1. The department has filed the present appeal on the following grounds: On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) has erred in deleting interest charged under Sections 234B and 234C with reference to total income computed under Section 115JA, without appreciation the provisions of Section 115JA(4) providing that all other provisions of the Act shall apply which assumes significance in view of there being no such provision in Section 115J." 2. The short issue in the case before us is whether the assessing officer is justified in charging interest under Sections 234B and 234C on the taxes levied under Section 115JA of the Income Tax Act. The learned Commissioner (Appeals) has held that the assessing officer is not justified in charging interest under Sections 234B and 234C of the Income Tax Act on the book profits computed under Section 115JA.3. Learned Counsel for the assessee has invited our attention to the decision of the Honble Supreme Court in CIT v. Kwality Biscuits Ltd. (2006) 284 ITR 434 by which the decision of Karnataka High Court in Kwality Biscuits Ltd. v. CIT(2000) 243 ITR 519 has been upheld. Honble Karnataka High Court has held that interest cannot be levied under Sections 234B and 234C on book profit computed under Section 115J of the Income Tax Act as the entire exercise of computing income under Section 115J can only be done at the end of the financial year, and the provisions of Sections 207, 208, 209 and 210 cannot be made applicable until and unless the accounts are audited and the balance sheet prepared.
4. Learned departmental Representative has, however, invited our attention to the assessment order passed by the assessing officer in which the book profit under Section 115JA has been computed and interest under Sections 234B and 234C has been charged with reference to the provisions of sub-Section (4) of Section 115JA. Sub-Section (4) of Section 115JA specifically provides that "Save as otherwise provided in the Section, all other provisions of this Act shall apply to every assessee, being a company, mentioned in this Section". It is submitted by the learned departmental Representative that all provisions of the Income Tax Act including those of Sections 234B and 234C are applicable to the assessee before us. According to him, similar provision as contained in sub-Section (4) of Section 115JA was absent in Section 115J and therefore the decision rendered by the Honble Karnataka High Court and Honble Supreme Court in Kwality Biscuits Ltd.s case (supra) with reference to the provisions of Section 115J could not be made applicable to defeat the express provisions enacted in the form of sub-Section (4) of Section 115JA.5. We have heard the parties and considered their submissions.
Sub-Section (1) of Section 115JA contains a deeming provision by which an amount equal to 3096 of book profit is deemed to be the total income of an assessee, being a company, if its total income as computed under the Income Tax Act is less than 30% of its book profit. Sub-Section (2) of Section 115JA provides the mechanism for computation of book profit.
Sub-Section (3) of Section 115JA contains provisions for determination of the amount in relation to the relevant previous year to be carried forward to the subsequent years. Sub-Section (4) specifies that "Save as otherwise provided in this Section, all other provisions of this Act shall apply to every assessee, being a company, mentioned in this Section." Sub-Section (4) has two critical limbs: one, it provides primacy to the matters covered by Section 115JA; and, two, it makes other provisions of the Income Tax Act applicable to the assessees falling under Section 115JA. We shall now concentrate as to what Section 115JA provides for. On careful analysis of Section 115JA, it is quite clear that it provides for two things: one, a specified percentage of book profit is deemed to be the total income of the assessee, being a company, chargeable to tax at the specified rate if the total income as computed under the normal provisions of the Income Tax Act is less than the specified percentage of book profit; and, two, the mechanism for computation of book profit. It is equally clear that Section 115JA does not provide for several matters, e.g., procedure for assessment; collection and recovery of tax of the amount due under Section 115JA. In other words, except for the manner of computation of book profits, all the provisions of the Income Tax Act including the provisions relating to charge, definitions, rec veries, payment, assessment, etc., would apply in respect of the provisions of Section 115JA. For the matters not provided in Section 115JA, one has to turn to other provisions of the Income Tax Act which have been made mutatis mutandis applicable to the assessees falling under Section 115JA.6. Next issue for consideration is as to whether the provisions relating to payment of advance tax under Section 207 of the Income Tax Act and payment of interest for defaults or deferment in payment of advance tax as contained in Sections 234B and 234C are applicable to an assessee falling under Section 115JA. Chapter XVII of the Income Tax Act deals with collection and recovery of taxes. Part "C" of Chapter XVII of the Income Tax Act deals with advance payment of tax while Part "F" of Chapter XVII deals with chargeability of interest in certain cases. It is therefore quite clear that the provisions relating to advance payment of tax and chargeability of interest on account of default or deferment in payment of tax are part of the provisions relating to collection and recovery of tax. It is equally clear that Section 115JA does not provide for the mechanism for collection and recovery of tax. The provisions of Chapter XVII of the Income Tax Act will therefore mutatis mutandis apply to the assessees covered by Section 115JA due to the specific insertion of sub-Section (4) in Section 115JA of the Income Tax Act provided the requisite conditions for the applicability of Sections 207, 234B and 234C are also satisfied.
7. We shall now turn to the issue whether the total income of the assessee falling under Section 115JA is chargeable to advance tax.
Section 4(l) of the Income Tax Act creates charge of income-tax in respect of the total income of the previous year of every person at the rate or rates, which may be prescribed by the Finance Act every year.
Sub-Section (2) of Section 4 mandates that income-tax shall be deducted at source or paid in advance where it is so deductible or payable under any provisions of the Income Tax Act in respect of the total income chargeable under sub-Section (1) of Section 4. Pausing here for a while we may once again reiterate that Section 115JA deems a specified portion of book profit as total income. There can therefore be no manner of doubt that that specified portion of book profit becomes total income of the assessee by virtue of the fiction created by Section 115JA(1) and hence this total income will have to suffer the same consequence as any total income computed under the Income Tax Act is required to suffer. This view is further supported by the provisions of Section 2(45) of the Income Tax Act, which defines "total income" as meaning "the total amount of income referred to in Section 5, computed in the manner laid down in this Act". Section 5 of the Income Tax Act defines scope of total income and provides that the total income of any previous year includes all income, which accrues or arises or is deemed to accrue or arise in India during the, previous year. Therefore the income computed under Section 115JA is total income within the meaning of Section 2(45) read with Section 5 of the Income Tax Act. Section 207 of the Income Tax Act creates liability for payment of advance tax in accordance with the provisions of Sections 208 to 209 in respect of the total income of the assessee, which would be chargeable to tax for the assessment year immediately following that financial year. Section 209 deals with the computation of advance tax based on the rates in force for the financial year, as are contained in the Finance Act. Thus the liability for payment of advance tax is in respect of the total income of the assessee, which would be chargeable to tax for the assessment year following that financial year. Since the income computed under Section 115JA is deemed to be the total income of the assessee, the provisions of Section 2(45) read with Sections 5 and 4 clearly create a liability for payment of a vance tax on such total income in terms of Section 207 of the Income Tax Act. In this view of the matter, it is held that the total income computed under Section 115JA is liable for payment of advance tax under Chapter XVII-C, which is mutatis mutandis applicable to the assessee falling under Section 115JA by virtue of the provisions of sub-Section (4) thereof.
8. Sections 234B and 234C provide for levy of interest for defaults in payment of advance tax and for deferment of advance tax. Provisions of Section 234B apply where an assessee is liable to pay advance tax under Section 208 but has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of Section 2 10 is less than 90% of the assessed tax. In such a case Section 234B mandates that the assessee shall be liable to pay simple interest at the prescribed rate for every month of default. The term assessed tax has been defined in Explanation 1 to Section 234B(l) of the Income Tax Act to mean 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 income. The total income computed on the basis of a specified percentage of book profit is assessed to tax under Section 143(1) or under Section 143(3)/144 and hence the amount of tax so assessed is assessed tax within the meaning of Explanation 1. Same is the case with regard to levy of interest for deferment of advance tax. Since we have taken a view that an assessee falling under Section 115JA is liable to pay advance tax under Chapter XVII of the Income Tax Act, it naturally follows that he is also liable for interest for defaults or deferment in payment of advance tax under Sections 234B and 234C of the Income Tax Act.
9. The view that we have taken in the matter is further supported by the decision of Honble Karnataka High Court in Jindal Thermal Power Co.
Ltd. v. Dy. CIT(2006) 286 ITR 182 which has been rendered in the context of Section 115JB of the Income Tax Act. Like Section 115JA(1), Section 115JB(1) also deems a specified percentage of book profit as total income of the assessee. Sub-Section (5) of Section 115JB contains identically worded provision like sub-Section (4) of Section 115JA. The Honble Karnataka High Court has held that the provisions of Section 115JB as introduced by the Finance Act, 2000 impose liability for payment of advance tax. In our view, similar logic would apply to Section 115JA also as the provisions of Section 115JA (1) and (4) are identically worded with those of Section 115JB in that both of them declare that a specified percentage of book profit shall be deemed to be the total income of the assessee and that the other provisions of the Income Tax Act shall apply to an assessee falling under the said Section.
10. As regards the decision of the Honble Karnataka High Court in Kwality Biscuits Ltd. (supra) against which the appeal filed before the Honble Supreme Court has been dismissed, it may be relevant to mention that the said judgment was rendered in the context of the provisions of Section 115JA of the Income Tax Act which has ceased to be effective from the assessment year 1991-92. In Section 115J, there was no provision similar to sub-Section (4) in Section 115JA or sub-Section (5) in Section 115JB. In this view of the matter, the express provisions contained in Section 115JA(4) or sub-Section (5) of Section 115JB cannot be ignored. In Jindal Thermal Power Co. Ltd. case (supra), the Honble Karnataka High Court has also taken note of the decision in Kwality Biscuits Ltd.s case (supra), but held that the provisions of Section 115JB imposed liability for payment of advance tax in view of the provisions contained in Section 115JB which were absent in secti n 115J of the Income Tax Act. Section 2(8) of the Finance Act, 1999 required payment of advance tax at the rate specified there under in respect of income on which advance tax was payable under Chapter XVII-C of the Income Tax Act.
11. In view of the foregoing, we hold that the total income computed under the provisions of Section 115JA is liable to advance tax and also to levy of interest under Sections 234B and 234C. In this view of the matter, the action of the assessing officer in charging interest under Sections 234B and 234C is confirmed. Appeal filed by the department is allowed.