Nil Book Profit – Section 234B & 234C Interest not applies

CIT Vs National Dairy Development Board (Gujarat High Court)

When its book profit was nil on the last date of the financial year then the assessee had no liability to pay advance tax and therefore, interest u/s 234B and section 234C of the Act will not be charged

The issue under consideration is Whether on the facts and circumstances of the case and in law, the ITAT was justified in deleting interest u/s. 234B and 234C of the I.T.Act by holding that same would not have been charged on the assessee on account of increase in total income resulting from retrospective amendment to section 43(6) of the Act without appreciating that charging of interest u/s. 234B and 234C of the I.T Act is mandatory?”

In case of Emami Ltd. v. Commissioner of Income Tax (supra), Kolkata High Court held that “the amended provision of section 115JB having come into force with effect from April 1, 2001, the appellant cannot be held defaulter of payment of advance tax. As pointed out earlier, on the last date of the financial year preceding the relevant assessment year, as the book profit of the appellant in accordance with the then provision of law was nil, we cannot conceive of any “advance tax” which in essence is 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 of the Act which inevitably falls within the last date of the financial year preceding the relevant assessment year. Consequently, the assessee cannot be branded as a defaulter in payment of advance tax as mentioned above.”

It appears that the learned Tribunal has not at all considered the aforesaid aspect as to the liability of the assessee to make payment of the advance tax on the last day of the financial year, i.e.,March 31,2001, when its book profit was nil according to the then law of the land. The various decisions of the other High Courts and the Tribunals relied upon by the Tribunal did not effectively consider the question whether even in a case like the present one where on the last date of the financial year preceding the relevant assessment year, the assessee had no liability to pay advance tax, he would be nevertheless asked to pay interest in terms of section 234B and section 234C of the Act for default in making payment of tax in advance which was physically impossible.”

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