1. This appeal, by the assessee, pertaining to the assessment for the year 1982-83, is against levy of interest under section 7(c) of the Companies (Profits) Surtax Act, 1964.
2. The assessee is a public limited company registered under the Indian Companies Act. It is engaged in the manufacture of wines and spirits.
It also trades in sewing machines and various other commodities. It has got distilleries at Shertallay, Hyderabad, Goa and Hathidah. In addition, it has a polymer unit at Vizag.
3. While completing the assessment, the AO charged interest under section 7(c) of the Companies (Profits) Surtax Act, 1964, among other things, in a sum of Rs. 96,34,020. On 12-6-1981, the assessee filed an estimate of advance tax under section 7A of the Surtax Act computing the chargeable profits at nil In a letter enclosed to the said estimate, it was stated as follows : "We have submitted an application to the Specified Authority under section 72A of the Income-tax Act regarding our proposed Scheme of Amalgamation with Hindustan Polymers Limited and, as the application has been approved by the Central Government under the provisions of section 23(2) of the Monopolies & Restrictive Trade Practices Act, 1969, and has also been recommended by the Screening Committee, we are expecting the necessary approval in the near future.
Further, we have made an application to the High Court of Judicature at Madras for sanctioning the Scheme of Amalgamation with Hindustan Polymers Limited pursuant to section 394 of the Companies Act, 1956, and Hindustan Polymers Limited have made a similar application to the High Court of Judicature at Bombay.
We expect that the necessary approval will be obtained by the end of this year and we have been advised that in these circumstances we can adjust the carry forward losses, unabsorbed depreciation and development rebate available to Hindustan Polymers Limited against our own profits for the current year which are estimated on the basis of the results of our last financial year. As this leaves no surplus, we are not paying any amount by way of advance surtax.
If, for any reason, the amalgamation does not go through as expected by us, we shall submit a revised estimate of chargeable profits and pay the Advance Surtax on the basis of such revised estimate, at the appropriate time." Thereafter the assessee did not file any estimate. Thus the 'nil' estimate filed in terms of the aforesaid letter dated 12-6-1981 is the only estimate for the purpose of section 7A of the Act. Subsequently, on 30-9-1982 the assessee filed a return in Form No. 1 of the chargeable profits disclosing surplus of Rs. 1,06,24,243. In this return, the loss under the head 'Profits and gains of business', was disclosed at Rs. 1,11,41,193. This amount was arrived at after setting off the accumulated losses, etc., of the erstwhile Hindustan Polymers Limited. Up to 31-3-1981, the accumulated losses, unabsorbed depreciation, development rebate and investment allowance of M/s.
Hindustan Polymers Ltd. accounted for Rs. 1,10,96,733. On completion of the, assessment under section 6(2) of the Surtax Act, the AO levied interest under section 7(c) amounting to Rs. 96,54,020. The assessee appealed.
4. Before the CIT(A), it was argued that the provisions of section 7(c) of the Companies (Profits) Surtax Act (hereinafter referred to as the Act) were not attracted. Since the assessee had filed a return showing 'nil' chargeable profits there was no question of paying advance surtax under section 7A of the Act as it is based on its own estimate. It was further contended that the estimate had been filed having regard to the proposed scheme of amalgamation which awaited approval of the Government. The assessee had subsequently filed return of income taking into account the relief due under section 72A of the IT Act, 1961. The 'nil' estimate under section 7A of the Act was filed in June, 1981 on the assumption that there will be no chargeable profits if the relief under section 72A of the IT Act was given in respect of the losses, unabsorbed depreciation and investment allowance of M/s. Hindustan Polymers Ltd. The amalgamation had taken place on 1-4-1978. Approval of the Central Government was awaited at that time. Rejecting the above contentions put forward on behalf of the assessee, the CIT(A) sustained the levy of interest under section 7(c) of the Act. Hence this further appeal by the assessee.
5. Shri G. Sarangan, the learned Senior Advocate, appearing for the assessee contended that the levy of interest under section 7(c) of the Act corresponds to section 2 15 of the IT Act. He also pointed out that interest levied under sections 139(8) and 215 of the IT Act was waived by the IAC in his order dated 5th July, 1985 under Rules 40 and 117A of the IT Rules, 1962 but the application moved by the assessee for waiver of interest levied under section 7(c) of the Act was rejected by the IAC by his order dated 10th March, 1987. A copy of the letter addressed to the ITO, Companies Circle 1(2), Madras by the assessee dated 25-9-1982 for set off of accumulated losses, etc., of M/s. Hindustan Polymers Ltd. is furnished to us. A copy of the letter dated 13-6-1984 from the Ministry of Industry, Department of Industrial Development regarding the recommendation of the Specified Authority under section 72A(I) of the IT Act on amalgamation of M/s. Hindustan Polymers Ltd. with the assessee has also been filed before us. The learned Senior Advocate contended that section 7(c) of the Act does not speak of levy of interest for non-payment of advance surtax. Hence, the interest levied is liable to be cancelled. support, reliance is placed on the following case laws : (ii) CIT v. Elgin Mills Co. Ltd. [1980] 123 ITR 712/3 Taxman 529 (All.); (iii) CIT v. Golcha Properties (P.) Ltd. [1988] 169 ITR 493/[1987] 31 Taxman 321 (Raj.); (iv) Chief Commissioner (Admn.) v. Mysore Minerals Ltd. [1992] 197 ITR 572 (Kar.); (vi) Shree Digvijay Woollen Mills Ltd. v. CIT [1993] 204 ITR 398 (Guj.).
It is also contended that non-payment of advance surtax is for a bona fide belief that since application under section 72A of the assessee was pending it need not pay. Subsequently the application under section 72A was allowed. There is a loss and unabsorbed depreciation in M/s.
Hindustan Polymers Ltd. which were liable to be set off against the income of the assessee.
6. On the other hand, the learned departmental representative contended that bona fide belief that the assessee is not liable to pay advance surtax has not been established in this case. Further, he contended that all the case laws cited on behalf of the assessee, except the one reported in Babulal Newar case (supra) relate to levy of interest under section 216, etc. Therefore, those decisions are not applicable here.
He also contended that though the decision in Babulal Newar's case (supra) relates to levy of interest under section 2 1 5 the facts are different altogether from the facts of the case now before us and this decision also does not apply here. He finally contended that the levy of interest under section 7(c) of the Act is perfectly justified and no interference is required in the orders of the authorities below.
7. We have carefully considered the rival submissions. In our opinion, the AO is justified in levying interest under section 7(c) of the Act for non-payment of advance surtax in this case. Admittedly, the assessee here filed statement on 12-6-1981. Though the assessee had filed a petition for waiver of interest under section 7(c) of the Act it was rejected by the IAC as stated earlier. The case of the assessee is that since it has filed a nil estimate of advance tax under section 7A of the Act it is not liable to pay interest under section 7(c) of the Act. It is also the contention on behalf of the assessee that levy of interest under section 7(c) and levy of interest under section 215 of the IT Act is pari materia, i.e., section 7(c) of the Companies (Profits) Surtax Act, 1964, corresponds to section 215 of the IT Act 1961. If this is so, then, as contended by the learned departmental representative, the case laws cited on behalf of the assessee, except the one reported in Babulal Newar case (supra), are not helpful to the case to the assessee. The decision of the Allahabad High Court in Elgin Mills Co. Ltd case (supra) relates to levy of interest under section 216 of the IT Act. The decision of the Rajasthan High Court in Golcha Properties (P.) Ltd. case (supra) pertains to interest under sections 212(3A) and 217(1A) of the IT Act, 196 1. The decision of the jurisdictional High Court of Karnataka in - Mysore Minerals Ltd. case (supra) speaks of levy of interest under sections 209, 209A, 212(3A) and 216 of the IT Act, 196 1. The decision of the Patna High Court in the decision in Bihar Journals Ltd.'s case (supra) is regarding levy of interest. under sections 212(3A), 215 and 217. But according to that decision interest under section 215 is leviable. The decision of the Gujarat High Court in Shree Digvijay Woollen Mills Ltd. case (supra) is regarding interest under section 216 of the IT Act, 1961. Now we have to see how far the decision of the Calcutta High Court in the case of Babulal Newar (supra) will apply to the cost to the present case. This decision relates to charging of interest under section 2 1 5 of the IT Act. As per this decision, according to law as then existing (1963-64) interest under section 215 of the IT Act, 1961, could only be agreed when an estimate under section 21 1 has been filed, advance tax on the basis of such estimate has been paid and the advance tax paid is found to be less than 75 per cent of the tax determined on the basis of the regular assessment and that an estimate which is filed beyond time is not a valid estimate and interest under section 215 could not be charged on the basis of such estimate. In our considered opinion, the facts of the reported decision are distinguishable from the facts of the case on hand. In this case, the assessee has filed a 'nil' estimate within time whereas in the reported decision the assessee has filed an estimate which was beyond time. It was, therefore, held, in the reported decision, that an estimate which is filed beyond time is not a valid estimate and interest under section 2 15 could not be charged on the basis of such estimate. Therefore, none of the case laws cited on behalf of the assessee are applicable to the facts of the present case.
In the earlier years, the assessee has paid advance surtax. The loss and unabsorbed depreciation relevant to M/s. Hindustan Polymers Ltd. have exhausted in the year 1981-82. Therefore, we are of the opinion that if the interpretation sought to be placed by the learned Senior Advocate appearing for the assessee to the effect that since the assessee has filed nil estimate for the payment of advance surtax it need not pay interest under section 7(c) of the Act is accepted it will lead to unabsorbed conclusion. Hence we are unable to agree with the contentions put forward on behalf of the assessee. We, therefore, hold that the authorities below are justified in levying interest under section 7(c) of the Companies (Profits) Surtax Act, 1964.