Setback to Bennett Coleman: Assessee to pay Interest, Advance Tax paid less than 75% of Assessed Tax, says Bombay High Court

Setback to Bennett Coleman: Assessee to pay Interest, Advance Tax paid less than 75% of Assessed Tax, says Bombay High Court

Bennett Coleman has dealt a major setback when the Bombay High Court ruled that the assessee was required to pay interest if the advance tax paid was less than 75 percent of the assessed tax.

The appellant presented in his return of income for the assessment year 1985-86 a total income of Rs.1,53,41,650/-. Accordingly, the Assessing Officer passed an assessment order under Section 143(3) of the Act, with various additions and disallowing several condensed tax deductions to the income reported by the Appellant, which resulted in a total income assessment of Rs.2,74,47,780/-. A charge of interest under Section 215 of the Act was also directed by the Assessing Officer in the assessment order. According to the computation sheet, the Assessing Officer assessed interest of Rs.13,67,999/- under Section 215 of the Act.

In his appeal, the appellant questions whether the Tribunal ought to have determined that in the light of the judgment handed down by this Hon'ble Court in Bennett Coleman & Co. Ltd. In view of the finding in the order dated 20th March 1989, passed under Rule 40(1) of the Rules that the non-finalization of the assessment could not be attributed to the appellant, he was not justified in waiving only the interest for an extended period and should have waived the interest for the entire period.

Justice Amit B Borkar and Justice K.R. Shriram emphasized that Section 215 of the Act makes it clear that unless an assessee has paid 75percent or more of the assessed tax in advance, it is required to pay interest. Assesses are required to pay simple interest at a rate of 15percent p.a. beginning on the first day of April following the financial year until the date of regular assessment.

As the court pointed out, "Deputy Commissioner of Income Tax, Bombay, by order dated 20th March 1989, in exercising the power under Rule 40 of Income Tax Rules, held that delay in finalizing assessment was not attributable to the Assessee and therefore the Assessee was not liable to pay interest under Section 215 of the Act beyond one year from the date of filing of return." In view of this, an amount of Rs.4,40,020/- was ordered to be paid by the Appellant. Consequently, the order of DCIT, Bombay, on 20th March, 1989 has not been challenged by Revenue or Appellant, with the result that it has become final. It follows that, in the absence of any challenge to the order under Rule 40(1) of IT Rules, the Appellant is not entitled to benefit from the judgment of the Division Bench of this Court in Bennett Coleman & Co. Ltd."

The appellant is therefore not entitled to a waiver of interest for a period of one year. According to the court, the appellant is entitled to the benefit of the order passed under Rule 40(1) only to the extent set forth in it.