Taxpayer need not Deposit penalty/ interest Amount to entertain Local Body Tax Appeals

In a recent case of Bombay High Court it was ruled that deposition of penalty and interest is not required as a pre-condition in entertaining disputed local body tax appeals. The issue of the case was whether the petitioner, Wintry Engineering And Chemicals Private Limited, is liable to pay Local Body Tax ( LBT ). Respondents had passed an order levying LBT of Rs.28,861,674/,  interest of Rs.28,861,674/- for the period June 2015 to June 2017 and penalty of Rs.15,000/. The petitioner had deposited the LBT but failed to deposit the interest and penalty amount of “ disputed tax.” The contention of the respondents was that in order to entertain the appeal, petitioner should deposit not only the disputed tax but also the interest and penalty.  Essential Training for Tax Professionals: Know Your Sections! The question before the court was whether the proper construction of Section 406( 8 ) of Maharashtra Municipal Corporations Act, the phrase “ disputed tax” used in the section, includes interest and penalty ? The petitioner tendered a written note in which it was submitted that the judgements referred by the court such as (a) Chennai Network Infrastructure Ltd. Vs. Kalyan Dombivli Municipal Corporation & Ors. 1 and  (b) Reliance Communications Ltd. & Ors. Vs. Thane Municipal Corporation & Ors. 2 and (c) C. G. International P. Ltd. Vs. State of Maharashtra Essential Training for Tax Professionals: Know Your Sections!  were not applicable to the case in hand and on the contrary the decision in the case of C.G. International P. Ltd supports the petitioner’s case. The learned single judge after analyzing the Bombay Provincial Municipal Corporation Act recognized the distinction between tax, interest and penalty, and that it is not required to be deposited for entertaining the appeal. Further the impugned order was quashed and the matter was remanded for fresh consideration. Essential Training for Tax Professionals: Know Your Sections! The division bench of Bombay High Court comprising Justice K.R. Shriram and Justice Jitendra Jain remarked that considering the issue before the court whether to challenge levy of cess, interest  and penalty is to be deposited as precondition for entertaining appeal. The appellate authority shall dispose of the appeal in accordance with law by giving personal hearing. If the assessing officer is going to rely on any judgements or orders of the court or tribunal then a list of the same should be made available to the petitioner in advance before the personal hearing. If the petitioner wishes to file written submission to record what transpired during the personal hearing, then the petitioner may file the written submission within 4 days of completion of personal hearing. Thus the petition was disposed of.