Law: Income Tax Act, 1961

Section: 273,212(3)

Section 273 of the Income-tax Act, 1961 - Penalty - For false estimate of, or failure to pay advance tax - Assessment year 1982-83 - Assessee-company declared a loss in its return - Assessing Officer, however, arrived at a positive income by disallowing set-off of carried forward unabsorbed depreciation of earlier years against income assessed under head 'Income from other sources' and, accordingly, levied penalty under section 273 - Later on, in a separate , High Court allowed set-off of unabsorbed depreciation of earlier years against income assessed under head 'Income from other sources' - On account of such set-off, taxable income of assessee became nil - Whether since there was no liability to pay income-tax, there could be no obligation to pay advance tax and, consequently, no occasion for levy of penalty for non- payment of advance tax - Held, yes FACTS The assessee-company declared a loss in its return. However, the Assessing Officer computed the total income for the year by disallowing set-off of carried forward unabsorbed depreciation of earlier years against the income assessed under the head 'Income from other sources', and arrived at a positive figure. Thereafter, the Assessing Officer levied penalty under section 273. The penalty so levied was upheld by the Commissioner (Appeals). On second appeal, the Tribunal also affirmed the same on the ground that the total income for the relevant assessment year as computed by the Assessing Officer being a positive figure, the assessee was required to pay advance tax. On appeal under section 260A : HELD In a separate , the High Court had held that the assessee was entitled to set-off of unabsorbed depreciation of earlier years against the income assessed under the head 'Income from other sources'. Admittedly, on account of such set-off of unabsorbed depreciation of earlier years against the total income computed for the relevant assessment year, the taxable income would work out to nil and the assessee would not be liable to pay any tax in respect of the year under consideration. It is axiomatic that if there is no liability to pay income-tax, there is no obligation to pay advance tax and, consequently, no…

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