2016 (9) TMI 757 - HC - Income Tax

Terminal date for charging interest under Section 234B - Held that - Hon ble Supreme Court in Brij Lal and Ors. Vs. Commissioner of Income Tax reported in (2010 (10) TMI 8 - SUPREME COURT ) held that the terminal date for charging interest will be the date on which the order under Section 245D (1) is passed i.e., the date on which the Settlement Commission entertains the application for settlement. By applying the said decision to the instant case, the appropriate date for charging interest would be 04.07.1997. Accordingly, the writ petition is allowed and the impugned order dated 03.02.2004 is set aside and it is ordered that the interest under Section 234A shall be charged upto the date of order under Section 245D (1) i.e., 04.07.1997 in stead of 28.10.2002 i.e, order under Section 245D (4) of the Act. The fourth respondent is directed to pass the consequential order pursuant to the above direction. No costs. Consequently, the connected miscellaneous petition is closed.

Summary

Issues:
1. Determination of the terminal date for charging interest under Section 234B of the Income Tax Act, 1961.

Analysis:
The High Court of Madras addressed the issue of the terminal date for charging interest under Section 234B of the Income Tax Act, 1961, in a writ petition challenging an order by the Settlement Commissioner Additional Bench, Chennai. The petitioner had filed a return of income for the Assessment Year 1995-96 and subsequently approached the Settlement Commission under Section 245C of the Act. The Settlement Commission entertained the settlement application on 04.07.1997 and issued the final order on 28.10.2002. The key contention revolved around the terminal date for charging interest, as determined by the Settlement Commission, which was challenged by the petitioner. The High Court referred to a decision by the Constitution Bench of the Supreme Court in Brij Lal and Ors. Vs. Commissioner of Income Tax (2010) 328 ITR 477, which clarified that the terminal date for charging interest would be the date on which the order under Section 245D(1) is passed, i.e., the date of entertaining the settlement application.

The Court, applying the Supreme Court's decision, held that the appropriate date for charging interest in the instant case would be 04.07.1997, the date on which the Settlement Commission entertained the application. Consequently, the impugned order dated 03.02.2004 was set aside, and it was ordered that interest under Section 234A would be charged up to the date of the order under Section 245D(1) and not the later date of the final order under Section 245D(4). The fourth respondent was directed to pass the consequential order in accordance with this direction. The writ petition was allowed, and no costs were awarded, leading to the closure of the connected miscellaneous petition.