REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.135 OF 2011 (arising out of S.L.P. (C) No. 25746 of 2009)

Jt. C. I. T., Mumbai …  Appellant(s)

         versus

M/s Rolta India Ltd.          …  Respondent(s)

with Civil Appeal No.136 of 2011 @ S.L.P. (C) No. 18367 of 2010,  Civil  Appeal  No.  459 of  2006 and Civil  Appeal  No.  7429 of  2008.

J U D G M E N T

S.H. KAPADIA, CJI

Leave granted.

2. A short question which arises for determination in this  

batch of cases is – whether interest under Section 234B can be  

charged on the tax calculated on book profits under Section  

115JA?   In  other  words,  whether  advance  tax  was  at  all  

payable on book profits under Section 115JA?

3. The lead matter in this batch of cases is Joint CIT  v.  

Rolta  India  Ltd.  (Civil  Appeal  arising  out  of  S.L.P.  (C)  No.  

25746/09).

4. Assessee furnished a return of income on 28.11.1997  

declaring  total  income  of  Rs.  Nil.   On  28.3.2000,  an  order  

under Section 143(3) was passed determining the total income  

at  nil  after  set  off  of  unabsorbed  business  loss  and  

depreciation.  The tax was levied on the book profit worked out  

at  Rs.  1,52,61,834/-  determined  as  per  the  provisions  of  

Section  115JA.   The  interest  under  Section  234B  of  Rs.  

39,73,167/-  was  charged  on  the  tax  on  the  book profit  as  

worked out in the order of assessment.  Aggrieved by the said  

order, the assessee went in appeal before CIT (A).  The appeal  

on  the  question  in  hand  was  dismissed.   On  charging  of  

interest under Section 234B the appeal was dismissed by the  

Tribunal on the ground that the case fell under Section 115JA  

and  not  under  Section  115J,  hence,  judgment  of  the  

Karnataka High Court in the case of M/s Kwality Biscuits Ltd.  

was  not  applicable.   At  one  stage  the  Bombay  High  Court  

decided the matter in favour of the Department but later on by  

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way  of  review  it  took  the  view  following  the  judgment  of  

Karnataka High Court in the case of Kwality Biscuits Ltd.  that  

interest  under  Section  234B  cannot  be  charged  on  tax  

calculated on book profits,  hence, the CIT has come to this  

Court by way of Civil Appeal(s).

5. We quote hereinbelow Sections 234B and 234C of the  

Income Tax Act, 1961 (in short “the Act”):

“Interest  for  defaults  in  payment  of  advance tax.

234B. (1)  Subject  to  the  other  provisions  of  this section, where, in any financial year, an  assessee  who  is  liable  to  pay  advance  tax  under section 208 has failed to pay such tax  or,  where  the  advance  tax  paid  by  such  assessee under the provisions of section 210 is  less than ninety per cent of the assessed tax,  the  assessee  shall  be  liable  to  pay  simple  interest  at  the  rate  of  one  and  one-half  per  cent  for  every  month  or  part  of  a  month  comprised in  the  period from the 1st  day of  April next following such financial year to the  date  of  determination  of  total  income  under  sub-section  (1)  of  section  143  and  where  a  regular  assessment  is  made,  to  the  date  of  such regular assessment, on an amount equal  to the assessed tax or, as the case may be, on  the amount by which the advance tax paid as  aforesaid falls short of the assessed tax.

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Explanation 1.—In this section, “assessed tax”  means,—

(a) for the purposes of computing the interest  payable  under  section  140A,  the  tax  on  the  total income as declared in the return referred  to in that section;

(b)  in  any  other  case,  the  tax  on  the  total  income  determined  under  sub-section  (1)  of  section 143 or on regular assessment,

as reduced by the amount of tax deducted or  collected  at  source  in  accordance  with  the  provisions  of  Chapter  XVII  on  any  income  which  is  subject  to  such  deduction  or  collection and which is taken into account in  computing such total income.

Explanation  2.—Where,  in  relation  to  an  assessment year,  an assessment  is  made for  the  first  time  under  section  147,  the  assessment  so  made  shall  be  regarded  as  a  regular  assessment  for  the  purposes  of  this  section.

Explanation 3.—In  Explanation 1 and in sub- section (3) “tax on the total income determined  under sub-section (1) of section 143” shall not  include  the  additional  income-tax,  if  any,  payable under section 143.

(2) Where, before the date of determination of  total  income under sub-section (1)  of  section  143 or completion of a regular assessment, tax  

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is paid by the assessee under section 140A or  otherwise,—

(i)  interest  shall  be  calculated  in  accordance  with the foregoing provisions of this section up  to the date on which the tax is so paid, and  reduced  by  the  interest,  if  any,  paid  under  section 140A towards the interest chargeable  under this section;

(ii)  thereafter,  interest  shall  be  calculated  at  the rate aforesaid on the amount by which the  tax so paid together with the advance tax paid  falls short of the assessed tax.

(3)  Where,  as  a  result  of  an  order  of  re- assessment  or  re-computation  under  section  147,  the  amount  on  which  interest  was  payable under sub-section (1) is increased, the  assessee shall be liable to pay simple interest  at  the  rate  of  one  and one-half  per  cent  for  every month or part of a month comprised in  the  period  commencing  on  the  day  following  the date of determination of total income under  sub-section  (1)  of  section  143  and  where  a  regular assessment is made as is referred to in  sub-section  (1)  following  the  date  of  such  regular assessment and ending on the date of  the  re-assessment  or  re-computation  under  section 147, on the amount by which the tax  on the total income determined on the basis of  the re-assessment  or  re-computation exceeds  the tax on the total income determined under  sub-section (1) of section 143 or on the basis  of the regular assessment aforesaid.

(4) Where, as a result of an order under section  154 or section 155 or section 250 or section  

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254 or section 260 or section 262 or section  263  or  section  264  or  an  order  of  the  Settlement Commission under sub-section (4)  of section 245D, the amount on which interest  was  payable  under  sub-section  (1)  or  sub- section (3) has been increased or reduced, as  the  case  may  be,  the  interest  shall  be  increased or reduced accordingly, and—

(i) in a case where the interest is increased, the  Assessing Officer shall serve on the assessee a  notice  of  demand  in  the  prescribed  form  specifying the sum payable and such notice of  demand shall be deemed to be a notice under  section 156 and the provisions of this Act shall  apply accordingly;

(ii) in a case where the interest is reduced, the  excess interest paid, if any, shall be refunded.

(5) The provisions of this section shall apply in  respect  of  assessments  for  the  assessment  year commencing on the 1st day of April, 1989  and subsequent assessment years.

Interest for deferment of advance tax.

234C. (1) Where in any financial year,—

(a) the company which is liable to pay advance  tax under section 208 has failed to pay such  tax or—

(i) the advance tax paid by the company on its  current income on or before the 15th day of  

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June is less than fifteen per cent of the tax due  on the returned income or the amount of such  advance tax paid on or before the 15th day of  September is less than forty-five per cent of the  tax due on the returned income or the amount  of such advance tax paid on or before the 15th  day of December is less than seventy-five per  cent of  the tax due on the returned income,  then, the company shall be liable to pay simple  interest  at  the  rate  of  one  and  one-half  per  cent per month for a period of three months on  the  amount  of  the  shortfall  from  fifteen  per  cent or forty-five per cent or seventy-five per  cent, as the case may be, of the tax due on the  returned income;

(ii) the advance tax paid by the company on its  current income on or before the 15th day of  March is less than the tax due on the returned  income, then, the company shall  be liable to  pay simple interest at the rate of one and one- half  per  cent  on the amount of  the  shortfall  from the tax due on the returned income:

Provided that if the advance tax paid by the  company on its  current income on or  before  the  15th  day  of  June  or  the  15th  day  of  September, is not less than twelve per cent or,  as the case may be, thirty-six per cent of the  tax due on the returned income, then, it shall  not be liable to pay any interest on the amount  of the shortfall on those dates;

(b) the assessee, other than a company, who is  liable  to  pay  advance tax  under  section  208  has failed to pay such tax or,—

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(i) the advance tax paid by the assessee on his  current income on or before the 15th day of  September is less than thirty per cent of the  tax due on the returned income or the amount  of such advance tax paid on or before the 15th  day of December is less than sixty per cent of  the tax due on the returned income, then, the  assessee shall be liable to pay simple interest  at  the rate of  one and one-half  per cent  per  month  for  a  period  of  three  months  on  the  amount of the shortfall from thirty per cent or,  as the case may be, sixty per cent of the tax  due on the returned income;

(ii) the advance tax paid by the assessee on his  current income on or before the 15th day of  March is less than the tax due on the returned  income,  then,  the  assessee shall  be  liable  to  pay simple interest at the rate of one and one- half  per  cent  on the amount of  the  shortfall  from the tax due on the returned income:

Provided that nothing contained in this sub- section  shall  apply  to  any  shortfall  in  the  payment of the tax due on the returned income  where such shortfall  is on account of under- estimate or failure to estimate—

(a) the amount of capital gains; or

(b)  income  of  the  nature  referred  to  in  sub- clause (ix) of clause (24) of section 2,

and  the  assessee  has  paid  the  whole  of  the  amount  of  tax  payable  in  respect  of  income  referred to in clause (a)  or clause (b),  as the  case may be, had such income been a part of  

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the  total  income,  as  part  of  the  remaining  instalments of advance tax which are due or  where  no  such  instalments  are  due,  by  the  31st day of March of the financial year:

Explanation.—In this section, “tax due on the  returned income” means the tax chargeable on  the  total  income  declared  in  the  return  of  income  furnished  by  the  assessee  for  the  assessment year commencing on the 1st day of  April  immediately following the financial  year  in which the advance tax is paid  or payable,  as reduced by the amount of tax deductible or  collectible  at  source  in  accordance  with  the  provisions  of  Chapter  XVII  on  any  income  which  is  subject  to  such  deduction  or  collection and which is taken into account in  computing such total income.

(2) The provisions of this section shall apply in  respect  of  assessments  for  the  assessment  year commencing on the 1st day of April, 1989  and subsequent assessment years.”

6. At the outset, it may be stated that Sections 234B and  

234C  do  not  make  any  reference  to  Section  115J/115JA.  

Section 234B lays down that where advance tax is required to  

be paid under Section 208 and there is a failure on that if the  

amount of advance tax paid under Section 210 is less than  

90% of the assessed tax, then,  in that case the assessee is  

liable  to  pay  interest.   Section  234C  refers  to  interest  for  

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deferment of advance tax.  It says that if the assessee has to  

pay advance tax on its  current  income on or  before  15th of  

June and the tax paid is less than 15% of the tax due on the  

returned income or the amount of the advance tax paid on or  

before 15th of September is less than 45% of the tax due on the  

returned income or the amount of such advance tax paid on or  

before 15th of December is less than 75% of the tax due on the  

returned  income,  then  the  assessee  shall  be  liable  to  pay  

interest at  the specified rate on the amount of the shortfall  

from 15% or 45% or 75%, as the case may be, of the tax due  

on the returned income.

7. In  our  view,  Section  115J/115JA  are  special  

provisions.  Section 207 envisages that tax shall be payable in  

advance  during  any  financial  year  on  current  income  in  

accordance with the scheme provided in Sections 208 to 219  

(both inclusive) in respect of the total income of the assessee  

that  would  be  chargeable  to  tax  for  the  assessment  year  

immediately  following that financial  year.   Section 215(5)  of  

the Act defined what is “assessed tax”, i.e., tax determined on  

the basis of regular assessment so far as such tax relates to  

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income subject to advance tax.  The evaluation of the current  

income and the determination of the assessed income had to  

be made in terms of the statutory scheme comprising Section  

115J/115JA  of  the  Act.   Hence,  levying  of  interest  was  

inescapable.   The  assessee  was  bound  to  pay  advance  tax  

under the said scheme of the Act.  Section 115J/115JA of the  

Act were special provisions which provided that where in the  

case of an assessee, the total income as computed under the  

Act in respect of any previous year relevant to the assessment  

year is less than 30% of the book profit, the total income of the  

assessee shall be deemed to be an amount equal to 30% of  

such book profit.  The object is to tax zero-tax companies.

8. Section 115J was inserted by Finance Act, 1987 w.e.f.  

1.4.1988.  This  section  was  in  force  from  1.4.1988  to  

31.3.1991.   After  1.4.1991,  Section  115JA was  inserted  by  

Finance Act of 1996 w.e.f. 1.4.1997.  After insertion of Section  

115JA,  Section  115JB  was  inserted  by  Finance  Act,  2000  

w.e.f. 1.4.2001.  It is clear from reading Sections 115JA and  

115JB that the question whether a company which is liable to  

pay tax under either provision does not assume importance  

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because specific provision(s) is made in the section saying that  

all other provisions of the Act shall apply to the MAT Company  

(Section  115JA(4)  and  Section  115JB(5)).   Similarly,  

amendments  have  been made  in  the  relevant  Finance  Acts  

providing for payment of advance tax under Sections 115JA  

and 115JB.  So far as interest leviable under Section 234B is  

concerned, the section is clear that it applies to all companies.  

The pre-requisite condition for applicability of Section 234B is  

that assessee is liable to pay tax under Section 208 and the  

expression “assessed tax” is defined to mean the tax on the  

total  income  determined  under  Section  143(1)  or  under  

Section 143(3) as reduced by the amount of tax deducted or  

collected at  source.   Thus,  there  is  no exclusion of  Section  

115J/115JA in the levy of interest under Section 234B.  The  

expression “assessed tax” is defined to mean the tax assessed  

on regular assessment which means the tax determined on the  

application of Section 115J/115JA in the regular assessment.

9. The  question  which  remains  to  be  considered  is  

whether the assessee, which is a MAT Company, was not in a  

position to estimate its profits of the current year prior to the  

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end of the financial year on 31st March. In this connection the  

assessee  placed  reliance  on the  judgment  of  the  Karnataka  

High Court in the case of Kwality Biscuits Ltd. v. CIT reported  

in (2000) 243 ITR 519 and, according to the Karnataka High  

Court, the profit as computed under the Income Tax Act, 1961  

had  to  be  prepared  and  thereafter  the  book  profit  as  

contemplated  under  Section  115J  of  the  Act  had  to  be  

determined and then, the liability of the assessee to pay tax  

under Section 115J of the Act arose, only if the total income as  

computed under the provisions of the Act was less than 30%  

of the book profit. According to the Karnataka High Court, this  

entire exercise of computing income or the book profits of the  

company could be done only at the end of the financial year  

and hence the provisions of Sections 207, 208, 209 and 210  

(predecessors of Sections 234B and 234C) were not applicable  

until and unless the accounts stood audited and the balance  

sheet stood prepared, because till then even the assessee may  

not  know whether  the  provisions  of  Section  115J would be  

applied  or  not.  The  Court,  therefore,  held  that  the  liability  

would arise only after the profit is determined in accordance  

with the provisions of the Companies Act, 1956 and, therefore,  

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interest under Sections 234B and 234C is not leviable in cases  

where Section 115J applied. This view of the Karnataka High  

Court in Kwality Biscuits Ltd. was not shared by the Gauhati  

High Court in Assam Bengal Carriers Ltd. v. CIT reported in  

(1999) 239 ITR 862 and Madhya Pradesh High Court in Itarsi  

Oil and Flours (P.) Limited v. CIT reported in (2001) 250 ITR  

686 as also by the Bombay High Court in the case of CIT v.  

Kotak Mahindra Finance Ltd. reported in (2003) 130 TAXMAN  

730 which decided the issue in favour of the Department and  

against  the assessee.  It  appears  that none of  the assessees  

challenged the decisions of the Gauhati High Court, Madhya  

Pradesh  High  Court  as  well  as  Bombay  High  Court  in  the  

Supreme Court. However, it may be noted that the judgment  

of  the  Karnataka  High Court  in  Kwality  Biscuits  Ltd.   was  

confined to Section 115J of the Act. The Order of the Supreme  

Court dismissing the Special Leave Petition in limine filed by  

the  Department  against  Kwality  Biscuits  Ltd.  is  reported  in  

(2006) 284 ITR 434. Thus, the judgment of Karnataka High  

Court  in  Kwality  Biscuits  stood  affirmed.  However,  the  

Karnataka  High  Court  has  thereafter  in  the  case  of  Jindal  

Thermal Power Company Ltd.  v. Dy. CIT reported in (2006)  

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154 TAXMAN 547 distinguished its  own decision in case of  

Kwality  Biscuits  Ltd.  (supra)  and  held  that  Section  115JB,  

with  which  we  are  concerned,  is  a  self-contained  code  

pertaining  to  MAT,  which  imposed  liability  for  payment  of  

advance tax on MAT companies  and,  therefore,  where  such  

companies defaulted in payment of advance tax in respect of  

tax payable under Section 115JB, it was liable to pay interest  

under Sections 234B and 234C of  the Act.  Thus,  it  can be  

concluded that interest under Sections 234B and 234C shall  

be  payable  on  failure  to  pay  advance  tax  in  respect  of  tax  

payable  under  Section  115JA/115JB.  For  the  aforestated  

reasons,  Circular  No.  13/2001  dated  9.11.2001  issued  by  

CBDT reported in 252 ITR(St.)50 has no application. Moreover,  

in any event,  para 2 of  that  Circular  itself  indicates  that  a  

large  number  of  companies  liable  to  be  taxed  under  MAT  

provisions  of  Section  115JB  were  not  making  advance  tax  

payments.  In  the  said  circular,  it  has  been  clarified  that  

Section  115JB  is  a  self-contained  code  and  thus,  all  

companies  were  liable  for  payment  of  advance  tax  under  

Section 115JB and consequently provisions of Sections 234B  

and 234C imposing interest on default in payment of advance  

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tax were also applicable.

10. For the aforestated reasons CIT succeeds in the civil  

appeal arising out of S.L.P. (C) No. 25746 of 2009 (Jt. CIT v.  

Rolta India Ltd.) as also in the civil appeal arising out of S.L.P.  

(C)  No.  18367 of  2010 (CIT-3  v.   Export  Credit  Guarantee  

Corporation of India Ltd.). Consequently, Civil Appeal No. 459  

of 2006 (Nahar Exports  v.  CIT) and Civil Appeal No. 7429 of  

2008 (Lakshmi Precision Screws Ltd. v.  CIT) stand dismissed  

with no order as to costs.

………..……………………….CJI (S. H. Kapadia)

……..……………………………..J.              (K.S.  Panicker  

Radhakrishnan)

……..……………………………..J.             (Swatanter Kumar)

New Delhi;  January 7, 2011

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