| SooperKanoon Citation | sooperkanoon.com/707450 |
| Subject | Direct Taxation |
| Court | Delhi High Court |
| Decided On | Oct-09-2003 |
| Case Number | ITA Nos. 2825 & 2826/Del/2002 9 October 2003 A.Y. 1997-98 & 1998-99 |
| Reported in | (2004)91TTJ(Del)214 |
| Appellant | M.G. Capital Services Ltd. |
| Respondent | Asstt. Cit |
| Advocates: | J.K. Jain,;for the assessed; Chitali Panmie,;for the Revenue |
| Cases Referred | Jagan Nath Syal v. Asstt. |
T.N. Chopra, A.M.:
These two appeals have been filed by the assessed against separate orders of the learned Commissioner (Appeals) for assessment years 1997-98 and 1998-99. Since the issues involved are identical, both these appeals have been heard together and are disposed off by a single order.
2. The Tribunal had earlier vide its order dated 4-12-2002, granted stay of the disputed demand and fixed the appeals for 29-1-2003, for disposal. Thereafter, the matter has been adjourned on a number of occasions. On 26-6-2003, learned representatives on both sides were heard at length.
3. In the appeal ITA 2825/Del/2002 for assessment year 1997-98, short time was allowed to the learned counsel with regard to addition of Rs. 11,26,265 on account of speculation loss, agitated vide ground No. 3 for filing contract notes and evidence regarding the share transactions in respect of Reliance Industries and State Bank of India allegedly in the account of M/s Suresh Kumar and Co. and the matter was adjourned to 27-4-2003, for filing the evidence. However, on 27 June no such evidence was filed and the assessed came forward with the request for adjournment. In the circumstances of the case, no further time was allowed and the request of the assessed was declined.
4. First, we take up ITA 2825/Del/2002 for assessment year 1997-98. Ground 1 is against sustaining the addition of Rs. 4,25,000 in respect of admission fee paid to OTCEI. The assessed- company has debited a sum of Rs. 4,25,000 on account of admission fee paid to OTCEI. When called upon to furnish the details, the assessed explained that total amount of Rs. 8,50,000 has been paid to OTCEI for acquiring partnership (membership) of the exchange as under
Rs.
Admission fee
6.00 lakh
Annual fee
25.00 lakh
Technology cost
2.00 lakh
Settlement deposit
25.00 lakh
Total :
8,50,000
The date-wise payment of the above amounts are as under
Particulars
Amount (Rs.)
Chand/DD No.
Dated
Amount deposited with application
1,00,000
51654
31.01.95
Admission fees
5,00,000
723458
11.09.95
Annual fees
25,000
723458
11.09.95
Technology cost 1st Installment
50,000
724273
13.10.95
Settlement deposit
25,000
724273
13.10.95
Technology cost 2nd Installment
50,000
249848
18.12.95
Technology cost 3rd Installment
1,00,000
249848
18.12.95
Total :
8,50,000
5. One half of the entire payment, i.e., sum of Rs. 4,25,000 has been claimed for the assessment year 1997-98 whereas the balance one half has been claimed for assessment year 1998-99. The assessing officer held that the expenditure in question is clearly capital in nature since the assessed has acquired the entire benefit in the form of membership of the OTCEI. In support of his finding, assessing officer placed reliance on the following decisions of Calcutta High Court : CIT v. Aluminium Corpn. of India Ltd. : [1973]92ITR563(Cal) CIT v. Hindustan General Electrical Corpn. Ltd. : [1971]81ITR243(Cal)
6. The assessed carried the matter before the Commissioner (Appeals) and argued that since the expenditure in question has been spread over two years, deduction as claimed should be allowed. In support of its contention, reliance is placed on the decision of Supreme Court in Madras Industrial Investment Corpn. v. CIT : [1997]225ITR802(SC) wherein discount allowed in the issue of debentures has been allowed to be written off over the period of the debentures by accepting the principle of spread over of the revenue expenditure. According to the assessed, even though the payment of Rs. 8,50,000 has been made in the earlier assessment year, i.e., assessment year 1996-97 deduction was not claimed due to bad market conditions. It was further contended that the amount was written off in two Installments for assessment years 1997-98 and 1998-99 in pursuance of resolution passed by the Board of Directors on 5-3-1997. Commissioner (Appeals) however disallowed the deduction for each of the assessment years 1997-98 and 1998-99 mainly on the following grounds
1. The expenditure does not pertain to the assessment years under reference. The assessed acquired the membership of OTCEI in the preceding assessment years and the amount of Rs. 8,50,000 has been paid between 31-1-1995 to 18-12-1995, i.e., prior to assessment year 1997-98. Such expenditure, according to the learned Commissioner (Appeals), could not be allowed as revenue expenditure either for assessment year 1997-98 or assessment year 1998-99.
2. The expenditure in question incurred for acquiring the membership of OTCEI is clearly capital in nature. By becoming a member of OTCEI, the assessed derived enduring benefit to enter into a new area of business, i.e., dealing in shares listed in OTCEI.
3. The Commissioner (Appeals) placed reliance on the Special Bench decision of the Tribunal in the case of Jagan Nath Syal v. Asstt. CGT (2000) 72 ITD 1 (DelHI) wherein it has been held that acquiring membership of Delhi Stock Exchange constituted capital asset which entitled a person to transact business in sale and purchase of shares listed in the stock exchange after entering the trading circle in the exchange. Commissioner (Appeals) further placed reliance on the decision of Bombay High Court in Bombay Steam Navigation (P) Ltd. v. CIT : [1965]56ITR52(SC) .
7. On the aforesaid grounds, Commissioner (Appeals) sustained the disallowance of Rs. 4,25,000 for each of the two assessment years, i.e., 1997-98 and 1998-99,
8. We have carefully considered the rival submissions and gone through the orders of the tax authorities below. We have no hesitation in endorsing the reasoning and finding of the learned Commissioner (Appeals) for the disallowance of the impugned expenditure of Rs. 4,25,000 for each of the assessment years involved. In the first instance, the expenditure in question has neither accrued nor arisen during the assessment years 1997-98 or 1998-99 and thereforee,. there is no occasion for allowing any deduction for such expenditure under section 37(l) of the Income Tax Act for either of these assessment years. Secondly, the expenditure in question has clearly been incurred for acquiring the membership of the OTCEI which confers a right on the assessed to trade as a broker in the shares listed on the OTCEI. The expenditure has clearly been incurred for the purpose of expanding or strengthening the profit-earning apparatus of the assessed's business and the expenditure, thereforee, clearly lies in the capital field. The basic principles laid down by the Hon'ble Supreme Court determining the nature of the expenditure whether capital or revenue in the two decisions, namely, Empire Jute Co. Ltd. v. CIT : [1980]124ITR1(SC) and Alembic Chemical Works Ltd. v. CIT : [1989]177ITR377(SC) are to ascertain the purpose of the outlay and its intended object and effect considered in a common-sense way having regard to the business realities. Where the expenditure leads to expansion of the business infrastructure of the assessed or acquisition of a source of profit or income, the expenditure is to be treated on capital account. Applying these principles, acquisition of membership of OTCEI confers a right on the assessed to deal in the shares listed on the OTCEI as a broker and thus earn commission on such dealings through brokerage. We, thereforee, endorse reasoning and not the. finding of the learned Commissioner (Appeals) sustaining the disallowance of the impugned expenditure. For these reasons, we uphold the disallowance of Rs. 4,25,000 each for assessment years 1997-98 and 1998-99. Ground No. 1 for assessment year 1997-98 as well as for assessment year 1998-99 are thus dismissed.
9. The second ground of appeal, which is common for both the assessment years, is against sustaining the addition of Rs. 50,000 each in respect of expenses written off out of deferred revenue expenditure being 1/10th of admission fees of NSE (National Stock Exchange). A sum of Rs. 5 lakh has been paid to National Stock Exchange for acquiring membership of the exchange and this sum has been written off in the books over a period of 10 years in 10 equal Installments. The facts and issues involved are similar as dealt with by us above and, thereforee, for the reasons discussed hereinbefore, we are inclined to hold that admission fee paid for acquiring membership of National Stock Exchange represents capital expenditure and there is no occasion for the assessed to claim 1/10th of the expenditure by spreading over the amount over a period of 10 years. The disallowance of Rs. 50,000 would, thereforee, be upheld for both the assessment years under appeal and ground No. 2 for each of the two assessment years would thus be dismissed.
10. Ground 3 for assessment year 1997-98 is against sustaining the addition of Rs. 11,26,265 on account of speculation loss. Learned Commissioner (Appeals) has discussed the issue vide para 5 of the impugned appellate order. Briefly stated, the facts having a bearing on the point in issue, are that a sum of Rs. 11,26,265 has been debited by the assessed to the P&L; a/c as loss in share trading. On the basis of the details furnished during the assessment proceedings, the assessing officer noted that the loss is the result of various share transactions carried out by the company on the Delhi Stock Exchange as well as National Stock Exchange (NSE). Explanationn to section 73 proposed in (sic) purchase or sale of shares by certain companies to be speculative for the purposes of section 73. An investment company or a company whose principal business is banking or money ending are exempted from the purview of the aforesaid Explanationn. If the business of a company, which does not fall within the excluded categories, is the purchase and sale of shares of other companies, then such a company shall be deemed to be carrying on speculation business for the purposes of section 73 to the extent to which the business consist of purchase and sale of such shares. Since the assessed-company does not fall within the exempted category as specified in the Explanationn, the assessing officer called upon the assessed to explain as to why the loss of Rs. 11,26,265 be not treated as speculation loss by applying Explanationn to section 73. In the assessment order, the assessing officer has extracted at p. 2 submissions made by the assessed vide letter dated 7-1-2000, which reads as under :
'The trading loss (Rs. 11,26,265) is the net balance of the purchases and sales of shares, in which the assessed- company has dealt with from time-to-time, but due to bad market conditions the net effect of all the share trading resulted in loss.'
Assessing officer has further referred to the ledger account labelled as trading account (NSC) and trading account (DSC) as reflected in the ledger of the assessed indicating that share transactions have been carried out by the assessed- company throughout the year under reference and resulting in the loss of Rs. 11,26,265. This included loss to the extent of Rs. 10,46,450 in respect of share transactions where no delivery has been taken and transactions have been squared off merely by the settlement of the difference. Before the assessing officer the assessed claimed vide its subsequent letter dated 10-3-2000, that during the year a few purchases and sales of shares were made by the operator of the company on the instructions of the client who later on refused to honour the commitments with the result that losses in such transactions were borne by the assessed. The assessing officer rejected the contention and proceeded to treat the entire loss of Rs. 11,26,265 as speculation loss. Loss to the extent of Rs. 10,46,450 where delivery has not been taken is in any case covered as speculation loss under the express provisions of section 43(5). In support of his conclusions the assessing officer placed reliance on the decision of Hon'ble Supreme Court in Davenport & Co. (P) Ltd. v. : [1975]100ITR715(SC) . Assessing officer accordingly rejected the claim of set off of the speculation loss of Rs. 11,26,265 against brokerage income and made the addition.
11. In appeal, the learned Commissioner (Appeals) has discussed the entire matter at length vide para 5 of his appellate order. The Commissioner (Appeals) has noted detailed submissions of the assessed vide para 5.1 of the order. Before the Commissioner (Appeals), the assessed stated that one of its clients M/s. Suresh Kumar and Co., had placed order on 29-1-1997, on the telephone for purchase of 10,000 shares of Reliance Industries and 21,000 shares of State Bank of India and these shares were purchased at different rates prevailing in the stock exchange. According to the assessed, the party however declined to honour the transaction. The assessed further pleaded that the company consulted Jain & Associates, advocates whether legal proceedings for non-acceptance of shares' purchases on their orders can be initiated against M/s Suresh Kumar and Co. or not. The advocates, however advised as per letter appearing at p. 55 of the paper book that since the orders were over telephone and no documentary evidence or any other proof for their ordering of purchase of shares is available, filing of legal case would not be of any benefit. The assessed submitted before the Commissioner (Appeals) that pursuant to the advice of the advocates, the assessed disposed of the shares and incurred loss of Rs. 10,46,460 which was debited to the P&L; a/c as part of loss in share dealing. The assessed further claimed that in view of various decisions namely, CIT v. Shantilal (P) Ltd. : [1983]144ITR57(SC) and Daulat Ram Ravat Mal v. CIT (1979) 78 ITR 503 , loss suffered by the assessed on account of breach of contract by M/s Suresh Kumar and Co. is liable to be allowed as business expenditure.
12. Learned Commissioner (Appeals) considered the aforesaid contentions of the assessed vide para 5.2 of the appellate order and upheld the view taken by the assessing officer that the loss of Rs. 11,26,265 is hit by the mischief of Explanationn to section 73 and is to be treated as deemed speculation loss. Learned Commissioner (Appeals) noted that no evidence whatsoever has been produced by the assessed in support of its claim that transactions in shares of Reliance Industries and State Bank of India were entered into on behalf of Suresh Kumar and Co. No contract note in support of the claim has been produced by the assessed. In fact, there is no evidence whatsoever, documentary or otherwise, that the transactions were entered into for and on behalf of Suresh Kumar and Co. M/s Suresh Kumar and Co. have denied placing any orders for purchase of such shares at such rates with the assessed- company. Regarding the claim of the assessed that damages awarded on the basis of settlement of the contract, the Commissioner (Appeals) noted that in the case of the assessed- company, neither there is any arbitration nor there is any award. On this ground, learned Commissioner (Appeals) upheld the finding of the assessing officer that the loss of Rs. 11,26,000 being speculative cannot be set off against brokerage income. In support of his finding, learned Commissioner (Appeals) has placed reliance on the following decisions :
1. MR. Dhawan v. CIT : [1979]119ITR412(Delhi)
2. Davenport & Co. (P) Ltd. v. CIT (supra)
3. CIT v. Pangal Vittal Nayak & Co. (P) Ltd. : [1969]74ITR754(SC)
4. CIT v. K.L. Jhunjhunwala : [1983]139ITR371(Cal)
5. CIT v. Arvind Investment Ltd. : [1991]192ITR365(Cal)
13. Learned counsel assailing the impugned finding of the learned Commissioner (Appeals) argued before us that the loss has been suffered in the transactions of shares which had been entered into for and on behalf of the clients and since the clients refused to honour these transactions, the assessed- company had to bear the said loss in its own account. According to the learned counsel, M/s Suresh Kumar and Co., client of the assessed- company has placed order on 29-1-1997, on the telephone for purchase of 10,000 shares of Reliance Industries and 21,000 shares of State Bank of India and subsequently, the said client backed out with the result that assessed had to square off these transactions incurring loss to the extent of Rs. 10,46,450. Learned counsel referred to the correspondence entered into with M/s Suresh Kumar and Co. placed in paper book at pp. 48-52. He claimed that since the loss has been suffered during the course of brokerage business, claim of deduction as business loss made by the assessed is liable to be allowed.
14. Learned Departmental Representative, on the other hand, strongly supported the finding of the learned Commissioner (Appeals) on the issue and argued that there is absolutely no evidence on record, documentary or otherwise, in support of claim of the assessed that the share trading loss of Rs. 11,26,266 has been incurred by the assessed in respect of transactions of purchase and sales which have allegedly been entered into for and on behalf of the clients. According to the learned departmental Representative, entries in the books of account clearly disapprove the claim of the assessed. He pointed out that in the ledger account, assessed has shown trading account (NSC) and trading account (DSC) wherein transactions in share entered into by the assessed have been reflected. Learned departmental Representative pointedly referred to the categorical admission made by the assessed- company regarding own business of share dealings carried on by the assessed made vide its letter dated 7-1-2000, sent to the assessing officer during the assessment proceedings. Learned departmental Representative referred to para 3 of the assessment order wherein extract from the assessed's letter dated 7-1-2000, has been reproduced to the effect that the trading loss of Rs. 11,26,265 is the net balance of the purchase and sale of shares in which the assessed- company has dealt with from time to time. According to the learned departmental Representative, after this categorical admission made during the assessment proceedings, there is no occasion for the assessed to claim that such transactions have been entered for and on behalf of the client. Learned departmental Representative further pointed out that even with regard to M/s Suresh Kumar and Co., no contract notes in support of assessed's claim that shares have been purchased for and on behalf of the said client have been produced before the revenue authorities. Even the entries in the books of account indicate that the transactions have been made in the assessed's own account. Learned departmental Representative further pointed out that assessed has not recorded the transactions even in the chopris (share transactions book) and such share transaction books have not been produced at any stage before the revenue authorities. Learned departmental Representative placed reliance on the definition of 'speculative transaction' as contained under section 43(5) of the Income Tax Act and argued that since the transactions in question have been admittedly settled without delivery of share securities, loss of Rs. 11,26,265 has been rightly held to be speculative, loss. He further relied upon Explanationn to section 73 and argued that because of the deeming fiction enacted by the legislature, loss in share dealing is liable to be treated as speculative loss.
15. We have carefully considered the rival submissions and gone through the orders of the revenue authorities below as well as the paper book filed by die learned counsel before us. As we have already pointed out hereinbefore, despite opportunity allowed by us, share transaction books (chopris) or documents like contract notes in respect of transactions with M/s Suresh Kumar and Co., or any other evidence in support of assessed's claim that transactions were entered into for and on behalf of its clients have not been produced before us. In fact no such evidence., has been produced before the revenue authorities below. In fact from the letter of M/s. Jain and Associates placed in the paper book at p. 55 we find that it has been specifically' stated by the advocates that 'no documentary evidence or any other proof for their ordering of purchase of shares is available'. Rather, on the contrary, we find that the assessed-company has specifically admitted during the assessment proceedings vide. its letter dated 7-1-2000, extracts of which have been reproduced hereinbefore that trading loss of Rs. 11,26,265 is the net balance of the purchase and sale of shares in which the assessed-company has dealt with from time to time. For the aforesaid reasons, we have no hesitation in concluding that the assessed- company has entered into transactions of purchase and sale of shares in its own account and trading loss of Rs. 11,26,265 suffered in such transactions is liable to be treated as deemed speculation loss by virtue of Explanationn to section 73. Apart from the deeming fiction as enacted in section 73, the transactions in share dealing have been settled without actual delivery, these are, thereforee, in any case liable to be treated as speculation transaction as per the definition contained under section 43(5). A very simple and objective test for determining whether a transaction is a speculative transaction or not has been laid down in the definition in section 43(5) of the Income Tax Act, 1967. In this definition, all that has to be done is to find out whether the contract was periodically or ultimately settled by actual delivery/transaction or otherwise. If the goods or commodities in respect of which the contracts were entered into were actually taken delivery of pursuant to the contract, it would not be a speculative transaction even though the commodity or scrip may be a highly speculative one by its very nature. On the other hand, if the contract is settled otherwise than by actual delivery, then it will be a speculative transaction notwithstanding that the intention of the parties at the time when the contracts were entered into might have been to take actual delivery but this intention could not be effected for one reason or the other. We may at this stage refer to the decision of Supreme Court in Davenport & Co. (P) Ltd. v. CIT (supra). A similar proposition has been laid down by the Delhi High Court in M.R. Dhawan v. CIT (supra). Apart from the applicability of section 43(5) in the context of established facts of the instant case, which lead to the impugned transactions in share dealings being speculative transactions, we may further refer to deeming fiction created by Explanationn to section 73 in the case of a company which is neither investment company nor banking company and carries on business of purchase and sale of shares. The case of the assessed is clearly hit by the mischief of the aforesaid Explanationn to section 73. Since the assessed- company does not fall within the exempted categories, section 73 would apply. The loss in share dealings amounting to Rs. 11,26,265 would thus be treated as speculation loss under section 73 read with Explanationn thereto.
16. The proposition is well-settled that brokerage income received by the assessed as a share broker could not be set off against speculation loss because there was no element of speculation whatever in the brokerage/commission income received by the assessed. The brokerage was independent of any fluctuations in the market and no risk was involved in earning it. The brokerage/commission had to be treated not as a profit from speculation business but as a profit from the business as a broker and the assessed was not entitled to have the commission income set off against the loss of the speculation business. Section 72 specifically prohibits set off of speculation loss against business income. thereforee, there is no occasion for allowing set off of speculation loss of Rs. 11,26,905 against business income of the assessed. The decision of Supreme Court in the case of CIT v. Pangal Vittal Nayak & Co. (P) Ltd. (supra) and Calcutta High Court in the case of CIT v. K.L. Jhunjhunwala (supra) have set at rest any controversy on the issue holding that loss in speculative business cannot be set off against income from brokerage.
17. For the aforesaid reasons, we are inclined to uphold the reasoning and findings of the learned Commissioner (Appeals) on the issue. In our considered opinion, loss of Rs. 11,26,265 suffered by the assessed in share dealing represent speculation loss which falls in the definition as contained under section 43(5) as well as the deeming fiction as indicated under section 73 read with Explanationn thereto. Addition of Rs. 11,26,265 made by the assessing officer has, thereforee, been rightly upheld by the Commissioner (Appeals). Ground No. 3 for assessment year 1997-98 is, thereforee, dismissed.
18. Ground 4 for assessment year 1997-98 as well as ground 3 for assessment year 1998-99 agitates the levy of interest on the ground that there was no specific order for charging interest. This ground against levy of interest has not been argued by the learned counsel before us. However, we find that in the written submissions, it has been contended that interest under sections 234B and 234C cannot be charged unless a specific direction to this effect has been made in the assessment order itself. In support of this contention, reliance has been placed on the decision of the Supreme Court in the case of CIT v. Ranchi Club Ltd. (2000) 164 CTR (SC) 200.
19. After careful consideration of the rival submissions, as well as the judicial pronouncements of the Hon'ble Supreme Court and various High Courts on the issue, we are of the firm opinion that there is no infirmity whatsoever in the action of the assessing officer in charging interest under sections 234A, 234B and 234C while making the assessments for the two assessment years 1997-98 and 1998-99. Assessment is an integrated process involving not only the assessment of total income but also the determination of the tax and interest livable on the assessed. Thus, two computations are required to be made by the assessing officer namely, computation of total income as well as computation of tax and interest payable thereon. The statute does not however require that both the computations should be done on the same sheet of paper, the sheet which is superscribed, as 'Assessment order'. No specific statutory form has been prescribed by the income-tax statute for the assessment order. It is a common practice amongst the assessing officers that the assessment order is separately drawn up assessing the total income and tax computation form is attached therewith indicating computation of tax and interest. This form is described as income-tax computation form also known as ITNS 150. The process of assessment under section 143(3) is complied when the assessment order as well as tax computation sheets are sent by the Income Tax Officer. Now, in the instant case, computation forms for both the assessment years indicate the levy of interest which is reflected in the notice of demand as issued by the assessing officer. Since computation form is a part of assessment order, levy of tax and interest in the said form would comply with the requirement that interest should be levied while making the assessment. Reliance is placed in this behalf on the decision of Supreme Court in the case of Kalyan Kumar Ray v. CIT : [1991]191ITR634(SC) . This decision has been rendered by three Judges wherein it has been held specifically that income-tax computation form is a part of the assessment order. Their Lordships observed at p. 639 of the report :
'ITNS 150 is also a form for determination of tax payable and when it is signed or initialled by the Income Tax Officer, it is certainly an order in writing by the Income Tax Officer, determining the tax payable, within the meaning of section 143(3). It may be, as stated in CIT v. Himalaya Drug Co. : [1982]135ITR368(All) , only a tax calculation form for departmental purposes as it also contains columns and code numbers to facilitate computerization of the particulars contained therein for statistical purposes but this does not detract from its being considered as an order in writing determining the sum payable by the assessed. We are unable to see why this document which is also in writing and which has received the imprimatur of the Income Tax Officer, should not be treated as part of the assessment order in the wider sense in which the expression has to be understood in the context of section 143(3). '
(underlined, italicized in print, for the sake of emphasis)
We may further refer to the decision of the Punjab & Haryana High Court in Vinod Khurana v. CIT . In this case, the assessing officer while making the assessment order observed that 'charge interest as per law'. In the demand notice, interest under section 234B was actually charged by the department. On these facts, the High Court opined that since the same officer has passed the assessment order as well as issued the demand notice on the same day, the levy of interest after application of mind by the assessing officer is valid and proper. In this decision, the High Court has also taken note of the decision of Supreme Court in CIT v. Ranchi Club Ltd. (supra). It is relevant to mention here that the decision of Punjab & Haryana High Court in Vinod Khurana's case (supra) has been upheld by the Supreme Court and the Special Leave Petition filed by the assessed has been dismissed as reported in (2002) 254 ITR 277 .
We may at this stage refer to the decision of the Supreme Court in the case of CIT v. Anjum MH Ghaswala : [2001]252ITR1(SC) which has been rendered by five Hon'ble Judges of the Supreme Court. The Supreme Court held that levy of interest under sections 234A, 234B and 234C is mandatory and does not depend upon the discretion of the tax authorities. The Supreme Court observed that the legislature has deliberately used the expression 'shall' in sections 234A, 234B and 234C which cannot be construed as 'may'. Prior to the Finance Act 1987, the corresponding sections pertaining to the imposition of interest used the expression 'may' but the change brought about by the Finance Act, 1987 is a clear indication that the intention of the, legislature was to make the calculation of statutory interest mandatory.
The mainstay of the case, as presented by the learned counsel before us, concerning levy of interest under sections 234A, 234B and 234C is the decision of Supreme Court in CIT v. Ranchi Club Ltd. (supra). In this decision the Apex Court has held that the interest under sections 234A, 234B and 234C could not be levied merely through a notice of demand under section 156 of the Income Tax Act, 1961, where there was no specific order in the assessment order that interest was livable and for charging such interest. When we apply the proposition enunciated by Their Lordships in Ranchi Club Ltd.'s case (supra) to the facts of this instant case, it is clear that interest under sections 234A, 234B and 234C has been charged in ITNS-150 in compliance with the direction of the assessing officer in the assessment order itself and since ITNS-150 is a part of the assessment order, the test laid down in Ranchi Club Ltd.'s case (supra) is fulfillled. Kalyan Kumar Ray's case (supra) is an authoritative pronouncement of the Supreme Court which lays down law of the land by virtue of article 141 of the Constitution. The binding authority of this decision has not been, in our opinion, diluted or eroded by Ranchi Club Ltd. (supra) decision. Both the decisions have to be understood and appreciated in a harmonious manner. In Ranchi Club Ltd.'s case (supra), the Supreme Court endorsed the view of Patna High Court that interest could no be levied merely through a notice of demand under section 156 of the Act where there was no specific order in the order. Now, the scope and ambit of assessment as well as the assessment order have been considered by the Supreme Court in Kalyan Kumar Ray's case (supra) wherein it has been held that income-tax computation form (ITNS-150) is also a part of the assessment order. thereforee, specific charging of interest under sections 234A, 234B and 234C in income-tax computation form clearly tantamounts to the charging of interest in the assessment order itself thus, fulfilling the requirement as envisaged in Ranchi Clubs Ltd. case (supra). The decision of Punjab & Haryana High Court in Vinod Khurana's case (supra), though it has considered the issue from a different facet, fully lends support to the view taken by us above.
That leaves us with the decision of Delhi High Court in the case of CIT v. Insilco Ltd. (2003) 179 CTR (Delhi) 214 relied upon by the learned counsel. This decision has clearly been rendered in the facts of the case before the Hon'ble High Court. Vide para 6 of the judgment, the High Court observed, 'In the present case, the Tribunal has noticed that in the order of assessment for the assessment year 1991-92, the only direction of the assessing officer was to 'charge interest' and there was no specific direction to charge interest under section 234B of the Act. In view of the said authoritative pronouncement, no question of law, much less a substantial question of law, arises from the order of the Tribunal in respect of the said assessment year.' This decision is thus clearly distinguishable and does not support the assessed's case.
20. For the aforesaid reasons, we uphold the levy of interest for both the assessment years and dismiss the common grounds being ground 4 for assessment year 1997-98 and ground 3 for assessment year 1998-99.
21. In the result, the appeals of the assessed for both the assessment years are dismissed.