Mumbai: The Bombay High Court on Tuesday quashed the order passed by the Chief Commissioner of Income Tax (Central) 1 [CCIT] on March 30, 2024, which rejected Grasim Industries Limited’s application for waiver of interest amounting to over Rs 3.88 crore under Section 234C of the Income Tax Act, 1961.
Grasim, a flagship company of the Aditya Birla group which is into textile manufacturing since 1947, challenged the CCIT’s decision, contending that the interest charged was for deferment of Advance Tax for Assessment Year (AY) 2021-22.
The company filed its income tax return on March 11, 2022, declaring a total income of Rs 365.12 crore and book profits of Rs 1157.63 crore with a total tax liability of Rs 206.03 crore, including the disputed interest of Rs 3.88 crore.
Grasim’s counsel Dharan Gandhi argued that despite suffering a loss of Rs 395 crore in the first quarter of 2020 due to the COVID-19 pandemic, the company still paid Rs 11 crore as Advance Tax. For the fiscal year 2021-22, Grasim paid a total Advance Tax of Rs 171 crore. However, the delay in payment during the July to September 2020 quarter was due to significant business disruptions caused by the pandemic, which made it challenging to accurately estimate taxable income.
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Gandhi cited government instructions allowing for the waiver of interest under certain circumstances to mitigate taxpayer hardships, emphasising that the pandemic’s impact was “beyond the company’s control”.
Counsel for the Revenue Akhileshwar Sharma, defended the CCIT’s order, arguing that the waiver application was an afterthought and lacked merit. He maintained that the impugned order was legally sound and adequately justified, demonstrating proper exercise of discretion by the tax authorities.
A bench of Justices Girish Kulkarni and Advait Sethna noted that the CCIT’s order failed to address Grasim’s primary argument regarding the impact of COVID-19 on its financial situation. The court emphasised that the order showed a lack of consideration of crucial contentions raised by Grasim. It found that the CCIT did not properly assess the unique circumstances outlined in Grasim’s waiver application dated November 9, 2022.
As a result, the court quashed the CCIT’s order and remanded the matter for a fresh evaluation of Grasim’s application. The High Court directed that the reassessment be conducted within eight weeks, ensuring that it considers the petitioner’s arguments on their own merits and without bias from the previous order.
