Director of Income Tax (Exemption) vs Shree Sitaram Public Charitable Trust

Ajit K. Sengupta, J.—In this reference u/s 256(2) of the Income Tax Act, 1961, for the assessment year 1984-85, the following question of law has been referred to this court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that interest u/s 217 of the Income Tax Act, 1961, is not exigible in this case ?"

The brief facts of the case are that the assessee, Shree Sitaram Public Charitable Trust, is a public charitable trust. The Assessing Officer denied the benefit of Section 11 of the Act to the assessee holding that the assessee held shares in Messrs. K. C. Thapar and Brothers and Hindusthan General Electric Corporation. Besides shares of the aforesaid two companies, the assessee also advanced loan to Messrs. K. C. Thapar and Bros. Ltd. The Assessing Officer held that the aforesaid investments were in violation of Section 13(1)(d)/11(5) of the Act as the assessee continued the investment after November 30, 1983, and the claim for exemption u/s 11 of the Act was rejected, and consequentially, interest u/s 217 was charged for violation of the provisions of Section 209A(1) of the Act.

The assessee appealed before the Commissioner of Income Tax (Appeals) against the levy of interest u/s 217 of the Act. Before the Commissioner of Income Tax (Appeals), it was submitted on behalf of the assessee that, as per the provisions of Section 209A(1) of the Act, the assessee was required to file a statement of advance tax payable by it on or before June 15, 1983, since the assessee was an assessee regularly assessed to tax in the past. But the assessee was enjoying exemption u/s 11. Therefore, as on June 15, 1983, the latest income returned and assessed was "nil". There was no liability to pay advance tax on the part of the assessee as on June 15, 1983. There was, therefore, no obligation to file a statement of advance tax under the provisions of Section 209A(1) of the Act. Accordingly, no statement was filed by the assessee for the assessment year 1984-85. In view of the above facts, charging of interest u/s 217 of the Act was not justified. The Commissioner of Income Tax (Appeals), relying on the decision of the Bombay High Court in the case of Patel Aluminium Pvt. Ltd. Vs. Miss K.M. Tawadia, Income Tax Officer and another, , deleted the interest levied u/s 217 of the Act.

Feeling aggrieved, the Department came up in appeal before the Tribunal. The Tribunal considered the submissions of the parties. The Tribunal found that the assessee being "an only assessee" and the latest completed assessment having resulted in the assessee''s taxable income being computed at nil by reason of the operation of Section 11, the assessee was not obligated to file a statement u/s 209A(1). That section incorporates a twin requirement, namely, filing of a statement and paying of advance tax in accordance with the statement. The focus is naturally on the payment of advance tax. The fact that, in the assessment for the assessment year 1984-85, the assessee was initially denied the benefit of exemption u/s 11 is neither here nor there. This is because at the time when the assessee is obligated to file the statement u/s 209A(1), what needs to be looked into is whether the assessee had any taxable income in the latest completed assessment. Even if it is assumed that somehow the denial of exemption u/s 11 is a material factor, the matter does not improve because the issue relating to exemption u/s 11 is one on which there can be an honest difference of opinion between the assessee and the Department. In such circumstances, there is no question of levying interest u/s 217 of the Act.

As indicated, the Tribunal has found as a fact that, in the last completed assessment, i.e., on June 15, 1983, the latest income returned and assessed was "nil". Thus, there was no liability to pay advance tax on the part of the assessee as on June 15, 1983. Therefore, there was no obligation to file a statement of advance tax under the provisions of Section 209A(1) of the Act.

This question came up for consideration before this court in Commissioner of Income Tax Vs. Indian Molasses Co. (P.) Ltd., There this court held that, where the assessed income and the returned income of the latest previous year of the assessee-company were minus figures, no statement of advance tax u/s 209A of the Income Tax Act, 1961, is required to be sent by the assessee and, consequently, interest u/s 217 of the Act is not payable by the assessee.

Following the said decision, we answer the question in this reference in the affirmative and in favour of the assessee.

There will be no order as to costs.

Nure Alam Chowdhury, J.

I agree.