2016 (2) TMI 274 - HC - Income Tax

Interest under Section 234A determined before taking notice of self assessment payment under Section 140A - Held that - In the absence of any statutory provision made for reducing such amount paid towards self assessment tax, the Authorities proceeded to levy interest on the entire amount de hors the payment of ₹ 40 lakhs made by the Assessee towards the self assessment tax before the due date of filing of return of income. A similar question was considered in the case of Pranoy Roy 2008 (9) TMI 150 - SUPREME COURT wherein considered by the Central Board of Direct Taxes in Circular No.2/2015 dated 10.2.2015 and the Board has decided that no interest under Section 234A of the Act is chargeable on the amount of self assessment tax paid by the Assessee before the due date of filing of return of income. This circular was not available at the time of the Tribunal deciding the matter. Accordingly, we are of the view that the Tribunal had no occasion to examine the case of the Assessee in the light of the Circular No.2/2015 dated 10.2.2015 and its applicability thereof to the present case. Hence, it would be appropriate for us to remand the matter to the Tribunal to examine the issue of payment of interest under Section 234A of the Act on the amount of self assessment tax paid by the Assessee before the due date of filing of return of income in the light of the Judgment of the Apex Court in the case of Pranoy Roy supra , as well as the Circular No.2/2015 dated 10.2.2015. Matter is remitted back to the Tribunal to address on these issues and to pass appropriate orders in accordance with law after providing an opportunity of hearing to both the parties leaving open all the contentions

Summary

Issues Involved:
1. Interpretation of Section 234A of the Income Tax Act, 1961 regarding the levy of interest.
2. Application of judicial precedents and circulars in determining the liability for interest payment.
3. Discrepancy in the calculation of interest under Section 234A based on self-assessment tax payments.

Analysis:
1. The primary issue in this case revolves around the interpretation of Section 234A of the Income Tax Act, specifically regarding the levy of interest for defaults in furnishing the return of income. The appellant, engaged in the business of transport, travel, and tourism, filed the return for the assessment year 2009-2010 after the due date, leading to the imposition of interest by the Assessing Officer under various sections of the Act.

2. The appellant argued that interest under Section 234A should be calculated based on the self-assessment tax paid before the due date of filing the return, rather than on the total tax amount. The appellant relied on judicial precedents, including the Apex Court judgment in a similar case, to support this argument. Additionally, reference was made to Circular No.2/2015 dated 10.2.2015, which clarified the non-applicability of interest on self-assessment tax paid before the due date.

3. On the other hand, the Revenue contended that Section 234A does not provide for the reduction of self-assessment tax while calculating interest. The Revenue emphasized the strict application of the statutory provision and highlighted that the Tribunal and Authorities had correctly levied interest on the entire tax amount, including self-assessment tax paid before the due date.

4. The Court analyzed the provisions of Section 234A, noting that the statute does not explicitly allow for the reduction of self-assessment tax in the interest calculation. However, considering the compensatory nature of interest and the absence of specific provisions, the Court found merit in the appellant's argument based on the Apex Court judgment and the subsequent circular issued by the Central Board of Direct Taxes.

5. Consequently, the Court decided to remand the matter back to the Tribunal for a reevaluation in light of the Apex Court judgment and Circular No.2/2015. The Tribunal was directed to examine the issue of interest payment on self-assessment tax paid before the due date and make a decision based on the legal principles discussed in the judgment.

6. The Court refrained from addressing the substantial questions raised in the appeal directly, opting to provide the Tribunal with an opportunity to reconsider the matter. Both parties were instructed to appear before the Tribunal for further proceedings on the specified date.

7. In conclusion, the appeal was disposed of with a directive for the Tribunal to review the interest calculation under Section 234A based on the self-assessment tax payments made by the appellant before the due date of filing the return, considering the relevant legal precedents and circular instructions.