Section 234B read with sections 115JA, 207 and 234C of the Income-tax Act, 1961

HELD 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 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 Act including the provisions relating to charge, definitions, recoveries, 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 Act, which have been made mutatis mutandis applicable to the assesses falling under section 115JA. [Para 5] Now the question for consideration would arise as to whether the provisions relating to payment of advance tax under section 207 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 Act deals with collection and recovery of taxes. Part ‘C’ of Chapter XVII deals with advance payment of tax; while Part 'F’ of Chaper 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 would, therefore, mutatis mutandis apply to the assessees covered by section 115JA due to the specific insertion of sub-section (4) in section 115JA provided the requisite conditions for the applicability of sections 207, 234B and 234C are also satisfied. [Para 7] Now the next question for consideration would arise to whether the total income of the assessee falling under section 115JA is chargeable to advance tax. Section 4(1) 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 Act in respect of the total income chargeable under sub-section (1) of section 4. Since section 115JA deems a specified portion of book profit as total income, 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 would have to suffer the same consequence as any total income computed under the Act is required to suffer. This view is further supported by the provisions of section 2(45), 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 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. Further section 207 creates liability for payment of advance tax in accordance with the provisions of sections 208 and 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 advance tax on such total income in terms of section 207. Therefore the total income computed under section 115JA is liable for payment of advance tax. [Para 7] Further 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 210 is less than 90 per cent of the assessed tax. The term 'assessed tax' has been defined in Explanation 1 to section 234B(1) 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 an assessee falling under section 115JA is liable to pay advance tax under Chapter XVII, it naturally follows that he is also liable for interest for defaults or deferment in payment of advance tax under sections 234B and 234C. [Para 8] Therefore, 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. Hence, the action of the Assessing Officer in charging interest under sections 234B and 234C on the book profit computed under section 115JA was justified. [Para 11]