2015 (12) TMI 628 - HC - Income Tax

Interest u/s 234B - upto which date interest under Section 234B can be admitted - ITAT directing the Assessing Officer to charge interest u/s 234B after giving effect to the order of the Tribunal till the date of order of original assessment - Held that - Section 234B has two parameters. One is the principal on which such interest would be computed and the other is the period, during which, such interest liability would arise. Two terminal points of the liability are the 1st of April next following the financial year in question and the date of determination of total income under Section 143(1) assessment or the date of regular assessment as the case may be. Sub- section (4) of Section 234B, however, further provides that where, as a result of an order under rectification or revision etc., the amount on which interest is payable under sub-section (1) is increased or decreased, the interest will also correspondingly increased or decreased. Sub section (4) of Section 234B of the Act thus only pertains to the adjustment of the principal on the basis of any change in the principal liability of the tax of the assessee and has no reference to the two terminal points of time for which the interest liability would arise under sub-section (1). Here, the liability would end on the date of determination of total income under Sub-section (1) of Section 143 of the Act or, in case of regular assessment, the date of such assessment. In view of such clear language of sub-section (1) of Section 234B of the Act, there is no scope for extending such liability to a later date and relate it to a revisional appellate or a rectification order as is desired by the revenue. Tribunal, in the present case, has followed the decision in case of Frightship Consultants P. Ltd. vs. Income Tax Officer reported in 2007 (5) TMI 259 - ITAT DELHI-A referring to the decision of Supreme Court in case of Modi Industries Ltd. vs. CIT 1995 (9) TMI 324 - SUPREME Court to hold that the term regular assessment would mean the original order of assessment and would not include any other debt of the consequential order which can be treated as the debt of the regular assessment - Decided against revenue

Summary

Issues:
1. Interpretation of Section 234B of the Income Tax Act, 1961 regarding the period for charging interest.
2. Determination of the terminus date for charging interest under Section 234B.

Analysis:
1. The primary issue in this case revolves around the interpretation of Section 234B of the Income Tax Act, 1961, specifically concerning the period for charging interest. Section 234B deals with interest for default in payment of advance tax. It mandates that if an assessee fails to pay at least 90% of the assessed tax as advance tax, they are liable to pay simple interest at a prescribed rate from the 1st day of April following the financial year to the date of determination of total income under Section 143(1) assessment or the date of regular assessment. The interest liability is calculated on the amount equal to the assessed tax or the shortfall in advance tax paid compared to the assessed tax.

2. The court analyzed the provisions of Section 234B in detail to determine the terminus date for charging interest. It clarified that the interest liability under sub-section (1) of Section 234B ceases at the date of determination of total income under Section 143(1) assessment or the date of regular assessment. The court highlighted that any increase or decrease in the principal amount, as per sub-section (4) of Section 234B, is only related to adjustments in the principal tax liability and does not extend the period for charging interest. The court emphasized that the statutory language of the Act does not provide for extending the interest liability beyond the specified terminal points.

3. The court referred to the decision in the case of Frightship Consultants P. Ltd. vs. Income Tax Officer and the Supreme Court ruling in Modi Industries Ltd. vs. CIT to establish that the term 'regular assessment' refers to the original assessment order and does not include subsequent orders. The Tribunal's decision aligned with this interpretation, rejecting the revenue's contention to extend the interest liability period. The Tribunal emphasized that the interest under Section 234B is to be calculated based on the assessed tax and does not extend beyond the date of assessment determination.

4. In conclusion, the court dismissed the tax appeal filed by the Revenue, upholding the Tribunal's decision. The court affirmed that the interest liability under Section 234B of the Income Tax Act ceases at the date of determination of total income under Section 143(1) assessment or the date of regular assessment, and any adjustments in the principal amount do not alter the termination date for charging interest.