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Judgment
N. Kumar, J.—This appeal was admitted to consider the following substantial question of law:
Whether the appellate authorities were correct in holding that mandatory interest u/s 234B and 234C is not leviable when assessment/intimation are completed u/s 115JA of the Act?
The parties relied on a judgment of this Court in the case of Jindal Thermal Power Company Limited (Formerly Jindal Tracteble Power Co. Ltd.) Vs. The Deputy Commissioner of Income Tax and Union of India (UOI), which has been upheld by the Hon''ble Apex Court holding the said question in favour of the revenue and against the assessee. However, the Apex Court in the case of Star India (P.) Ltd. v. CCE (2005) 2 STT 274 explaining the principles underlying the liability to pay interest has held as under:
The liability to pay interest would only arise on default and it is in the nature of a quasi-punishment. Such liability although created retrospectively could not entail punishment by payment of interest with retrospective effect. By a catena of decisions, the Supreme Court has laid down that the payment of interest for delayed payment of tax is compensatory in nature. It is a suffered liability. Though such a liability could be created retrospectively. When such a liability is retrospectively created. The assessee cannot be accused of committing default and he cannot be charged with interest for such default. As the assessee was under no obligation on the date of the alleged default to pay tax at that particular rate, he cannot be accused of having committed default and made to pay interest as compensating the revenue for having not paid the money. The liability to pay advance tax on payable income tax is not disputed. In that view of the matter, the charging of interest on the difference; in the advance tax cannot be sustained. Therefore, what emerges from the aforesaid discussion is:
(a) The assessee is liable to pay advance tax as per the amended provisions of Section 115JB for the relevant period. However, he is not liable to pay interest on the amount due as per the amended provision.
(b) If he has not paid the advance tax as per the provision existing prior to amendment, he is liable to pay interest on the said amount.
(c) He has no liability to pay interest on the difference in the tax paid.
In the light of the aforesaid judgment of the Apex Court, the substantial question of law is answered in favour of the assessee and against the Revenue.