2015 (3) TMI 1083 - AT - Income Tax

Interest charged under S.201(1A) - AO taking the period of delay on the basis of calendar month instead of month of 30 days as claimed by the assessee - Held that - In the present case, clause (ii) of S.201(1A) read with Clause (b) of Rule 119A is applicable and it provides that where the interest is to be calculated for every month or part of a month comprised in a period, any fraction of a month shall be deemed to be a full month, and the interest shall be so calculated. The dispute in this context as involved in the present case is whether the month for such calculation of interest is to be taken as a British calendar month or a period of 30 days. It is observed that similar controversy had arisen in the case of CIT V/s. Arvind Mills Limited (2011 (9) TMI 244 - GUJARAT HIGH COURT ), wherein the assessee claimed interest under S.244A on the basis of British calendar month. The claim of the assessee, although was not allowed by the Assessing Officer as well as the learned CIT(A), the Tribunal allowed the same. When the matter was carried before the Hon ble Gujarat High Court in an appeal filed by the Revenue, Their Lordships held that a reading of sub-section (1) of S.244A, the relevant provisions of which are analogous to the provisions of clause (ii) of S.201(1A) read with Rule 119A, would make it clear that the term month must be given the ordinary meaning of the term of 30 days period and not the British calendar month as defined in S.3(35) of the General Clauses Act. It was held that the definition given in General Clauses Act cannot be adopted for the purposes of subsection (1) of S.244A as such importation of the definition would lead to anomalous situation. Thus direct the Assessing Officer to recompute the interest payable under S.201(1A) by taking a period of 30 days as a month instead of British calendar month. - Decided in favour of assessee

Summary

Issues:
Computation of interest under Section 201(1A) - Calendar month vs. 30 days period.

Detailed Analysis:

1. Issue of Interest Calculation: The appeal concerned the computation of interest under Section 201(1A) of the Income Tax Act. The Assessing Officer charged interest based on a calendar month, while the assessee argued that interest should be calculated based on a period of 30 days. The dispute arose from the delay in remittance of tax deducted by the assessee, leading to a shortfall in interest payment.

2. Contentions Before CIT(A): During the appellate proceedings, the assessee contended that interest under Section 201(1A) should be calculated based on a 30-day month, not a calendar month. The CIT(A) upheld the Assessing Officer's decision, citing Rule 119A(b) of the Income-tax Rules, which mandates that any fraction of a month should be deemed a full month for interest calculation purposes.

3. Tribunal's Decision: The Tribunal analyzed the relevant provisions of Section 201(1A) and Rule 119A(b) and referred to a similar case precedent where the Gujarat High Court ruled in favor of considering a month as a 30-day period, not a British calendar month. The Tribunal found no contrary decisions cited by the Departmental Representative and thus followed the Gujarat High Court's decision. Consequently, the Tribunal directed the Assessing Officer to recalculate the interest payable under Section 201(1A) based on a 30-day month.

4. Outcome: Ultimately, the Tribunal allowed the appeal of the assessee, emphasizing the interpretation of a month as a 30-day period for interest calculation under Section 201(1A). This decision aligned with the precedent set by the Gujarat High Court, resolving the dispute over the method of interest computation in the present case.

In conclusion, the judgment clarified the method for calculating interest under Section 201(1A) by determining a month as a 30-day period, as per the Gujarat High Court's ruling. The decision provided clarity on the interpretation of the relevant provisions and resolved the appeal in favor of the assessee.