2004 (1) TMI 33 - HC - Income Tax

Interest under section 234C - case of the petitioner is that she had duly paid the advance tax in time as required by the provisions under the Act but the authorities have charged the interest for short payment of advance tax in the first and second instalments - only on the ground that it may create hardship in some cases, the provision cannot be declared unconstitutional. As stated above, the provision being mandatory and admittedly the petitioner having not deposited the advance tax in the first and second instalments to the extent she was required to deposit, she was liable to pay interest in terms of the provisions of section 234C and the authorities have rightly ordered for payment of interest petition dismissed

Summary

Issues:
Challenge to demand of interest under section 234C of the Income-tax Act, 1961 for assessment year 1998-99.

Analysis:
The petitioner contested the demand of Rs. 2,250 charged as interest under section 234C of the Income-tax Act, 1961 for the assessment year 1998-99. The assessing authority determined the total income, tax, and interest, which the petitioner sought rectification for. The petitioner argued that the interest charged for short payment of advance tax was unjust due to unanticipated income received at the end of the accounting year. The respondent-Department contended that the interest provision was compensatory and mandatory, requiring advance tax payment based on returned income. The petitioner's claim of timely advance tax payment was refuted based on statutory provisions mandating advance tax payment on estimated total income.

The petitioner's assertion of no liability for advance tax by September 15, 1997, was contradicted by statutory requirements for advance tax payment on returned income. The court emphasized that advance tax payment is obligatory based on estimated total income to be taxed in the following assessment year. The provision of section 234C of the Act is deemed mandatory, leaving no discretion to waive interest unless specified under the Act. The court highlighted that failure to estimate capital gains or certain income types does not exempt from advance tax payment and resultant interest liability.

The court referenced a Constitution Bench decision affirming the mandatory nature of interest provisions under sections 234A, 234B, and 234C of the Act. The Bench emphasized legislative intent for mandatory interest collection, allowing latitude to economic legislation due to its complexity. The court underscored that legislation addressing economic matters is empirical, subject to experimentation, and may contain imperfections that do not warrant invalidation. The court rejected the petitioner's argument of unconstitutionality based on potential hardships, upholding the mandatory interest payment under section 234C.

In conclusion, the court dismissed the writ application, finding no merit in the petitioner's challenge against the interest charged under section 234C for the assessment year 1998-99. The judgment upheld the statutory requirement for advance tax payment and subsequent interest liability, emphasizing the mandatory nature of the provision despite potential hardships in specific cases.