CAG indicts I-T Dept for short levy of tax

Bhartesh Singh Thakur

Tribune News Service

Chandigarh, August 14

The Comptroller and Auditor General (CAG) has indicted the Income Tax (I-T) Department in Chandigarh for short levy of tax on companies.

The report, ‘Payment of tax by certain companies under special provisions’, was tabled before Parliament on August 4.

In the case of Venus Remedies, a local company, there was a short levy of Rs 12.17 crore. The assessing officer, while computing the tax liability, did not compute book profit and levied tax under normal provisions for assessment year 2013-14.

The assessee while computing book profit claimed deduction of Rs 43.25 crore for depreciation as per Income Tax Act in addition to book depreciation and Rs 1.55 crore for scientific research under Section 10 of the Act and offered tax under normal provision.

“As the above deductions were not allowable adjustments under special provisions of the Act, considering the above additions the assessee was liable to pay tax under special provisions. Omission resulted in non-computation of book profit of Rs 

62.67 crore involving tax effect of Rs 12.17 crore,” says the CAG.

The Income Tax Department did not accept the observation, stating that depreciation was an allowable deduction during computation of book profit. Further, on the issue of deduction for scientific research, department accepted the observation in November 2016 but stated that even after considering the same for disallowance, the assessee would still be liable to tax under normal provisions.

“The reply was not tenable as the depreciation as per Income Tax Act was not an allowable deduction,” says the CAG and added that Venus Remedies was liable to pay tax under Minimum Alternate Tax (MAT) but special provisions were not applied in this case.

The CAG also pointed another similar case of Anbros Motors Private Limited by the UT Income Tax Department where short levy was of Rs 2.21 lakh for assessment year of 2010-11.

Any tax, duty, cess or fee are disallowed during computation of income under normal provisions if such amount is not paid within the due date of filing of return of income. This provision has been brought into effect to promote timely payment of statutory dues. If the assessee was liable to pay tax under MAT during any year, it could intentionally delay the payment as there was no corresponding provision prescribed for disallowance of the same in the computation of book profit.

The CAG found that the statutory dues in the 

form of taxes were disallowed during computation of income under normal provisions but were not 

considered under MAT 

in case of two companies under Chandigarh 

income tax department- AB Sugars Ltd, for 

assessment year of 2012-13, and Rana Sugars Ltd, for 2010-11.

The tax effect in case of AB Sugars was Rs 65.71 lakh and for Rana Sugars it was Rs 2.35 crore.