S. 234C — Interest u/s.234C is not payable if, on the date of payment of advance tax it is not known whether the demerger scheme will be sanctioned or not and from which date it would be sanctioned.

9. 
   

   Ultratech Cement Ltd. v. Dy. CIT

ITAT ‘E’ Bench, Mumbai

Before R. K. Gupta (JM) and

D. Karunakara Rao (AM)

ITA No. 7646 & 7647/Mum./2007

A.Y. : 2004-05. Decided on : 20-8-2009

Counsel for assessee/revenue : Arvind Sonde &

Sampat Kabra/K. K. Das

S. 234C — Interest u/s.234C is not payable if, on the date
of payment of advance tax it is not known whether the demerger scheme will be
sanctioned or not and from which date it would be sanctioned.

Per R. K. Gupta :

Facts :

The assessee, pursuant to a demerger scheme, acquired
cement business of L & T Limited from 1-4-2003. The scheme of demerger was
sanctioned by the Bombay High Court on 22-4-2004 effective from 1-4-2003 as a
result of which the income for the period from 1-4-2003 to 31-3-2004 became
taxable in the hands of the assessee. The assessee had not paid advance tax in
respect of this income. Consequently, the Assessing Officer charged interest
of Rs.44,94,392 u/s.234C.

Aggrieved, the assessee preferred an appeal to the CIT(A)
where it contended that interest is not payable since on the due dates for
payment of advance tax there was no liability to pay tax. It was further
submitted that if the liability to pay advance tax arises on account of
subsequent event, i.e. demerger sanctioned after the end of the
previous year then in such an event it cannot be said that the assessee was
liable to pay advance tax on due dates specified in S. 210. The CIT(A)
dismissed the ground by observing that the assessee was liable for payment of
advance tax u/s.208 with all consequences of law to pay interest u/s.234B and
u/s.234C. He held that since there was a shortfall in payment of installments
of advance tax, liability of interest u/s.234C is automatically attracted.

Aggrieved, the assessee preferred an appeal to the Tribunal
where it was also contended on behalf of the assessee that it was impossible
to pay advance tax as it was not aware whether the demerger scheme would be
sanctioned and if yes, from which date.

Held :

The Tribunal observed that the liability to pay advance tax
in respect of cement business had arisen consequent to the sanction of the
demerger scheme by the Bombay High Court on 22-4-2004 i.e. after the
due dates of payments of advance tax. The Tribunal noted that the tax
liability arising after the date of sanction of the demerger scheme has been
paid by the assessee while filing its return of income along with interest
u/s.234A & B. It held that payment of advance tax in respect of cement
division was an impossible situation. The Mumbai Bench of the Tribunal in the
case of Reliance Energy Ltd. in ITA No. 218/Mum./05 (order dated 24-1-2008)
has after considering several decisions of the Tribunal and discussing the
doctrine of impossibility held that an assessee cannot be forced to do an
impossible task.