Judgment:
1. The present appeal, under Section 260A of the Income-tax Act, 1961 (hereafter referred to as 'the Act'), has been admitted vide order dated October 16, 2006, on the following substantial questions of law said to be arising out of the order of the Income-tax Appellate Tribunal dated March 22, 1999:
1. Whether on the facts and in the circumstances of the case the Income-tax Appellate Tribunal was justified in deleting the interest of Rs. 15,41,888 charged under Section 216 of the Income-tax Act, 1961 without appreciating the fact that the advance tax estimate filed by the assessee were grossly incorrect and did not reflect true and correct income of the assessee ?
2. Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in admitting the claim of the assessee for depreciation in higher rate relying upon the assessee's explanation that machinery comes into contact with corrosive chemicals without appreciating the fact that only corrosive ingredient coming into contact with machinery is sulphur dioxide but its percentage is well within tolerable limits ?
2. The appeal relates to the assessment year 1978-79.
3. Briefly stated the facts giving rise to the present appeal are as follows:
4. The respondent-assessee had filed the estimate of income on June 14, 1977 declaring income of Rs. 561.07 lakhs which was reduced on September 15, 1977, to Rs. 352.91 lakhs. However, on December 15, 1977, the assessee filed the estimate of income declaring income of Rs. 529.15 lakhs for the said assessment year. The assessment was made on total sum of Rs. 798.25 lakhs on which interest under Section 216 of the Act was also charged. The assessment has been modified in appeal. The matter was taken up before the Tribunal. The Tribunal has deleted the levy of interest under Section 216 on the ground that penalty under Section 273 of the Act has been deleted by the Tribunal on similar facts. The other issue involved in the present appeal is regarding higher rate of depreciation on the ground that the machinery installed by the assessee comes into contact with corrosive chemicals. The Tribunal has accepted the plea of the assessee.
5. So far as the second question is concerned, we find that the apex court in the case of Saraswati Industrial Syndicate Ltd. v. CIT : [1999] 237 ITR 1, has held that where machinery comes into contact with corrosive chemicals, the higher rate of depreciation is admissible. In the present case the machinery installed by the assessee comes into contact with corrosive chemicals and, therefore, it is entitled for higher depreciation. The second question is answered accordingly.
6. Coming to the first question we find that the explanation given by the respondent-assessee as to the filing of the estimated income was genuine and the Tribunal had accepted the same. It may be mentioned here that under Section 216 of the Act, levy of interest unlike the interest levied under Section 234A, 234B or 234C of the Act is not automatic. It is leviable only when the assessee underestimates his income. The word 'underestimate' itself means that there should be conscious act on the part of the assessee in filing the estimate declaring the lower income. It is not the case of the Revenue that the assessee in spite of having higher income during the period had deliberately filed an estimate showing lower income. As in the present case the explanation submitted by the assessee has been accepted by the Tribunal, we are of the considered opinion that the Tribunal had rightly deleted the interest.
7. In view of the foregoing discussions the appeal fails and is dismissed. However, the parties shall bear their own costs.