INCOME TAX ACT, 1961

Section 234B

Interest under section 234B - Failure to pay advance tax - Leviability as regards highly debatable issue -

Assessee claimed expenditure on replacement of rings and frames in Textile Machineries, installed by the factory, as an allowable revenue expenditure, AO rejected assessee's claim and raised demand of tax and also imposed, inter alia, interest under section 234B, for failure of assessee to pay advance tax and the same was confirmed on appeal, by CIT(A) and by ITAT. The said order was assailed by Revenue before High Court. A Division Bench of High Court took up the matter and decided the same in favour of the assessees. The said issue came to be decided against assessee by Apex court. Consequently assessee filed application seeking waiver of interest under section 234B before CCIT, which stood rejected. Assessee aggrieved by dismissal of writ petition by single Judge upholding the order of CCIT, filed the instant writ appeal. Held: . In view of thin line difference between 'revenue expenditure' for replacing some of parts of plant and machinery, like rings and frames in the instant case in Textile industry being allowable deduction or not and that being a highly debatable issue, particularly when assessee had succeeded up to High Court consistently, irrespective of the fact whether appeal was filed by assessee or by Revenue before the High Court or lower authorities, it could not be said that assessee in such case, ought to have admitted liability to pay advance tax, by giving up its claim for such expenditure for replacement of part of plant and machinery as an allowable revenue expenditure. That is why, while considering application for waiver of interest under section 234B, CCIT was bound to consider this aspect, which had unfortunately not been done. merely because Supreme Court held that expenditure in question could not be allowed as 'current repairs', even though it was revenue expenditure in nature, it would not mean that the levy of interest under section 234B for failure to pay advance tax, is of automatically attracted and the waiver in such cases, could not be granted by Competent Authority. The issue was highly debatable and therefore, liability of paying advance tax to that extent, treating as admitted liability could not arise. Therefore, Writ Appeal was allowed and order passed by single judge and matter was remanded to CCIT for re-considering the case of assessee afresh for Waiver of interest under section 234B.

Referred:CIT v. Saravana Spinning Mills (P) Ltd. (2007) 293 ITR 201 (SC) : 2007 TaxPub(DT) 1442 (SC) Berger Paints India Ltd. v. CIT (2004) 266 ITR 99 (SC) : 2004 TaxPub(DT) 1388 (SC) CIT v. Anjum MH Ghaswala & Ors. (2001) 252 ITR 01 (SC) : 2001 TaxPub(DT) 1637 (SC) CIT v. Narendra Doshi (2002) 254 ITR 606 (SC) : 2002 TaxPub(DT) 0496 (SC) Union of India v. Satish Panalal Shah (2001) 249 ITR 221 (SC) : 2001 TaxPub(DT) 0900 (SC) Alembic Chemical Works Company Ltd. v. CIT (1989) 177 ITR 377 (SC) : 1989 TaxPub(DT) 1096 (SC) Empire Jute Company Ltd. v. CIT (1980) 124 ITR 1 (SC) : 1980 TaxPub(DT) 1083 (SC) CIT v. Mahalakshmi Textile Mills Ltd. (1967) 66 ITR 710 (SC) : (1967) 3 SCR 957 (SC) : 1967 TaxPub(DT) 0371 (SC) CIT v. Sambandham Spinning Mills Ltd. (2008) 298 ITR 306 (Mad) : 2008 TaxPub(DT) 0637 (Mad-HC) CIT v. Metal Powder Co. Ltd. (2008) 300 ITR 48 (Mad) : 2008 TaxPub(DT) 0578 (Mad-HC) CIT v. Janakiram Mills Ltd. (2005) 275 ITR 403 (Mad) : 2005 TaxPub(DT) 1572 (Mad-HC) Mrs. Prabha Lal v. CIT & Ors. (2004) 269 ITR 212 (Pat) : 2004 TaxPub(DT) 1266 (Pat-HC) Kuttukaran Machine Tools v. CIT (2003) 264 ITR 305 (Ker) : 2003 TaxPub(DT) 0494 (Ker-HC) Vinod Kurana v. CIT & Anr. (2002) 253 ITR 578 (P&H) : 2002 TaxPub(DT) 0510 (P&H-HC) CIT v. R. Ramalingair (2000) 241 ITR 753 (Ker) : 2000 TaxPub(DT) 0394 (Ker-HC) Dy. CIT v. Vellore Co-operative Sugar Mills Ltd. (2000) 242 ITR 170 (Mad) : 2000 TaxPub(DT) 0819 (Mad-HC) Dr. S. Reddappa & Ors. v. UOI & Ors. (1998) 232 ITR 62 (kar) : 1998 TaxPub(DT) 0388 (Karn-HC) Union Land and Building Society (P) Ltd. v. UOI & Ors. (1995) 215 ITR 758 (Karn) : 1995 TaxPub(DT) 1089 (Karn-HC) New Shorrock Spinning and Manufacturing Co. Ltd. v. CIT (1956) 30 ITR 338 (Bom) : 1956 TaxPub(DT) 0138 (Bom-HC) CIT v. Shivsagar Estate (2002) 257 ITR 59 (SC) : 2002 TaxPub(DT) 0101 (SC)

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