Advance tax is payable in case of companies liable to pay tax on book profits

Facts

• Taxpayer filed its return of income declaring total income of Rs. NIL under the normal provisions and offered the income based on book profits.
• Assessment order was passed under section 143(3) assessing total income at Rs. Nil after setting off the brought forward losses and unabsorbed depreciation.
• The Assessing Officer („the AO?) levied tax on the book profits determined under section 11 5JA of the Income Tax Act,1961 („the ITA?).
• Interest under section 234B was charged since no advance tax had been paid in respect of tax on book profits.
• On an appeal by the taxpayer, the Commissioner of Income Tax (Appeals) (“CIT(A)”) and the Tribunal upheld the AO?s order.
• On further appeal, the Bombay High Court following the judgment of Karnataka High Court in the case of Kwality Biscuits Ltd. took the view that interest under section 234B cannot be levied on the tax calculated on book profits.
• Aggrieved by the order of the Bombay High Court, the Tax authorities filed an appeal before the Supreme Court („SC?).

Issue before the Supreme Court

• Whether advance tax was payable in respect of tax calculated on the book profits under section 11 5JA and consquently interest under section 234B was leviable in case of short payment of advance tax?

 Observations and Ruling of the Supreme Court