ORDER
Krishan Swarup, A.M.
In this appeal against the order of the Commissioner (Appeals), Shimla dated 28-11-1997, for the assessment year 1992-93, the grounds taken by the assessee run as under :
“1. (i) That the order of the learned Commissioner (Appeals) upholding the charge of interest under section 234B amounting to Rs. 2,82,59,843 is wholly unjustified and against law.
(ii) That the learned Commissioner (Appeals) has passed a perfunctory order, without in any manner discussing the written arguments filed by the appellant.
(iii) That the case of the appellant is squarely covered by the judgment of the Hon’ble Supreme Court in J.K. Synthetics cases followed by Patna High Court. The order of the learned Commissioner (Appeals) in not following the said judgments is totally arbitrary.
It is, therefore, prayed that interest charged by the assessing officer and upheld by the Commissioner (Appeals) be quashed.”
2. As is manifest, the challenge by the assessee is to the levy of interest under section 234B of the Income Tax Act, 1961. In order to appreciate the point of controversy, the factual matrix of the case may be stated thus. The assessee is a warehousing corporation set up under the Warehousing Corporation Act, 1962. In its profit and loss account attached with the return for the year under consideration, it had shown the following incomes:
Rs.
(i) Warehousing charges
7,65,76,819
(ii) Supervision charges
27,01,231
(iii) Interest on advances
19,90,541
(iv) Surplus on trading of wheat
8,27,39,992
The whole of the aforesaid income was claimed to be exempt under section 10(29) of the Income Tax Act, 1961 (hereinafter referred to as `the Act). In the assessment completed vide order under section 143(3) of the Act dated 8-12-1994, the assessing officer held that only the income of Rs. 7,65,76,819 from warehousing charges for storage, processing or facilitating the marketing of commodities was exempt under section 10(29) of the Act. The income from supervision charges, interest and buying and selling of wheat was thus held to be taxable. After making certain disallowances/additions, the total (taxable) income was computed at Rs. 8,77,03,400 as against the nil returned income. In the assessment interest under section 234B was charged at Rs. 2,99,55,030, In appeal against the assessment the learned Commissioner (Appeals) accepted the assessee’s plea for exemption of income from supervision charges and deleted the addition of account of interest income. Certain other relief was also allowed. After giving effect to the order of the learned Commissioner (Appeals) the total income remained at Rs. 8,27,39,990 (being the income from trading of wheat). Interest under section 234B was charged at Rs. 2,82,59,843. Before the learned Commissioner (Appeals), the assessee had not disputed the charging of interest. Both the assessee and the department came in appeal before the Tribunal which vide its order dated 19-2-1997, affirmed the order of the learned Commissioner (Appeals) in upholding the assessing officer’s action to treat the income from trading of wheat to be taxable.
2.1. In appeal before the Tribunal the assessee had raised an additional ground challenging the levy of interest under section 234B of the Act. The Tribunal admitted the additional ground and restored this matter to the file of the assessing officer for deciding the issue in accordance with law.
3. In the order passed by him under section 254(1), read with section 143(3) the assessing officer rejected the assessee’s plea that in the circumstances of the case it was not liable to pay advance tax and as such interest under section 234B was not leviable. The assessee had relied on the decision of the Apex Court in J.K. Synthetics Ltd. v. CTO AIR 1994 SC 2393 followed by the Patna High Court in Ranchi Club Ltd. v. CIT (1996) 217 ITR 72 (Pat) but the assessing officer held that this decision did not help the assessee. The order of the assessing officer was summarily upheld by the learned Commissioner (Appeals), Shimla. The assessee is aggrieved.
4. The submission of the learned counsel for the assessee was that it had two types of income-income from rent of godowns and income from procurement of wheat as agent of the government. It was submitted that upto assessment year 1991 -92 both these types of income was all along held to be exempt under section 10(29) of the Act In this connection our attention was invited to the assessment orders dated 24-9-1991/14-10-1991, for the assessment year 1990-91 and dated 15-12-1993, for the assessment year 1991-92, copies placed at pages 1 & 2 of the paper book. The learned counsel submitted that for the year under consideration also exemption of the aforesaid types of income was claimed in the return filed on 31-12-1992. It was explained that in its decision rendered on 1-12-1993 in the case of CIT v. Rajasthan State Warehousing Corporation (1994) 210 ITR 906 (Raj), the Rajasthan High Court held that income derived from procurement of grains for the State Government, etc., did not relate to letting of godowns or warehouses and hence it was not exempt under section 10(29) of the Act. According to the learned counsel, it was in view of this decision that the assessing officer and the learned Commissioner (Appeals) had held the income of Rs. 8,27,39,992 from trading of wheat to be taxable. The order of the learned Commissioner (Appeals) was affirmed by the Tribunal also, inter alia on the basis of this decision.
4.1. In the aforesaid background, the learned counsel for the assessee submitted that in the financial year 1991-92 when the instalments of advance tax were payable, the assessee was under a bona fide belief that it was not liable to pay any advance tax, its entire income being exempt under section 10(29) of the Act as in past. It was stressed that on the relevant dates the assessee had before it the assessment order for the assessment year 1990-91 by which the assessee’s entire income was held to be exempt under section 10(29) of the Act. It was argued that if there was no liability to pay advance tax, no interest could be charged under section 234B of the Act. In this connection reliance was placed on the decisions of the Tribunal, Chandigarh Bench in the case of Dr. (Mrs.) Devinder Kaur Sekhon v. Assistant (1999) 7 DTC 352 (Chd ‘B’-Trib) (1998) 67 ITD 407 (Chd-Trib) and the Tribunal Ahmedabad Bench in the case of Vikshara Trading & Investment (P) Ltd. v. Dy. (1999) 8 DTC 682 Ahd-Trib (1998) 96 Taxman 188 (Ahd-Trib). Strong reliance was placed on the ratio of the decision of the Patna High Court in the case of Ranchi Club Ltd. (supra).
5. We have given our utmost consideration to the facts and circumstances of the case, the material to which our attention was invited and the rival submissions. The provisions relating to advance payment of tax have undergone certain significant changes on account of amendments made by the Direct Tax Laws (Amendment) Act, 1987. It would be relevant to refer to some of these provisions.
5.1. Section 207, as substituted by the aforesaid Act, with effect from 1-4-1988, lays down that tax shall be payable in advance during any financial year in accordance with the provisions of sections 208 to 219, in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year, Such income on which advance tax is payable is to be called as “Current Income”. (Emphasis, here italicised in print, supplied)
5.2 Section 208, referred to in the aforesaid provision, read as under before amendment, with effect from 1-10-1996:
“208. Conditions of liability to pay advance tax.-Advance tax shall be payable during a financial year in every case where the amount of such tax payable by the assessee during that year, as computed in accordance with the provisions of this Chapter, is one thousand five hundred rupees or more.”
(Emphasis here italicised in print, supplied)
5.3. Section 210 provides for payment of advance tax by the assessee of his own accord or in pursuance of an order of the assessing officer. Sub-section (1) lays down that any person who is liable to pay advance tax under section 208 shall suo motu compute advance tax payable on his current income and pay the same in instalments as specified in section 211. There is no need to file any statement/estimate of advance tax payable, as was required before amendment by the Act of 1987. Sub-section (2) allows an assessee to subsequently revise the advance tax payable in the remaining instalments in accordance with the revised estimate of his current income, without any requirement of filing a revised estimate. Sub-s. (3) empowers the assessing officer to pass an order requiring an assessee who has been already assessed to income-tax, but has not paid any advance tax during the relevant financial year, to pay advance tax calculated in the manner laid down in section 209. Such an order must be passed during the financial year but not later than the last day of February. Sub-section (4) empowers the assessing officer to pass a revised order for payment of advance tax by the assessee where, subsequent to the passing of the original order, but before the first day of March, a return of income in respect of any later year has been furnished or any regular assessment for a later year has been made. Sub-section (5) enables the assessee to pay less amount of advance tax than what is demanded by the assessing officer under sub-section (3) or (4) if, in his estimation, the advance tax payable on his current income would be less than the amount demanded by the officer. Sub-section (6) correspondingly requires the assessee to estimate his current income where the amount of advance tax payable on the current income is likely to be higher than the advance demanded by the assessing officer under sub-section (3) or (4) or intimated by him under sub-section (5).
5.4. Section 209 of the Act, after amendment by the Amending Act, 1987, lays down the method of computing advance tax payable during a financial year as follows :
(a) Where the calculation is made by the assessee for paying the advance tax, either of his own accord or on the basis of the estimate of his current income after the assessee is served with a notice by the assessing officer under section 210(3) or (4) for payment of advance tax, income-tax on the current income shall be calculated at the rates in force in that financial year.
(b) Where calculation is made by the assessing officer for making an order under section 210(3) requiring the assessee to pay advance tax, he shall adopt the total income assessed by way of regular assessment of the latest previous year or the total income returned by the assessee for any subsequent previous year, whichever is higher, and calculate income-tax thereon at the rates in force in that financial year.
(c) Where calculation is made by the assessing officer for making an amended order under section 210(4), on the basis of a return filed or a regular assessment completed subsequently for a previous year later than that adopted in an order under section 210(3), income-tax shall be calculated on the total income declared in such subsequent return or total income determined in such subsequent regular assessment, as the case may be, at the rates in force in that financial year.
(d) The income-tax calculated under any of the above clauses shall, in each case, be reduced by the amount of income-tax which would be deductible at source under any provisions of the Act on any income which has been included in the current/total income determined under any of the above clauses.
5.5. Section 234B(1) inserted by the Direct Tax Laws (Amendment) Act, 1987, with effect from 1-4-1989, which provides for the liability to pay interest, reads as under :
“234B.(1) Subject to the other provisions of this section, where, in any financial year, an assessee who is liable to pay advance tax under section 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of section 210 is less than ninety per cent of the assessee tax, the assessee shall be liable to pay simple interest at the rate of two per cent for every month or part of a month comprised in the period from the 1st day of April, next following such financial year to the date of determination of total income under sub-section (1) of section 143 and where a regular assessment is made, to the date of such regular assessment, on an amount equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax.
(Emphasis, here italicised in print, supplied)
6. The important aspects that emerge from the provisions referred to above, in so far as they are relevant to the issue before us, can be succinctly culled out as under :
(a) Advance tax is payable by an assessee during any financial year in respect of his total income which would be chargeable to tax in the relevant assessment year.
(b) The liability to pay advance tax arises in the context of the current income of the assessee which would be chargeable to tax for the assessment year immediately following the relevant financial year, if the tax payable is Rs. 1,500 or more.
(c) If a person is liable to pay advance tax, he shall suo motu compute the advance tax payable on his current income.
(d) If an assessee who had earlier been assessed to income-tax, has not voluntarily paid the advance tax during the relevant financial year, the who can pass an order requiring him to pay advance tax and for this purpose, the total income assessed by way of regular assessment of the latest previous year or the total income returned by the assessee for any subsequent previous year, whichever is higher, is to be adopted.
(e) If an assessee who is liable to pay advance tax has failed to pay such tax, he will be liable to pay interest at the prescribed rate.
7. Adverting to the facts of the present case, as is mentioned above, the assessee had declared ‘nil’ income for the assessment year under consideration by claiming exemption under section 10(29) of the Act in respect of its entire income from various activities carried on by it, including the income of Rs. 8,27,39,992 from dealing in food grains, which is ultimately determined as its total income. The income from the said source i.e., trading of wheat had all along been exempted from tax under section 10(29) of the Act and during the financial year 1991-92 when the advance tax, if any payable, was to be paid, the order that held the field was the assessment order for the assessment year 1990-91 completed on 24-9-1991/14-10-1991, accepting that the entire income of the assessee was exempt from tax. The crucial question for consideration is whether during the financial year 1991-92 when the advance tax was to be paid, the assessee could visualize that its total income for the said financial year was “chargeable to tax” and hence he was “liable to pay advance tax” in the said financial year. In this connection the words “payable” and “liable” assume importance. The meaning ascribed to by the judicial authorities to the former word is “what is to be paid under any liability, liable to be paid”. The meaning assigned to the latter word is “bound” or “obliged in law”. In our considered opinion, it is not possible to hold that the law envisaged the assessee to anticipate its assessment and require it to pay the advance tax on that basis to avoid liability to pay interest. The well-settled proposition of law is that nobody can be asked to do the impossible. Income from dealings in food grains having been held to be taxable in the assessment only in view of the decision of the Hon’ble Rajasthan High Court delivered subsequent to the relevant financial year, it could not by any stretch of imagination be said that the assessee was liable or bound in law to pay advance tax. In other words, it could not be held that the assessee could know or anticipate that the condition of liability to pay advance tax as per provisions of sections 207 and 208 of the Act would be attracted in its case. A somewhat similar situation existed in the case of Ranchi Club Ltd. (supra) and the Hon’ble Patna High Court held that the assessee could not be said to have committed a default within the meaning of section 234B of the Act. In arriving at this conclusion, the Hon’ble High Court referred to the Apex Court decision in the case of J.K. Synthetics Ltd. (supra) which though delivered in a different context, but the principle laid down by it was held to cover cases of the present nature.
8. It would be relevant to refer very briefly to the facts in the case of J.K. Synthetics Ltd. (supra). In this case the appeals were directed against certain assessment orders made by the CTO under the Rajasthan Sales Tax Act, 1954. The question related to payment of interest on tax on the amount of freight charged in respect of sale of cement. The relevant facts were that the returns were filed by the appellant on the premises that the amount of freight charged in respect of sale of cement did not form part of the sale price for the payment of sales-tax. The appellant had contended that it had raised the contention bona fide but the same stood rejected by the order of the Hon’ble Supreme Court, holding that the freight element formed part of the price of the cement and sales-tax was leviable on the sale price inclusive of the freight amount. The appellant was, therefore, required to pay sales-tax on the sale price inclusive of the freight. The dispute before the Apex Court was limited to the question whether the assessee was required to pay interest on the additional sales-tax which had to be paid on the inclusion of the freight amount in calculating the sale price. The Apex Court referred to the provisions of section 7(1) of the Act providing that every dealer liable to pay tax shall furnish returns of his turnover in the prescribed manner. Section 7(2) providing that every return shall be accompanied by a receipt showing the deposit of the full amount of tax due on the basis of the return and sub-section (2A) of section 7 empowering the State Government to require any dealer to pay tax at interval shorter than those prescribed under sub-section (1). It referred to the provisions of section 11B providing for charging of interest if the amount of any tax payable under sub-section (2) and (2A) of section 7 was not paid within the time allowed. After analysing the relevant provisions of the Rajasthan Sales Tax Act, 1954, including the provisions referred to above, the Apex Court held that no interest was chargeable from the assessee under section 11B of the Act. It would be relevant to extract below the relevant part of the order :
“17. Let us look at the question from a slightly different angle. Section 7(1) enjoins on every dealer that he shall furnish prescribed returns for the prescribed period within the prescribed time to the assessing authority. By the proviso the time can be extended by not more than 15 days. The requirement of section 7(1) is undoubtedly a statutory requirement. The prescribed return must be accompanied by a receipt evidencing the deposit of full amount of ‘tax due’ in the State Government on the basis of the return. That is the requirement of section 7(2). Section 7(2A), no doubt, permits payment of tax at shorter intervals but the ultimate requirement is deposit of the full amount of ‘tax due’ shown in the return. When section 11B(a) uses the expression ‘tax payable under sub-section (2) and (2A) of section 7, that must be understood in the context of the aforesaid expressions employed in the two sub-sections. Therefore, the expression ‘tax payable’ under the said two sub-sections is the full amount of tax due and ‘tax due’ is that amount which becomes due ex-hypothesis on the turnover and taxable turnover “shown in or based on the return.” The word ‘payable’ is a descriptive word, which ordinarily means “that which must be paid or is due, or may be paid” but its correct meaning can only be determined if the context in which it is used is kept in view. The word has been frequently understood to mean that which may, can or should be paid and is held equivalent to ‘due’. Therefore, the conjoint reading of sections 7(1), (2) and (2A) and 11B of the Act leaves no room for doubt that the expression ‘tax payable’ in section11B can only mean the full amount of tax which becomes due under sub-sections (2) and (2A) of the Act when assessed on the basis of the information regarding turnover and taxable turnover furnished or shown in the return. Therefore, so long as the assessee pays the tax which according to him is due on the basis of information supplied in the return filed by him, there would be no default on his part to meet his statutory obligation under section 7 of the Act and, therefore, it would be difficult to hold that the ‘tax payable’ by him ‘is not paid’ to visit him with the liability to pay interest under clause (a) of section 11B. It would be a different matter if the return is not approved by the authority but that is not the case here. It is difficult on the plain language of the section to hold that the law envisages the assessee to predicate the final assessment and expect him to pay the tax on that basis to avoid the liability to pay interest. That would be asking him to do the near impossible. ”
9. The proposition laid down by the aforesaid decision is that the law does not envisage an assessee to predicate the position after the assessment. If this proposition is applied to the facts of the present case, it would have to be held that since the assessee could not by any means anticipate that advance tax was payable by it in the financial year 1991-92, it could not be expected to pay advance tax. If that is so, it could not be held liable to pay interest under section 234B of the Act.
10. The brief facts in the case of Dr. (Mrs.) Devinder Kaur Sekhon (supra) were that the assessee had received certain amount as interest on enhanced compensation for agricultural land acquired by the Government in the financial year 1992-93. In view of the decisions of the Apex Court, the amount of interest was held to be assessable in assessment years 1986-87 to 1992-93. On account of inclusion of the said interest income, interest under section 234C was charged for the assessment years 1989-90 to 1992-93. The Chandigarh Bench of the Tribunal held that the assessee could not have foreseen the amount of enhanced compensation and also interest awardable in relation thereto in the relevant years and, as such, there was no failure on her part so as to attract the provisions of section 234B/234C of the Act. This decision also supports assessee’s case.
11. The matter has another aspect also. Since the assessee had earlier been assessed to tax and had not paid advance tax voluntarily. Sub-section (3) of section 210 empowered the assessing officer to pass an order requiring it to pay advance tax. But in this case even the assessing officer could not pass such an order because the basis for passing the order was the assessed income of the latest previous year which was “nil” and no positive income was declared in the return for the subsequent period filed upto the last day of February of the financial year 1991-92.
12. In view of the foregoing discussion, we have no hesitation in coming to the conclusion that in the peculiar circumstances of the case the failure to pay advance tax cannot be attributed to the assessee, and, therefore, it cannot be held liable to interest under section 234B of the Act.
13. In the result, the appeal is allowed.
Phool Singh, J.M.
I have gone through the draft order prepared by my esteemed brother Shri Krishan Swarup, Accountant Member, and also discussed the matter with him in detail. I am unable to persuade myself to agree with the findings recorded by him. In view of this I proceed to record my findings on the issue involved.
The issue involved in the present appeal is about the correctness or otherwise of the action of assessing officer in respect of charging of interest under section 234B amounting to Rs. 2,82,59,843.
2. Facts are not in dispute and my learned brother has reproduced all the relevant facts. However, to appreciate the issue better, it is advisable to give some facts at the cost of repetition. For assessment year 1992-93 the assessee had shown the following income appearing in the profit and loss account attached with the return :
Rs.
(i) Warehousing charges
7,65,76,819
(ii) Supervision charges
27,01,231
(iii) Interest on advances
19,90,541
(iv) Surplus on trading of wheat
8,27,39,992
The assessee claimed the aforesaid income to be exempt under section 10(29) of the Income Tax Act, 1961 (“hereinafter referred to as the Act) and assessing officer completed the assessment under section 143(3) on 8-12-1994, by holding that income of Rs. 7,65,76,819 from warehousing charges for storage, processing or facilitating the marketing of commodities was exempt under section 10(29) of the Act and remaining income was held to be chargeable to tax. The assessing officer also directed the charging of interest under section 234B and in first appeal before the Commissioner (Appeals) the assessee did not challenge this action of the assessing officer about charging of interest under section 234B and against order of the Commissioner (Appeals) the assessee as well as the revenue went in appeal before the Tribunal and it was for the first time when assessee raised this issue of charging of interest under section 234B before the Tribunal by moving an application for permission to raise additional ground and permission was granted by the Tribunal and this issue was restored to assessing officer for deciding it afresh. When this issue came before the assessing officer, he after hearing the assessee in detail concluded that interest under section 234B was to be charged. In appeal the Commissioner (Appeals) also confirmed the action of the assessing officer against which the assessee came in second appeal before the Tribunal.
3. The learned counsel for the assessee submitted that up to the assessment year 1991-92 viz., just preceding year the assessee was claiming exemption under section 10(29) in respect of income from rent of godowns and also in respect of income from procurement of wheat as agent of the government and the department had been accepting the case of the assessee and exemption was allowed under section 10(29) in respect of both types of incomes. Copies of assessment orders for assessment years 1990-91 and 1991-92 had been placed on record to substantiate this plea. The learned counsel submitted that on the basis of earlier assessment orders the assessee also claimed exemption under section 10(29) of the Act in respect of both types of income viz., income from rent from godowns and income from procurement of wheat for assessment year 1992-93 but the assessing officer on the basis of decision of Hon’ble Rajasthan High Court in the case of Rajasthan State Warehousing Corporation (1994) 210 ITR 906 (Raj), concluded that income derived from procurement of grains for the State Government, etc., did not relate, to letting out of godowns or warehouse and it was not exempt under section 10(29) of the Act. The learned counsel submitted that it was on account of above referred decision which was rendered on 1-12-1993, the assessee’s claim for exemption under section 10(29) in relation to income from procurement of wheat was rejected.
4. According to the learned counsel prior to 1-12-1993, the date on which the Hon’ble Rajasthan High Court decided the issue against the assessee of that case, the assessee as well as income-tax authorities were treating the income from trading in procurement of wheat, etc., as exempt under section 10(29) of the Act and assessee was justified in having a bona fide belief that such an income was not subject to income-tax and question of payment of any advance tax did not arise. The advance tax, as per the learned counsel for the assessee, shall be payable only when the income is subject to income-tax and in the case in hand the assessee had filed return for assessment year 1992-93 much earlier to the decision of Rajasthan High Court and at that time the assessee could not have anticipated that the claim of the assessee seeking exemption under section 10(29) of the Act in respect of income from trading in procurement of wheat, etc., shall be subject to income-tax, nor the assessee could have anticipated whether any of its income was subject to income-tax or any advance tax was payable by him. The learned counsel submitted that in similar circumstances the view of different Benches of the Tribunal had been that charging of interest under section 234B is not warranted. Reliance has been placed by the learned counsel on the decision of Tribunal Chandigarh Bench in the case of Dr. (Mrs.) Devinder Kaur Sekhon v. Assistant CIT (1998) 67 ITD 407 (Chd-Trib) and also on the decision of Tribunal Ahmedabad Bench in the case of Vikshara Trading & Investment (P) Ltd. v. Deputy CIT (1999) 8 DTC 682 (Ahd-Trib) : (1998) 96 Taxman 188 (Ahd), in which explanation of the assessee for not paying the advance tax was treated as justified and charging of interest under section 234B was held to be not justified. In the last the learned counsel referred to the decision of Hon’ble Supreme Court in the case of J.K. Synthetics v. CTO AIR 1994 SC 2393 in which their Lordships concluded that in case dealer deposited full amount of tax which, according to him, was due without wilfully omitting any material information and later on additional amount was found to be payable, then dealer would not be liable to pay interest on the additional amount of tax deposited by him under section 11B of Rajasthan Sales Tax Act, 1954. The plea of the learned counsel for the assessee is that ratio of the said decision of Hon’ble High Court is fully applicable to the facts of the present case as in the case of assessee return was filed claiming exemption under section 10(29) of the Act in respect of the incomes including income from trading in procurement of food-grains and thus assessee was not supposed to pay any advance tax and thus interest under section 234B is not chargeable as assessee has not omitted any information in filing the return and was having bona fide basis for not showing the income from trading in procurement of wheat, etc.,s as its income because the department had been treating such income as exempt under section10(29) from so many years. The learned counsel for the assessee submitted that Patna High Court in the case of Ranchi Club Ltd. (supra) had concluded that no interest under section 234B can be charged in identical circumstances and their Lordships have followed the ratio of Apex Court in the case of J.K. Synthetics (supra). On the basis of these facts, the submission of the learned counsel for the assessee had been that assessee was having bona fide belief that it was not liable to pay any advance tax and thus charging of interest under section 234B cannot be held to be justified.
5. As against it the learned Departmental Representative placed reliance on the order of the assessing officer as well as the Commissioner (Appeals) and main plank of his argument is that provisions of section 234B of the Act are mandatory and assessing officer has no option but to charge interest under this section if assessee had failed to pay the advance tax and in the case in hand the assessee admittedly had not paid advance tax and thus charging of interest under section 234B is justified.
6. After considering the submissions of representative of both parties going through the record carefully, it is to be noted that provisions of sections 234A, 234B and 234C have been brought on statute by the Direct Tax Laws (Amendment) Act, 1987, with effect from 1-4-1989, under Chapter XVII which is in relation to collection and recovery-interest chargeable. The very heading before the provision of sections 234A to 234B had been as under :
“F. Interest chargeable in certain cases.”
7. To appreciate the argument of the learned counsel for the assessee as well as of the learned
Departmental Representative. It will be in the fitness of things to reproduce the relevant portion of section 234B which reads as under :
“234B. Interest for defaults in payment of advance tax.s-(1) Subject to the other provisions of this section, where, in any financial year, an assessee who is liable to pay advance tax under section 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of section 210 is less than ninety per cent of the assessed tax, the assessee shall be liable to pay simple interest at the rate of two per cent for every month or part of a month comprised in the period from the Ist day of April, next following such financial year to the date of determination of total income under sub-section (1) of section 143 and where a regular assessment is made, to the date of such regular assessment, on an amount equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax.”
8. The very heading of section 234B referred to above shall show that this section is meant for charging of interest for defaults in payment of advance tax. Further, language used by the legislature in bringing this provision is also significant. First part of this section provides- “An assessee who is liable to pay advance tax under section 208 has failed to pay such tax or,………..” At the very outset it is to be ascertained as to whether the assessee was liable to pay advance tax or not. No doubt up to the assessment year 1991-92 the assessee was claiming exemption under section 10(29) of the Act in respect of both types of incomes viz. income from letting out of godowns and warehouse and income from procurement of wheat, etc., on behalf of the State Government and income-tax authorities were allowing the claim of the assessee. But fact remains that the assessee as well as of income-tax authorities both failed to appreciate the correct legal proposition in this context. As is evident that Hon’ble High Court of Rajasthan in the case of Rajasthan State Warehousing Corporation (supra) had specifically laid down that income from trading of wheat procurement on behalf of the State Government, etc., is not to be treated as exempt under section 10(29) but the same is taxable. In view of this decision of Rajasthan High Court, it can easily be inferred that income earned by the assessee from trading in wheat procurement was taxable in all the years as legal position for all the assessment years was the same which the Hon’ble High Court of Rajasthan had laid down in the case referred to above. If we apply the above position of law then income from trading in procurement of wheat was taxable since the insertion of section 10(29) itself and assessee was liable to pay income-tax on Rs. 8,27,39,952 the income shown by the assessee on trading in procurement of wheat and the advance tax shall be payable as per provisions of section 208 of the Act. Section 208 requires that advance tax shall be payable if such tax is Rs. 5,000 or more and in the instant case as assessee had taxable income of Rs. 8,27,39,952, it admittedly was under obligation to pay advance tax of more than Rs. five thousand.
9. Now comes the later part of section 234B. It provides that if assessee who is liable to pay advance tax has failed to pay such tax or where advance tax paid by such assessee is less than ninety per cent of the assessed tax, the assessee shall be liable to pay interest at the rate 2 per cent for every month or part thereof. The language used by the Legislature is that “assessee shall be liable to pay simple interest…….” The word “shall” is significant and to ascertain the very intention of the legislature we have to look into the clauses by which the Legislature has brought section 234B to the statute through Direct Tax Laws (Amendment) Act, 1987. In this connection the relevant clause inserting section 234B is reproduced which is appearing at (1987) 168 ITR (St.) 343 and the same is reproduced as under :
“Section 234B incorporates the existing provisions of section 215 and section 217 with the difference that the new provisions make the charging of interest mandatory. The existing provisions provide for waiver or reduction of interest under rule prescribed in this regard. The new section does not have any such provision.”
10. From the above it is evident that provisions of section 234B are mandatory and legislature has made it clear that provisions of section 234B are quite different from provisions of sections 215 and 217 in which discretionary powers were provided to the authorities under the Act to charge or not to charge the interest. If any provision of statute is mandatory then it cannot entertain any explanation from either side but the provision has to be applied in its entirety.
11. The learned counsel for the assessee had taken the only plea that keeping in view the earlier treatment given by the income tax authorities to the income of the assessee from trading in procurement of wheat, etc., the assessee was justified in entertaining a bona fide belief that such income is also exempt under section 10(29) of the Act and thus he was justified in not making any payment of advance tax. This explanation cannot be allowed to be entertained in view of the specific nature of provisions of section 234B which are made mandatory without giving any discretionary power to assessing officer to entertain such explanation from assessee howsoever bona fide explanation may be. It is to be noted that whenever legislature in its wisdom has thought it fit that any explanation of the assessee is to be entertained by the assessing officer before charging interest or before levy of any type of penalty specific provision to that effect had been made in the relevant section and a notice is issued before charging interest or before levy of any penalty and after considering the explanation of the assessee the assessing officer passes the relevant orders of charging interest or levy of penalty or otherwise. But in the provisions of section 234B no such provision has been made and from clauses attached to the Direct Tax Laws (Amendment) Act, 1987, it is very clear that provisions are mandatory. I may recall a maxim “expresser facit cessare tacitum” and meaning thereof is that when there is express mention of certain thing then anything not mentioned is excluded. If we apply the above maxim to the facts of the case then it becomes abundantly clear that the very nature of provisions of section 234B is mandatory and entertainment of any explanation of assessee howsoever bona fide, has to be treated as excluded. Applying this, the plea of the assessee that on account of the bona fide belief he could not pay the advance tax is not to be entertained as the same has to be treated as excluded because not expressly provided. If we entertain such an explanation of the assessee then it will amount to adding a new proviso to section 234B which are impliedly excluded by the legislature in its wisdom. It has been settled proposition of law that courts/Tribunals are to interpret the existing provisions of law and not supposed to assume the role of Legislature themselves. If we entertain the assessee’s explanation that on account of bona fide belief he was not liable to pay the advance tax then by entertaining such an explanation we will be changing the very nature of section 234B from mandatory to discretionary and in such process we will be transgressing the jurisdiction of legislature which is not permissible in the eye of law.
12. The mandatory nature of section 234B can be examined by another angle and some of the observations of the Hon’ble High Court of Patna in the case of Ranchi Club Ltd. (supra) (relied by learned counsel for the assessee) is relevant. I am reproducing the relevant portion of head note which reads as under :
“Sections 234A and 234B of the Income Tax Act, 1961, are not penal in nature and, therefore, no element of arbitrariness or violation of rules of natural justice can be imputed to them. They merely provide for payment of interest by an assessee who commits default in furnishing the return either under section 139(1) or section 139(4), or in response to a notice under section 142(1) of the Act, or has either failed to pay the advance tax or the advance tax already paid is less than 90 per cent of the tax assessed against him. The amount on which the interest is levied is the amount which can legitimately be said to be public revenue which, although payable by the assessee, has actually not been paid by him. Levy of interest on such amount which the assessee withholds and makes use of cannot be said to be anything but a compensatory measure meant to offset the loss which the revenue suffers on account of non-payment of the said amount. This becomes evident also from the fact that the sections contain specific provisos in regard to the period for which this additional liability is imposed on the defaulting assessees. ”
13. From the above it transpires that interests are not penal in nature but only compensatory as the same are leviable because assessee had utilised the amount which was public revenue and payment of interest is nothing but a token in respect of utilisation of the public fund by the assessee. That appears to be the very reason that legislature in its wisdom has made the provision of section 234B as mandatory and thus I cannot entertain the explanation of the assessee that due to bona fide belief it could not pay the amount of advance tax.
14. It is also to be observed that some of the assessees had been facing lot of hardship on account of mandatory nature of provisions of sections 234A, 234B and 234C of the Act and when Central Board of Direct Taxes came to know the plight of assessees who were having s explanations for not complying with the provisions in filing the return making payment of advance tax, etc., came forward to give relief to some of the assessees and issued Notification F. No. 400/234/95-IT(B) dt, 23-5-1996, by which it authorised Chief Commissioners/Director General (Inv.) to waive penal interest in certain cases. The substance of the Notification stands and circumstances under which the Chief Commissioners and Director General (Inv.) had been authorised to waive penal interest for late furnishing of return, non-payment or inadequate payment of advance tax, etc., had been given out. This notification further goes to strengthen the case of the department that provisions of section 234B are mandatory, otherwise Central Board Direct Taxes would not have issued such Notification authorising Chief Commissioners/Director General (Inv.) to waive penal interest in specified circumstances.
15. On the basis of above, the only conclusion which could be drawn is that provisions of section 234B of the Act are mandatory and it gives no room to entertain any type of explanation of assessee and assessing officer has no other alternative but to charge interest.
16. So far as case laws relied upon by the learned counsel for the assessee are concerned, much reliance has been placed on the decision of J.K. Synthetics (supra) and facts of that case have also been reproduced in detail by my learned brother along with the ratio of the said decision. But perusal of the facts involved in that case shall reveal that issue involved in that case was entirely different. In that case the assessee had deposited the amount of sales-tax due as required under section 7(2) of the Rajasthan Sales Tax Act and question was whether interest under section 11B as it was existing prior to 1-4-1979, was leviable on the amount of tax due on return or on assessed tax. Their Lordships after considering all the facts opined in favour of the assessee. But the facts in the case in hand are quite different as we are not supposed to examine as to whether the amount of interest under section 234B is leviable on the amount of tax due as per return of income or on the amount of assessed income. The simple issue involved in the present case is about the consequence of non-payment of advance tax by the assessee. No doubt the Hon’ble Patna High Court in the case of Ranchi Club Ltd. (supra) had opined that ratio of J.K. Synthetics Ltd. (supra) was applicable to the provisions of sections 234A and 234B but it may be noted that provisions of sections 234B were not at issue before their Lordships of Patna High Court in the case referred to above as particular. Issue was of charging of interest under section 234A and their Lordships opined that provisions of sections 234A and 234B were not applicable in that case. It may also be mentioned here that the reasoning of their Lordships in the case of Ranchi Club Ltd. (supra) had not been appreciated by the same High Court in a subsequent decision in the case of Uday Mistanna Bhandar v. CIT (1996) 222 ITR 44 (Pat)) in which their Lordships have observed that ratio of Ranchi Club Ltd. (supra) had not laid down a correct law and Their Lordships have further observed that said ratio required reconsideration through a larger Bench and matter stands referred to Larger Bench. Their Lordships have also observed that ratio of the Apex Court decision in the case of J.K. Synthetics Ltd. (supra) might not be fully applicable while interpreting section 234A read with Explanation 4 thereto. Once, Their Lordships have observed that ratio of Apex Court in the case of J.K. Synthetics Ltd. (supra) is not applicable to the issue involving section 234A which was having identical provision to section 7(2) of Rajasthan Sales Tax Act, then that ratio shall not at all be applicable to the provisions of section 234B which had no similarity to the provisions of sales-tax in the case of J.K. Synthetics Ltd. (supra). Accordingly, the ratio of both the cases relied upon by the learned counsel are not going to help the assessee.
17. Further, the decisions of Tribunal Chandigarh as well as of Ahmedabad Bench are on the same pattern as adopted by my learned Brother and thus I am not in agreement with the view taken by those Benches as that will amount to adding of a new proviso to section 234B which will be again, the very intention of the legislature.
18. On the basis of above discussion, I am of the opinion that the view of assessing officer is well as of Commissioner (Appeals) is justified. Accordingly, I would the action of the Commissioner (Appeals) on the issue in question. In my view, therefore, the appeal of the assessee is to be dismissed. Order accordingly.
Order under section 255(4) of the Income Tax Act, 1961
Since in the captioned case we have difference of opinion, on the following point, the matter is submitted to the Hon’ble President for reference to the Third Member.
“Whether, – on the facts and in the circumstances of the case, the assessee could be said to be liable to pay advance tax under section 208 of the Income Tax Act, 1961 so as to be liable to interest under section 234B of the Act for its failure to pay the same.
M.K. Chaturvedi, J.M. (As Third Member)
This appeal came before me as a Third Member to express my opinion on the following question :
“Whether, on the facts and in the circumstances of the case, the assessee could be said to be liable to pay advance tax under section 208 of the Income Tax Act, 1961, so as to be liable to interest under section 234B of the Act for its failure to pay the same .”
2. I have heard the rival submissions in the light of material placed before me and precedents relied upon. Assessee is a warehousing corporation. It was set up under the Warehousing Corporation Act, 1962. Upto the assessment year 1991-92 its entire income was held to be exempt by the assessing officer under section 10(29) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).
3. The exemption was granted to the assessee on the basis of the decision of the Hon’ble Allahabad High Court rendered in the case of CIT v. U.P. State Warehousing Corporation (1992) 195 ITR 273 (All). This decision is dated 28-3-1991. In this case it was held that the assessee was an authority constituted under the law for the marketing of commodities. The Tribunal had held that income received by it, though called miscellaneous receipts was in truth income derived from letting warehouses for storage, processing and facilitating the marketing of commodities. Commission was received both for procuring and storing wheat and other food articles on behalf of the Food Corporation of India. The assessee’s income from miscellaneous receipts and commission was entitled to exemption under section 10(29) of the Act.
4. Assessee was also engaged in the activity of storage and procuring of food grains as agent of Food Corporation of India. Following the decision of the Hon’ble High Court the assessing officer allowed the claim of the assessee made under section 10(29).
5. It is pertinent to note that the assessee filed its return for the relevant year of assessment in December, 1992. Assessment for the assessment year 1991-92 was completed on Nil income on 15-12-1993. Exemption claimed by the assessee under section 10(29) was fully allowed in the assessment year 1991-92. Thereafter Hon’ble Rajasthan High Court decided the issue against the assessee in the case of Rajasthan State Warehousing Corporation (1994) 210 ITR 906 (Raj). Hon’ble Rajasthan High Court has held that income independent of letting of godown hall is beyond the ambit of section 10(29). Income derived from procurement of grains, from administrative, overheads, interest received from banks are independent activities, bearing no nexus with letting of godowns or warehousing for facilitating the marketing of commodities. As such, exemption under section 10(29) cannot be given in relation to those activities. This decision is dated 1-12-1993. Following this decision the assessing officer disallowed the claim made under section 10(29). The decision of the Rajasthan High Court was approved by the Apex Court vide order dated 1-4-1999, reported in the case of Orissa State Warehousing Corporation v. CIT (1999) 8 DTC 585 (SC) : (1999) 237 ITR 589 (SC).
6. It was further pointed out that in Civil Appeal No. 6650 of 1995 in the case of CIT v. Gujarat State Warehousing Corpn. Ltd., (2000) 18 DTC 146 (SC) : (2000) 245 ITR 1 (SC) Apex Court took note of the decision in Orissa State Warehousing Corporation case (supra). The matter was placed before the Hon’ble Chief Justice for placing the matter before the larger Bench for decision.
7. The general conspectus of the main plank of Shri Garg’s argument was that the assessee was not liable to pay advance tax The last date for making the payment of advance tax was 15-3-1992. The decision of the Rajasthan High Court was delivered on 1-12-1993. As on 15-3-1992, as per the law laid down by the Hon’ble Allahabad High Court the assessee was not liable to pay advance tax. It was entitled to get exemption under section 10(29). The department did accept this position in the preceding year. The assessee was held to be liable of payment of tax as because a different view was taken by Rajasthan High Court. As on the last date for the payment of advance tax the only decision available on the point was of Hon’ble Allahabad High Court. On the strength of this no liability can be passed on the assessee for the payment of advance tax.
8. Reference was made to the decision of apex court rendered in the case of CIT v. Hindustan Electro Graphites Ltd. (2000) 14 DTC 672 (SC) : (2000) 243 ITR 48 (SC).. In this case the assessee received cash compensatory support from government. It was not taxable on the date of filing the return. As such it was not included. Subsequently, there was amendment with retrospective effect making cash assistance from government taxable. Assessment was completed subsequent to the introduction of the provision. Apex Court held that additional tax on the basis of receipt of the cash compensatory support was not valid.
9. Shri Garg also relied on the decision of the Apex Court rendered in the case of J.K. Synthetics Ltd. v. CTO AIR 1994 SC 2393s. In this case the assessee filed the return on the premise that the amount of freight charge in respect of sale of cement did not form part of the sale price for payment of sales-tax. This premise was rejected by the Apex Court in the case of Hindustan Sugar Mifls. Accordingly, the assessee paid additional sales-tax on inclusion of freight amount in calculating the sale price pursuant to that decision. Hon’ble Supreme Court had held that the assessee was not liable to pay tax under section 11B on the additional amount of tax on freight.
10. Shri Garg also invited my attention on the decision of the Tribunal rendered in the case of Vikshara Trading & Investment (P) Ltd. v. Dy. CIT (1999) 8 DTC 682 (Ahd-Trib) : (1998) 96 Taxman 188 (Ahd-Trib). In this case the Tribunal held that interest under section 234B is not chargeable in a case where return was filed declaring loss which was converted by the assessing officer into income.
11. Reference was also made to the decision of the Tribunal rendered in the case of Sedco Forest International Driving Inc. v. Dy. CIT (2000) 16 DTC 202 (Del-Trib) (2000) 72 ITD 415 (Del). In this case the assessee was a non-resident company. It received fees for technical services rendered to ONGC. ONGC failed to deduct tax at source. Had ONGC deducted tax at source, the assessee would not be liable to pay advance tax under section 208. The Tribunal held that assessed tax means tax on total income as reduced by the amount of tax deducted at source. Since ONGC failed to deduct tax at source, the assessee-company could not be fastened with liability to pay interest under section 234B. Shri Garg also placed reliance on the decision rendered in the case of Dr. (Mrs.) Devinder Kaur Sekhon v. Assistant CIT (1999) 7 DTC 352 (Chd `B’-Trib) (1998) 67 lTD 407 (Chd-Trib). In this case the assessee received certain amount as interest on enhanced compensation. The assessee could not anticipate this receipt. The Tribunal held that there was no failure on the part of the assessee so as to attract the provisions of section 234B.
12. The learned Departmental Representative submitted that the provision of section 10(29) was unambiguous. The assessee was not entitled to get benefit in respect of section 10(29) on the incomes which it claimed. There was no decision of jurisdictional High Court or of Apex Court at the relevant point of time dealing with this issue. As such, the assessee ought to have paid the due tax. It was further argued that the levy of interest under section 234B is mandatory. Interest charged under section 234B is compensatory in nature. As such, the assessee cannot be exonerated from the charge of interest.
13. The defaults, which attract charge of interest under section 234B, are as under:
(i) Failure to pay advance tax during the financial year which an assessee is liable to pay under section 208; and
(ii) Payment of advance tax under section 210 by an assessee, which is less than 90 per cent of the “assessed tax”.
14. Admittedly upto assessment year 1991-92 the assessee did get the benefit of section 10(29) of the Act. It was assessed on Nil income. The exemption was granted on the basis of Allahabad High Court decision in U.P. State Warehousing Corpn.’s case (supra). Till 31-3-1992, this was the only decision available on the point. As no other decision was available, therefore, the department also accepted this decision. The assessee acted bona fide in conformity with the decision of the High Court. Just because the decision was reversed by the Apex Court liability to pay advance tax cannot be fastened on the assessee. At the relevant point of time it was impossible on the part of the assessee to foresee the decision of the Supreme Court on the point. Law is trite on the subject it is, canonized in the well-known common law dictum : “lex non cogit ad impossibly” (law cannot compel you to do the impossible).
15. I am inclined to agree with the argument of the learned departmental Representative that section 234B is mandatory in nature. But before invoking section 234B it is also essential to see that whether the assessee comes within the sweep of this section. The condition precedent for invoking the provisions of section 234B are that the assessee must be fastened with the liability to pay advance tax under section 208. Taking into consideration the entire conspectus of the case, I am of the opinion that the assessee was not liable to make the payment of advance tax The case of the assessee falls beyond the ken of section 208 of the Act. As such, it is not coming within the ambit of section 234B of the Act. Therefore, I am inclined to agree with the view taken by the learned Accountant Member.
16. The matter will now go before the regular Bench for deciding the appeal in accordance with the opinion of the majority.
