2016 (7) TMI 1600 - AT - Income Tax

Charging of interest u/s 234C - point of dispute by the assessee is that while processing such return under section 143(1) interest u/s 234C was levied on account of shortfall in payment of advance tax on first and second installments due on 15/09/2011 and 15/12/2011 in respect of gift of 10.00 crores claimed to have been received on 17/12/2011 - HELD THAT - Section 209 of the Act provides the computational mechanism of calculating advance tax to be paid. Notably section 209 envisages calculation of advance tax based on the estimate of current income . A reading of section 209 would reveal that in order to calculate the amount of advance tax payable an assessee is liable to estimate his income. Facts of the present case clearly show that the gift of 10.00 crores which has been received by the assessee on 17/12/2011 could not have been foreseen by the assessee so as to enable him to estimate such income for the purpose of payment of advance tax on an anterior date may it be 15/09/2011 or 15/12/2011. In such a situation the decision of the Hyderabad Bench of the Tribunal in the case of ACIT v. Jindal Irrigation Systems Ltd. 1995 (8) TMI 97 - ITAT HYDERABAD-A relied upon by the appellant clearly militates against charging of interest under section 234C of the Act. Therefore in this background the levy of interest under section 234C of the Act in the present case is untenable. Plea of the Revenue that charging of interest under section 234C of the Act is mandatory in natures is concerned the same in our view cannot lead to a situation where levy of interest can be fastened even in situations where there is impossibility of performance by the assessee. Charging of interest would be mandatory only if the liability to pay advance tax arises upon fulfilment of the parameters which in the present case is not fulfilled on account of the peculiar fact situation. Thus such plea of the Revenue is untenable. Decided in favour of assessee.

Summary

Issues:
Charging of interest under section 234C of the Income Tax Act for deferment in payment of advance tax.

Analysis:
The appeal pertains to the assessment year 2012-13 and challenges the charging of interest under section 234C of the Income Tax Act amounting to ?7,66,070. The appellant, an individual deriving income from bank deposits and capital gains, contested the interest levy due to a shortfall in payment of advance tax on specified dates in relation to a gift received after the due dates. The appellant argued that the income from the gift was unforeseeable on the due dates, thus advance tax payment was not possible. The Departmental Representative supported the interest levy, citing the mandatory nature of the provision and a Delhi High Court judgment. The Tribunal considered the principle of 'pay as you earn' and the requirement to estimate income for advance tax payment. It noted that the gift received after the due dates could not have been anticipated, aligning with precedents where impossibility to estimate income absolved the assessee from interest liability. The Tribunal rejected the Revenue's arguments, emphasizing the unique circumstances of the case. It distinguished a Delhi High Court judgment involving business receipts from the present situation of a windfall gain through gifts. Consequently, the Tribunal set aside the CIT(A) order and directed the Assessing Officer to delete the interest charged under section 234C.

In conclusion, the Tribunal allowed the appeal, ruling in favor of the assessee and ordering the deletion of the interest levied under section 234C of the Income Tax Act.