GUJARAT STATE FERTILIZERS AND CHEMICALS LTD. VS DEPUTY COMMISSIONER OF INCOME-TAX (ASSESSMENT).
1999PTD 1413
[226 I T R 270]
[Gujarat High Court (India)]
Before R. K. Abichandani and R. Balia, JJ
GUJARAT STATE FERTILIZERS AND CHEMICALS LTD.
versus
DEPUTY COMMISSIONER OF INCOME-TAX (ASSESSMENT).
Special Civil Application No.9392 of 1996, decided on 16/01/1997.
Income-tax---
----Recovery of tax---Appeal---Effect of Circular No.530, dated 6-3-1989-- Appeal from order of assessment---Demand in dispute relating to issues decided in favour of assessee in earlier years by Appellate Authority or Court ---Assessee cannot be treated as a defaulter during the pendency of appeal---Indian Income Tax Act, 1961, S.220---Circular No.530, dated 6-3-1989.
As per Circular No.530, dated March 6, 1989, on an application being filed by the assessee, the Assessing Officer will exercise his discretion under section 220(6) of the Income Tax Act, 1961, subject to such conditions as he may think fit to impose, so as to treat the assessee as not being in default in respect of the amount in the appeal in the situations indicated in paragraph 2 of the circular. Accordingly, where the demand in dispute relates to issue that have been decided in favour of the assessee in an earlier order by an appellate authority or a Court in the assessee's own case, the assessee is to be treated as not being in default in respect of the amounts attributed to such disputed amounts:
Held, that with regard to the disallowances amounting to Rs.56,57,534 there were appeals and decisions in favour of the assessee in earlier years by the Commissioner of Income-tax (Appeals) and the High Court. If this were kept out of consideration then the total assessable income would be Rs.26,96,45,016 and the tax demands on that income including surcharge would be approximately Rs.13,50,000. As against this, the figures of taxes paid, as given by the Department, were 13,31,52,312. In view of these facts and keeping in view the petitioner's claim for refund of Rs.11,27,35,845 or the higher amount as orally suggested on behalf of the petitioner, which the petitioner would want to be adjusted against dues, if any, there was absolutely no justification for imposing the condition of paying 20 per cent of the outstanding demand under the order made by the Deputy Commissioner of Income-tax under section' 220(6). If this condition were struck out the assessee could not be treated as a defaulter during the pendency of the appeal.
CIT v. Kaira District Cooperative Milk Producers Union Ltd. (1991) 192 ITR 608 (Guj.) ref.
J.P. Shah for Applicant.
Manish R. Bhatt for Respondent No. 1 .
JUDGMENT
Rule. Learned counsel appearing for the respondent waives service of rule and the matter is taken up for final disposal at the request of both the sides.
The petitioner challenges the order made under section 220(6) of the Income Tax Act, 1961, which is at Annexure "F" by which it was held that the assessee may not be treated as in default within the meaning of section 220(6) in case the condition imposed under the order was fulfilled and no coercive measures as provided will be taken to recover the balance demand until disposal of the appeal.
An order was made under section 143(3) of the Act on March 31, 1995, raising a demand of Rs.52,03,43,426 of which according to the Department, an amount of Rs.43,77,21,488 was outstanding and the assessee was, therefore, asked to pay the demand immediately. Thereafter, an application was made under subsection (6) of section 220 for not treating the assessee in default in respect of the amount in dispute as long as the appeal remained un-disposed of. According to the assessee, disallowance was made in respect of the covered issues, namely, pre--operative expenses of interest on the caprolactum project, depreciation on the caprolactum expansion project, guest-house expenses and interest on borrowed funds. The case of the petitioner is that in fact an amount of Rs.11,27,35,845 was due to be refunded to the petitioner-assessee and if the tax in respect of the covered points was excluded, the petitioner was not required to pay any tax.
Reliance has been placed on behalf of the petitioner on Circular No.530 (see (1989) 176 ITR (St.) 240), dated March 6, 1989, in support of its contentions. As per Circular No.530 (see (1989) 176 ITR (St.) 240), dated March 6, 1989, guidelines were issued by the Board that on an application being filed by the assessee in that regard, the Assessing Officer will exercise his discretion under section 220(6) subject to such conditions as he may think fit to impose, so as to treat the assessee as not being in default in respect of the amount in the appeal in the situations indicated in paragraph 2 of the circular. Accordingly, where the demand in dispute relates to issues that have been decided in favour of the assessee in an earlier order by an appellate authority or a Court in the assessee's own case, the assessee was to be treated as not being in default in respect of the amounts attributed to such disputed amounts.
According to the petitioner, the point of disallowance of interest of Rs.29,96,55,759, on borrowings for the caprolactum expansion plant was covered by the decision of the Commissioner of Income-tax (Appeals) in the case of the petitioner itself for the assessment year 1990-91 and the point in issue was also covered by the decision of this High Court and other decisions. As regards the depreciation claim of Rs.28,31,73,245, in respect of the expansion plant and on other points in respect of guest-house expenses of Rs.16,34,894, the points were covered by the decisions of this Court in CIT v. Kaira District Cooperative Milk Producers Union Ltd. (1991) 192 ITR 608 and CIT v. Ahmedabad Mfg. and Calico Printing Co. Ltd. (1992) 197 ITR 538, according to the petitioner.
Learned counsel for the Department has worked out the figures keeping out of consideration the disallowance made in the assessment on the covered issues which shows that when the disallowance under the aforesaid four covered issues totalling to Rs.56,57,534 is kept out of consideration, then the total assessable income would be Rs.26,96,45,016 and the tax demand on that income including surcharge would be approximately Rs.13,50,000. As against this, the figures of tax paid, as given by the Department, are Rs.13,31,52,312. In view of these facts and keeping in view the petitioner's claim for refund of Rs.11,27,35,845, or the higher amount as orally suggested on behalf of the petitioner, which the petitioner would want to be adjusted against dues, if any, there was absolutely no justification for imposing the condition of paying 20 per cent of the outstanding demand under the order made by the Deputy Commissioner of Income-tax under section 220(6) of the Act. We, therefore, strike out the said condition imposed under the said order, as a result of which the assessee will not be treated as a defaulter during the pendency of the appeal. As a consequence of this order, the petitioner will make a fresh application for the certificate under section 220(6) of the said Act and the concerned authority will issue the necessary certificate on the footing that the said condition has been struck out from the subject order. The concerned authority will issue the necessary certificate in accordance with law within two weeks after receiving the application from the petitioner for such certificate. Rule is made absolute accordingly with no order as to costs.
M.B.A./1901/FCRule made absolute.