Court Upholds Interest Liability on MAT Companies Under Sections 234B and 234C

Case Name**: Joint Commissioner of Income Tax V. Rolta India Ltd. **Key Takeaways**: 1. Companies liable to pay tax under Section 115JA (MAT) are also liable to pay interest under Sections 234B and 234C. 2. The Supreme Court's decision in Joint Commissioner of Income Tax V. Rolta India Ltd. is a significant precedent on this issue. 3. The ruling applies to all companies, regardless of whether they are assessed under regular provisions or MAT provisions. **Issue**: Whether companies whose tax is determined based on Section 115JA (Minimum Alternate Tax) are liable to pay interest under Sections 234B and 234C of the Income Tax Act? **Facts**: Hey there! Let me break down the facts for you in a more conversational way: So, we're looking at two tax appeals here, both filed under Section 260A of the Income Tax Act. These appeals are challenging orders from the Income Tax Appellate Tribunal (ITAT). The main issue in both cases is pretty much the same - it's about whether companies should pay interest under Sections 234B and 234C when their tax is calculated using Section 115JA (that's the Minimum Alternate Tax or MAT provision). In one of the appeals (Tax Appeal No. 676 of 2006), the company filed a tax return showing an income of about 54 lakhs rupees. The tax officer, after checking things out, said the income was actually around 68 lakhs. The company wasn't happy with this and appealed to the CIT(A), who sided with the company. Then the tax department took it to the ITAT, but the ITAT dismissed their appeal. **Arguments**: The main argument from the Revenue side was that companies should pay interest under Sections 234B and 234C even when their tax is determined under Section 115JA (MAT). They're saying that these interest provisions apply to all companies, regardless of how their tax is calculated. On the other hand, the companies were arguing that they shouldn't have to pay this interest when they're being taxed under the MAT provisions. **Key Legal Precedents**: The big one here is the Supreme Court case of Joint Commissioner of Income Tax V. Rolta India Ltd., reported in (2011) 330 ITR 470 (SC). This case basically said that yes, companies do have to pay interest under Section 234B even when they're being taxed under Section 115JA or 115JB. Another important case is M/s Riddhi Siddhi Gluco Boils Ltd. Versus Assistant Commissioner of Income Tax, Circle-5, where the Gujarat High Court followed the Supreme Court's decision. There's also the Punjab and Haryana High Court case of Swaraj Mazda Ltd. V. Commissioner of Income-tax, which came to the same conclusion. **Judgement**: The High Court ruled in favor of the Revenue department. They said that companies are indeed liable to pay interest under Sections 234B and 234C, even when their tax is determined based on Section 115JA (MAT). The court relied heavily on the Supreme Court's decision in the Rolta India Ltd. case. The court emphasized that Section 234B applies to all companies, and there's no exclusion for companies taxed under Section 115JA. They also pointed out that the term "assessed tax" includes tax determined under Section 115JA in regular assessments. **FAQs**: 1. Q: Does this ruling apply to all companies? A: Yes, the court made it clear that this applies to all companies, whether they're assessed under regular provisions or MAT provisions. 2. Q: What's the significance of Section 115JA? A: Section 115JA is the Minimum Alternate Tax provision, which ensures that companies pay a minimum amount of tax even if they have low taxable income due to various deductions and exemptions. 3. Q: Why were companies arguing against paying interest? A: Companies were likely trying to reduce their tax liability by arguing that the interest provisions shouldn't apply when they're being taxed under MAT. 4. Q: How does this affect companies going forward? A: Companies will need to factor in potential interest liability under Sections 234B and 234C when calculating their advance tax payments, even if they expect to be taxed under MAT provisions. 5. Q: Can companies appeal this decision further? A: While the judgment doesn't mention further appeals, in general, decisions of High Courts can be appealed to the Supreme Court if there's a substantial question of law involved.

1. The Tax Appeal No.676 of 2006 u/s.260A of the Income ­tax Act, 1961 is filed against the judgment and order dated 29.09.2005 of the Income Tax Appellate Tribunal passed in ITA No.1892/Ahd/2001.

2. The Tax Appeal No.677 of 2001 u/s.260A of the Income­tax Act, 1961 is filed against the judgment and order dated 11.11.2005 of the Income Tax Appellate Tribunal passed in ITA No.88/Ahd/2001.

3. The facts of both the appeals are identical Therefore, both these appeals are taken up for hearing and decided together as common questions of law are raised. The respondent though served, has chosen not to appear. 4. As the question of law as well as the facts of both these appeals are same, we discuss facts as emerging in Tax Appeal No.676 of 2006. The assessee filed its return on 31.07.1998, declaring total income of Rs.54,15,971/­ for the Assessment Year 1998­99. The assessments were taken under scrutiny and the Assessment Officer vide its order, determined the total income of assessee of Tax Appeal No.676 of 2006 at Rs.68,76,282/­. Against this order, the assessee filed appeal before the CIT(A). The CIT(A) vide its order dated 22.06.2001, allowed the appeal of the assessee. Against the said order, the revenue has filed an appeal before the Income­tax Appellate Tribunal being ITA No.1892/Ahd/2001 and the Tribunal has dismissed the appeal preferred by the Revenue.

5. While admitting Tax Appeal No.676/2006, following substantial questions of law arose for the determination of this Hon'ble Court; “(A) Whether on the facts and in the circumstances of the case, and in law, the Income Tax Appellate Tribunal is right in deleting interest charged under Sections 234B and 234C of the Income Tax Act on the income charged to tax under the provisions of Section 115JA of the Income Tax Act?”

6. Before proceeding with the matters, we would like to discuss Sections 234B and 234C of the Income Tax Act. Both these sections 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 assessed tax, the assessee shall be liable to pay simple interest at the rate of [one] 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 sub­section (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. [Explanation 1.­In this section, “assessed tax” means the tax on the total income determined under sub­section (1) of section 143 and where a regular assessment is made, the tax on the total income determined under such regular assessment as reduced by the amount of,­

(i) any tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income;

(ii) any relief of tax allowed under section 90 on account of tax paid in a country outside India;

(iii) any relief of tax allowed under section 90A on account of tax paid in a specified territory outside India referred to in that section;

(iv) any deduction, from the Indian Income­tax payable, allowed under section 91 on account of tax paid in a country outside India; and

(v) any tax credit allowed to be set off in accordance with the provisions of section 115JAA [or section 115JD]] Explanation 2.­Where, in relation to an assessment year, an assessment is made for the first time under section 147 [or section 153A], the assessment so made shall be regarded as a regular assessment for the purposes of this section. [Explanation 3.­ In Explanation 1 and in sub- section (3) “tax on the total income determined under sub­section (1) of section 143” shall not include the additional income­tax, if any, payable under section 143.] (2) Where, before the date of [determination of total income under sub­section (1) of section 143 or] completion of a regular assessment, tax is paid by the assessee under section 140A or otherwise,­*

(i) interest shall be calculated in accordance with the foregoing provisions of this section up to the date on which the tax is so paid, and reduced by the interest, if any, paid under section 140A towards the interest chargeable under this section;

(ii) thereafter, interest shall be calculated at the rate aforesaid on the amount by which the tax so paid together with the advance tax paid falls short of the assessed tax.

(3) Where, as a result of an order of reassessment or recomputation under section 147 [or section 153A], the amount on which interest was payable under sub­section (1) is increased, the assessee shall be liable to pay simple interest at the rate of [one] per cent for every month or part of a month comprised in the period commencing on the day following [the date of determination of total income sub­section (1) of section 143 [and where a regular \assessment is made as is referred to in sub­section (1) following the date of such regular assessment]] and ending on the date of reassessment or recomputation under section 147 [or section 153A] on the amount by which the tax on the total income determined on the basis of the reassessment or recomputation exceeds the tax on the total income determined [under sub­section (1) of section 143 or] on the basis of the regular assessment aforesaid.

(4) Where, as a result of an order under section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub­section (4) of section 245D, the amount on which interest was payable under sub­section (1) or sub- section (3) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and­

(i) in a case where the interest is increased, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly;

(ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded.

(5) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989 and subsequent assessment years.] [Interest for deferment of advance tax. 234C.

(1) [Where in any financial year,­

(a) the company which is liable to pay advance tax under section 208 has failed to pay such tax or­

(i) the advance tax paid by the company on its current income on or before the 15th day of June is less than fifteen per cent of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of September is less than forty­five per cent of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than seventy- five per cent of the tax due on the returned income, then, the company shall be liable to pay simple interest at the rate of [one] per cent per month for a period of three months on the amount of the shortfall from fifteen per cent or forty­five per cent or seventy­five per cent , as the case may be, or the tax due on the returned income;

(ii) the advance tax paid by the company on its current income on or before the 15th day of March is less than the tax due on the returned income, then, the company shall be liable to pay simple interest at the rate of [one] per cent on the amount of the shortfall from the tax due on the returned income:]

[Provided that nothing contained in this sub­section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of under­estimate or failure to estimate-

(a) the amount of capital gains; or

(b) income of the nature referred to in sub­clause (ix) of clause (24) of section 2, and the assessee has paid the whole of the amount of tax payable in respect of income referred to in clause (a) or clause (b), as the case may be, had such income been a part of the total income, as part of the [remaining installments of advance tax which are due or where no such installments are due], by the 31st day of March of the financial year;]

[Provided further that nothing contained in this sub­section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of increase in the rate of surcharge under section 2 of the Finance Act, 2000 (10 of 2000), as amended by the Taxation Laws (Amendment) Act, 2000 (1 of 2000), and the assessee has paid the amount of shortfall, on or before the 15th day of June, 2000, the 15th day of September, 2000 and 15th day of December, 2000.]

[Explanation.­ >In this. Section, “tax due on the returned income” means the tax chargeable on the total income declared in the return of income furnished by the assessee for the assessment year commencing on the 1st day of April immediately following the financial year in which the advance tax is paid or payable, as reduced by the amount of,­

(i) any tax deductible or collectible at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account of in computing such total income;

(ii) any relief of tax allowed under section 90 on account of tax paid in a country outside India;

(iii)any relief of tax allowed under section 90A on account of tax paid in a specified territory outside India referred to in that section;

(iv) any deduction, from the Indian Income­tax payable, allowed under section 91 on account of tax paid in a country outside India; and

(v) any tax credit allowed to be set off in accordance with the provisions of section 115JAA [or section 115JD]].

(2) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989 and subsequent assessment years.]]

7. The said question is raised in Tax Appeal No.677/2006. It appears from the decision of the Apex Court that the decision of the Tribunal will have to be reversed. The Apex Court in case of Joint Commissioner of Income Tax V. Rolta India Ltd., reported in (2011) 330 ITR 470 (SC) held as under:

“It is clear from reading Sections 115JA and 115JB that the question whether a company which is liable to pay tax under either provision does not assume importance because specific provision(s) is made in the section saying that all other provisions of the Act shall apply to the MAT Company (Section 115JA(4) and Section 115JB(5)). Similarly, amendments have been made in the relevant Finance Acts providing for payment of advance tax under Sections 115JA and 115JB. So far as interest leviable under Section 234B is concerned, the section is clear that it applies to all companies. The prerequisite condition for applicability of Section 234B is that assessee is liable to pay tax under Section 208 and the expression “assessed tax” is defined to mean the tax on the total income determined under Section 143(1) or under Section 143(3) as reduced by the amount of tax deducted or collected at source. Thus, there is no exclusion of Section 115J/115JA in the levy of interest under Section 234B. The expression “assessed tax” is defined to mean the tax assessed on regular assessment which means the tax determined on the application of Section 115J/115JA in the regular assessment.”

8. Relying on the above said decision of Hon'ble Apex Court, where the issue of deletion of interest leviable under Section 234B and 234C of the Act, the Division Bench of this Court in the case of M/s Riddhi Siddhi Gluco Boils Ltd. Versus Assistant Commissioner of Income Tax, Circle­5 has held as under:

“1. The assessee has challenged the order of Income Tax Appellate Tribunal dated 31.3.2010 raising following questions for our consideration: “Whether, in the facts and circumstances of the case the Income Tax Appellate Tribunal was right in law in holding that interest is leviable u/s 234B & 234C of the Act in case of an assessment order being framed on “Book Profits” u/s 115JB of the Act?”

2. On having heard learned senior counsel Shri Soparkar and having considered material on record, we are of the opinion that issue perhaps is no longer res integra as the same is decided by the Apex Court in case of Joint Commissioner of Income Tax v. Rolta India Ltd reported in (2011) 330 ITR 470(SC) as under :

“It is clear from reading Sections 115JA and 115JB that the question whether a company which is liable to pay tax under either provision does not assume importance because specific provision(s) is made in the section saying that all other provisions of the Act shall apply to the MAT Company (Section 115JA(4) and Section 115JB(5)). Similarly, amendments have been made in the relevant Finance Acts providing for payment of advance tax under Sections 115JA and 115JB. So far as interest leviable under Section 234B is concerned, the section is clear that it applies to all companies. The prerequisite condition for applicability of Section 234B is that assessee is liable to pay tax under Section 208 and the expression

“assessed tax” is defined to mean the tax on the total income determined under Section 143(1) or under Section 143(3) as reduced by the amount of tax deducted or collected at source. Thus, there is no exclusion of Section 115J/115JA in the levy of interest under Section 234B. The expression “assessed tax” is defined to mean the tax assessed on regular assessment which means the tax determined on the application of Section 115J/115JA in the regular assessment.”

3. Tax Appeal since raises no other question of law, same requires no further consideration. Tax Appeal is dismissed.

9. The said issue is also decided by the decision of Hon'ble Punjab and Haryana High Court in the case of Swaraj Mazda Ltd. V. Commissioner of Income­tax, where the issue was whether the assessee was liable to pay interest under sections 234B and 234C in respect of tax determined on basis of Section 115JA was answered in favour of the revenue as under: “...

2. ITA No.406 of 2005 has been preferred by the assessee under Section 260A of the Income­tax Appellate Tribunal, Chandigarh Bench (for brevity, :the Tribunal”) in ITA No.805/CHD/2000, for the Assessment Year 1998­99, claiming following substantial questions of law:­

“(i) Whether under the facts and circumstances of the case on the true and correct interpretation of the provisions of Section 115JA the interest under Sections 234B and 234C is to be charged under Section 143(1) (a) as a prima facie adjustment whereby no such charge made under Section 143(3)?

(ii) Whether on the true and correct interpretation of the provisions of Sections 115JA, 234B, 234C debatable issues can be covered under Section 143(1)(a)?

3. Briefly, the facts as narrated in ITA No.406 of 2005 may be noticed. The assessee filed its return of income for Assessment Year 1998­99 on 27­11­1998 at Rs.7,45,871/­ after excluding brought forward losses of Rs.10,23,33,050/­. Since after claiming brought forward losses of Rs.10,23,33,050/­, the taxable income worked out to be less than 30% of the book profit, the assessee filed its return of income at Rs.2,23,69,890/­ by applying the provisions of Section 115JA of the Act. The return was processed under Section 143(1)(a) of the Act on 31.05.1999. While processing the return, the Assessing Officer vide order dated 14­ 11­2000, Annexure A.3, made an adjustment to the returned income for an amount of Rs.5,80,579/­ being the capital expenditure debited to profit and loss account and additional tax of Rs.40,640/­ was levied on the same and also interest under Sections 234B and 234C of the Act amounting to Rs.12,50,250/­ and Rs.5,91,911/­ respectively was charged. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 5­7­2000, Annexure A.2, the appeal was allowed. Aggrieved by the order, the revenue filed an appeal before the Tribunal. Vide order dated 17­12­2004, Annexure A.1, the Tribunal allowed the appeal, set aside the order of the CIT(A) and restored that of the Assessing Officer. Hence, he present appeal by the assessee.

4. Learned counsel for the parties are ad- idem that the solitary issue involved in all the three appeals is whether interest under Sections 234B and 234C of the Act can be charged in respect of income which has been determined on the basis of book profit under section 115JA of the Act.

5. The matter is no longer res integra. This Court in CIT v. Nahar Spg. Mills Ltd. [2011] 339 ITR 557/[2012] 209 Taxman 143/20 taxmann.com 792, following the judgment of the Hon'ble Supreme Court in Jt. CIT v. Rolta India Ltd. [2011] 330 ITR 470/196 Taxman 549/9 taxmann.com 36 came to the conclusion that interest under Sections 234B and 234C of the Act would be payable on failure to pay advance tax in respect of tax payable under Section 115JA/115JB of the Act.

6. In view of the above, it is held that the appellant was liable to pay interest under Sections 234B and 234C of the Act in respect of tax determined on the basis of Section 115JA of the Act. The substantial questions of law are answered against the assessee and in favour of the revenue. Consequently, all the three appeals are dismissed.”

10. Since the question of law is already concluded vide the judgments rendered in the above decisions, we are not assigning elaborate reasons for disposing of these appeals. Accordingly, the questions of law are answered in favour of the Revenue and against the assessee. The appeals stand allowed accordingly.

(K.S.JHAVERI, J.)