G.T.N. Textiles Ltd. vs Deputy Commissioner of Income Tax and Another

K.P. Balanarayana Marar, J.—The petitioner seeks a writ of certiorari to quash exhibit P-3 order of the Commissioner of Income Tax, Cochin, to the extent to which it relates to the rejection of the application for waiver of interest levied u/s 220(2) of the Income Tax Act, 1961. This petition arose under the following circumstances :

The petitioner is an assessee under the Income Tax Act, 1961. For the assessment year 1979-80, a return was filed claiming depreciation and investment allowance on plant and machinery. The interest was capitalised on plant and machinery. In the original assessment, the Income Tax Officer had disallowed the capitalisation of interest payable subsequent to the date on which the plant and machinery were put to use. On appeal, the Commissioner of Income Tax directed depreciation and investment allowance to be granted taking into account interest also. An Explanation was added to Section 43(1) of the Income Tax Act by the Finance Act of 1986, with retrospective effect from April 1, 1974, providing for writing off of future interest as revenue expenditure subsequent to the commencement of use of plant and machinery. At that time, the second appeal filed by the Department was pending before the Tribunal. The Tribunal disallowed the petitioner''s claim. Consequent to the first appellate order, the first respondent levied, among other things, interest of Rs. 2,76,472 u/s 220(2) of the Income Tax Act. Besides that, there is also levy of interest u/s 215. An application was filed before the first respondent for waiver of interest u/s 215 which was partly allowed. The second respondent alone is vested with power to waive interest levied u/s 220(2). A petition was, therefore, presented before the second respondent for waiver of interest. That petition was disposed of by exhibit P-3 order by which the second respondent granted relief with regard to the levy of interest u/s 215, but the request for waiver of interest u/s 220(2) was rejected. That order is under challenge in this original petition.

Heard counsel for the petitioner.

The grievance of the petitioner is that the second respondent has disallowed the request for waiver on the sole ground that no undue hardship is caused to the assessee-petitioner. The petition was presented u/s 220(2A) which empowers the Commissioner to reduce or waive interest paid or payable u/s 220 if he is satisfied that (1) payment of such amount has caused or would cause genuine hardship to the assessee, (2) default in the payment of the amount on which interest has been paid or payable under the said sub-section was due to circumstances beyond the control of the assessee, and (3) the assessee has cooperated in any enquiry relating to the assessment or in the proceeding for recovery of any amount due from him.

The contention of learned counsel for the petitioner is that the Commissioner has not applied his mind regarding these three conditions enumerated in Section 220(2A). It is pointed out that the default occurred due to circumstances beyond the control of the assessee. The levy itself was on account of the Explanation introduced in 1986 to Section 43(1) of the Income Tax Act. The relevant assessment year is 1979-80. It is further pointed out that the Commissioner has not considered the genuine hardship that would be caused to the assessee in case the levy is sustained. According to the petitioner, he has co operated in the enquiry relating to the assessment.

On a perusal of exhibit P-3 order, it is seen that the Commissioner has looked into the fact as to whether genuine hardship will be caused to the assessee. It is stated in the order that the assessee is earning very good income from its business and that this does not appear to be a case where the payment of interest caused undue hardship to the assessee. The Commissioner has, therefore, considered the relevant aspects while passing the impugned order. The discretion vested in the Commissioner has, therefore, been exercised properly. In this connection, it has to be pointed out that the Commissioner has allowed waiver of interest relating to the period beyond one year from the date of filing of the return in respect of the interest levied u/s 215 of the Act. No error has, therefore, been committed by the Commissioner warranting interference in this petition.

The original petition is, therefore, dismissed in limine.