[Emami Ltd. v. CIT, 200 Taxman 326 (Cal.); 12 Taxman. com 64 (Cal.)]
The assessee did not have any taxable income according to the normal computation provisions of the Income-tax Act, 1961 for the A.Y. 2001-02. It had also no liability u/s.115JB. Thus, the assessee had no liability to pay any advance tax u/s.208 for the A.Y. 2001-02.
By the Finance Act, 2002, section 115JB was amended with retrospective effect from 1-4-2001. In view of the aforesaid retrospective amendment, the assessee was not in a position to deduct the sum of Rs.26.51 crore withdrawn from the revaluation reserve. It recomputed the book profit u/s.115JB for the A.Y. 2001-02, worked out the amount of tax payable, paid the same on 31-8-2002 and it filed revised return on the basis of amended section. The Assessing Officer passed an order u/s.143(3)/115JB for the A.Y. 2001-02. The Assessing Officer computed the tax liability u/s.115JB at the same figure as shown in the assessee’s revised return. However, he charged interest u/s.234B and section 234C since the assessee did not pay any advance tax with reference to the liability for tax under the retrospective amended section 115JB.
The Commissioner (Appeals) allowed the assessee’s appeal holding that since the amended provision did not exist in the statute during the relevant previous year, the assessee’s contention that it had no liability u/s.208 to pay advance tax was well-founded. The Tribunal held that the assessee was liable to pay interest u/s.234B and u/s.234C.
On appeal by the assessee, the Calcutta High Court reversed the decision of the Tribunal and held as under:
“(i) A plain reading of sections 234B and 234C makes it abundantly clear that these provisions are mandatory in nature and there is no scope of waiving of the said provisions. However, in order to attract the provisions contained in sections 234B and 234C, it must be established that the assessee had the liability to pay advance tax as provided in sections 207 and 208 within the time prescribed u/s.211.
(ii) A mere reading of sections 207, 208 and 211 leaves no doubt that the advance tax is an amount payable in advance during any financial year in accordance with the provisions of the Act in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year. Thus, in order to hold an assessee liable for payment of advance tax, the liability to pay such tax must exist on the last date of payment of advance tax as provided under the Act or at least on the last date of the financial year preceding the assessment year in question. If such liability arises subsequently when the last date of payment of advance tax or even the last date of the financial year preceding the assessment year is over, it is inappropriate to suggest that still the assessee had the liability to pay ‘advance tax’ within the meaning of the Act.
(iii) The amended provision of section 115JB having come into force with effect from 1-4-2001, the assessee could not be held defaulter of payment of advance tax. On the last date of the financial year preceding the relevant assessment year, as the book profit of the assessee in accordance with the then provision of law was nil, one could not conceive of any ‘advance tax’ which in essence was payable within the last day of the financial year preceding the relevant assessment year as provided in sections 207 and 208 or within the dates indicated in section 211, which inevitably fell within the last date of financial year preceding the relevant assessment year. Consequently, the assessee could not be branded as a defaulter in payment of advance tax as mentioned above and no interest could be imposed upon it u/s.234B and u/s.234C.”
