999, copy placed at p. 10 of paper book, took note of the assessee’s letter dated 23-10-1998 and informed that their offer was accepted subject to terms and conditions specified therein. Thereafter, an agreement was entered into between the Government of Rajasthan and M/s Chetak Enterprises, a copy of which is available at p. 11 onwards of the paper book, in which the aforesaid letter of Chief Engineer dated 27-8-1999, was considered as part of the agreement. Page 14 of the paper book is agreement for lease of land to the assessee in which it is clearly mentioned that this agreement is between the Government and M/s Chetak Enterprises referred to as lessee “to mean and include its successors and assigns.” The agreement for authorising collection of toll by concessionaire is placed on p. 19 of paper book in which again M/s Chetak Enterprises has been adopted as party to the agreement to mean and include “its successors and assigns”. On going through these documents, it becomes explicitly clear that M/s Chetak Enterprises declared to the State government, in the very beginning itself, that the firm win be converted into company under Part IX of the Companies Act and no objection was raised by the Government authorities and all the further agreements were entered into with M/s Chetak Enterprises “to mean and include its successors and assigns”. Eventually, the erstwhile firm was converted into a company under Part IX of the Companies Act and all the assets and liabilities of the firm including the capital investment in the road became the ownership of the company.
(d) Viewed from any angle, namely, the conversion of the firm into company under Part IX of the Companies Act or enterprise being owned by the company registered in India at the time of claiming deduction or factual position emerging from correspondence of M/s Chetak Enterprises with the State Government indicating its intention of conversion of firm into company, ab initio, lead us to infallible conclusion that the assessee-company complied with sub-clause (a) of section 80-IA(4)(i).
(ii) Section 80-IA(4)(i), sub-clause (b)
The learned assessing officer did not allow the claim for deduction as in his opinion, no agreement was made by the assessee-company with the Government of Rajasthan in supersession of the original agreement dated 1-12-1999 signed between government of Rajasthan and the firm M/s Chetak Enterprises.
Narration of the facts in the foregoing paras reveals that M/s Chetak Enterprises, a firm, at the very outset, had made its intention clear to the State Government that it would get converted into company which was not objected to by the Government authorities and all the further agreements were entered into with the firm M/s Chetak Enterprises “to mean and include its successors and assigns”. As soon as the said partnership firm was converted into company, as per Part IX of the Companies Act, an intimation to this effect was sent to the Chief Engineer, PWD (Road), Government of Rajasthan, who vide office order dated 11-5-2000 accepted the same, allowed registration to the assessee-company, cancelled the registration to the erstwhile firm and held the company to have all the pre and post-qualifications of the erstwhile firm which is engaged in the eligible business. Sub-clause (b) of section 80-IA(4)(i) mandates that the enterprise which is engaged in the eligible business, should have entered into agreement with the State Government, so as to qualify for deduction under this section. When the agreement was entered into with firm M/s Chetak Enterprises, which subsequently got converted into the assessee-company and no objection was raised by the concerned authorities on intimation sent in this regard, it cannot be stated that there was no agreement of the assesseecompany with the State Government. On the contrary, they accepted the position and granted fresh registration to the assessee-company in lieu of the earlier registration granted to the erstwhile firm. Not only this, the State Government allowed the assessee-company to operate and maintain the said road with effect from 1-4-2000 and collect the toll tax. These facts, along with the documents discussed supra wherein M/s Chetak Enterprises as party to agreement was meant to “include its successors and assigns”, go to show that the State Government had granted sanction to the company and the original agreement entered into with the firm M/s Chetak Enterprises automatically stood converted with the assessee-company when it came into existence. We are, therefore, of the considered opinion that the authorities below were not justified in holding that clause (b) of section 80-IA(4)(i) was not complied with.
(iii) Proviso to section 80-IA(4)(i)(c)
There is another important aspect of the case, which cannot be lost sight of Proviso to sub-clause (c) of section 80-IA(4)(i) provides that where an infrastructure facility is transferred after specified date by an enterprise, which developed such infrastructure facility (transferor enterprise) to another enterprise (transferee enterprise) for the purpose of operating and maintaining infrastructure on its behalf in accordance with the agreement with the Central Government or State Government or local authority, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies. A plain reading of this proviso makes it clear that the ambit of this section is extended to the cases where the eligible enterprise is transferred, in which situation the transferee will become entitled to deduction. The contention of the assessee before the assessing officer for examining its claim of deduction within the purview of this proviso did not find favour with the latter.
Even if, for a moment, it is accepted, as held by the authorities below, that eligible enterprise was owned by the firm M/s Chetak Enterprises and the assessee was ineligible for deduction under this section because the enterprise was not owned by the company which came into existence later on, it would automatically mean that the firm transferred the enterprise to the assessee-company on its coming into existence. In that situation, the case of the assessee-company would stand covered within the ambit of this proviso. Be that as it may, we are of the considered opinion that the claim for deduction is available to the assessee without any aid from this proviso.
(iv) Other aspects
(a) It is of utmost importance to consider the order passed by the Indore Bench in the case of Ayush Ajay Construction (supra) which was relied upon before the assessing officer and the same was not accepted by holding that it was not known as to whether the said decision has been accepted by the department. The learned CIT (A) distinguished it by holding that in that case a tripartite agreement was entered into. A glance at the facts of that case indicates that “A” was originally granted tender for construction of bridge by the State Government. He entered into an agreement with “U” promoter of the company and assigned the tender for construction of the bridge on BOT basis. “U” undertook the construction work and after the incorporation, the company carried it on. On the basis of tripartite agreement between the company. “A” and the State Government, the assessee claimed deduction under section 80-IA(4)(i), which was rejected by the assessing officer, but finally allowed by the Tribunal. The learned CIT (A), in the present case distinguished it by observing that the facts were materially different. We are unable to appreciate any such distinction, which mars the assessee’s claim for deduction under this section. Albeit, a tripartite agreement between the assessee-company, the firm M/s Chetak Enterprises and the State Government was not directly reached, yet, it cannot be said that the ratio of the said decision, based on the legal position, is not applicable. In the instant case, the firm entered into an agreement with the State Government which included the successors and assigns of the firm and intention of conversion into company was made clear to the government authorities and no objection was raised and all the agreements were entered into accordingly. In our considered view, the learned CIT (A) was not justified in unnecessarily distinguishing the present case from that of the Ajay Ayush Construction case (supra). In fact, it is the ratio decidendi of a decision which is required to be looked into and applied to similar situations when the question is the interpretation of a provision of a statute. No attempt should be made unnecessarily to embark upon distinguishing a case. It is further noted from para 2, p. 8, of the assessment order, that the assessing officer noted the aforesaid order of Ajay Ayush Construction (supra) and could not find any distinguishing feature but refused to follow the same because it was not known whether the department had finally accepted the order or not. The course of action adopted by the assessing officer is beyond all the cannons of judicial discipline, which, in turn, requires that every junior authority is bound to follow the orders of his superior authorities. If the situation, as in the instant case is allowed to continue, it would lead to a state of utter chaos culminating into the travesty of justice.
The Hon’ble MP High Court in the case of Shri Govindram Sekhsaria Charity Trust v. ITO & Ors. (1987) 168 ITR 387 (MP) has held that till the order passed by the Tribunal is set aside, the revenue is bound by it. In the case of Bank of Baroda v. H.C. Srivastava & Anr. (2002) 256 ITR 385 (Bom), their Lordships of the Bombay High Court have held that the assessing officer is bound to follow the judgment of the Tribunal in its true letter and spirit. The action of the assessing officer in not following the same was viewed very strictly. The Hon’ble MP High Court in Agarwal Warehousing Leasing Ltd. v. CIT (2002) 257 ITR 235 (MP) has reiterated its earlier stand by observing that the learned CIT (A) not only exercised judicial improprietory but also erred in law in refusing to follow the order of the Tribunal. In the light of the legal position enunciated by the aforesaid different High Courts, we do not approve the course of action adopted by the assessing officer by getting satisfied with the applicability of the said order but refusing to follow the same. This tendency needs to be deprecated.
After having given our anxious consideration and thoughts to the factual backdrop emerging from the record of the present case, coupled with the relevant proposition of law and in particular, the material provisions of section 80-IA, we hold that the assessee is entitled to deduction under section 80-IA(4)(i) and the learned CIT (A) erred in not accepting the assessee’s claim. This ground is, therefore, allowed.
3. The assessee has raised second ground, as alternative to ground No. 1. Since the first ground is allowed, this alternative ground becomes academic.
4. Last effective ground is on the charging of interest under section 234B.
The facts of this ground are that the assessing officer gave direction for charging of interest under section 234B in the assessment order and in the income-tax computation form charged interest at Rs. 67,14,592 under section 234B. It was contended before the first appellate authority that there was no obligation on the part of the company to make the payment of advance tax in view of the fact that it had computed its income in terms of section 115JB of the Act. The learned CIT (A) rejected the assessee’s contention.
We have heard the rival submissions and perused the relevant material on record in the light of precedents cited by both the sides. The short question which falls for our consideration is to decide as to whether any interest under section 234B is chargeable when income is computed under Chapter XII-B of the Act. The Hon’ble Madras High Court in the case of CIT v. Holiday Travels (P) Ltd. (2003) 263 ITR 307 (Mad) has held that when income is computed under section 115J, the assessee is liable to pay interest under section 234B. Similar view has been taken in Itarsi Oils & Flours Mills Ltd. v. CIT (2001) 250 ITR 686 (MP) and Assam Bengal Carriers Ltd. v. CIT (1999) 239 ITR 862 (Gau). The Hon’ble Kerala High Court in the case of Karimtharuvi Tea Estates Ltd. & Anr. v. Dy, CIT (2000) 163 CTR (Ker) 565 and the Hon’ble Bombay High Court in the case of CIT v. Kodak Mahendra Finance Ltd. (2003) 183 CTR (Bom) 491 have also reiterated this view. There is only one contrary decision rendered by the Hon’ble Karnataka High Court in the case of Kwality Biscuits Ltd. v. CIT (2000) 243 ITR 519 (Karn). It is observed that the Punjab & Haryana High Court in a recent case of CIT v. Upper India Steel Manufacturing & Engineering Co. Ltd. (2004) 192 CTR (P&H) 385 has upheld the charging of interest under section 234B in such situation, while specifically dissenting with the view taken by the Hon’ble Karnataka High Court in the case of Kwality Biscuits Ltd. (supra). In view of these facts, we are satisfied that the learned CIT (A) was justified in deciding this ground against the assessee. However, as the assessee has succeeded on the main ground of grant of deduction under section 80-IA, the amount of interest under section 234B would be consequently get reduced pro tanto. 5. In the result, the appeal of the assessee is partly allowed.
