2015 (9) TMI 58 - AT - Income Tax

Interest under section 201(1A) - interest as computed by the Assessing Officer by taking the period of delay on the basis of British calendar month instead of month of 30 days as claimed by the assessee - Held that - In the present case, clause (ii) of section 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. It is observed that similar controversy had arisen in the case of CIT v. Arvind Mills Ltd. 2011 (9) TMI 244 - GUJARAT HIGH COURT wherein the assessee claimed interest under section 244A on the basis of British calendar month.. 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 section 244A, the relevant provisions of which are analogous to the provisions of clause (ii) of section 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 section 3(35) of the General Clauses Act. It was held that the definition given in the General Clauses Act cannot be adopted for the purposes of sub-section (1) of section 244A as such importation of the definition would lead to anomalous situation. In our opinion, the ratio of the decision of the hon ble Gujarat High Court in the case of CIT v. Arvind Mills Ltd. (supra) is squarely applicable in the present case and direct the Assessing Officer to recompute the interest payable under section 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) based on calendar month vs. month of 30 days.

Detailed Analysis:
The appeal was against the order confirming interest charged under section 201(1A) by the Assessing Officer for delayed remittance of tax. The Assessing Officer calculated interest based on a calendar month, while the assessee argued it should be based on a month of 30 days. The company had deducted tax but delayed remittance, leading to the interest dispute.

The Commissioner of Income-tax (Appeals) upheld the interest calculation method of the Assessing Officer, citing rule 119A(b) of the Income-tax Rules, 1962. The rule states that interest is calculated for every month, with any fraction of the month deemed a full month. The Commissioner emphasized the mandatory nature of interest under section 201(1A) and noted that the Department's interest calculation method is consistent for collecting and paying interest.

The Tribunal analyzed the provisions of section 201(1A) and rule 119A, focusing on whether a month should be considered a British calendar month or a period of 30 days for interest calculation. Referring to a similar case, the Tribunal followed the decision of the Gujarat High Court, which held that a month should be interpreted as a 30-day period, not a British calendar month. As there was no contrary decision cited, the Tribunal directed the Assessing Officer to recalculate the interest based on a 30-day month.

In conclusion, the Tribunal allowed the appeal, directing the recalibration of interest calculation under section 201(1A) based on a month of 30 days. The decision aligned with the interpretation of a month as a 30-day period, as per the Gujarat High Court ruling.

This comprehensive analysis of the judgment highlights the key legal issues, arguments presented, and the final decision rendered by the Tribunal, providing a detailed understanding of the case.