2012 (4) TMI 370 - AT - Income Tax

Levy of interest under Sections 234A, 234B and 234C assessee contested that as the payee being a non-resident tax ought to have been deducted u/s.195 of the IT Act - AO charged interest after considering the actual amount of tax deducted at source Held that - the interest under section 234A is not levied for any default of payment of any advance tax, but is levied for default in furnishing return of income within the specified time - the interest under section 234A is to be computed by excluding the amount of tax actually deducted from the assessee during the relevant previous year and interest under section 234B and 234C are to be charged by excluding the tax, which was deductible from the assessee as per provisions of Chapter XVII of the Act - set aside the Order and direct the AO to recompute the interest - Appeal of assessee partly allowed.

Summary

Issues:
Appeal against levy of interest under Sections 234A, 234B, and 234C of the IT Act.

Analysis:
The appellant contested the levy of interest under Sections 234A, 234B, and 234C of the IT Act in multiple appeals. The appellant argued that M/s. Core Carbon Private Ltd. had deducted tax at source on commission payments, reducing the total tax liability. The appellant relied on legal precedents to support the contention that interest under Section 234B should be computed based on tax deductible at source, not just tax actually deducted. The appellant also cited cases where no advance tax liability was present if the entire amount received was subject to Tax Deducted at Source (TDS).

The Assessing Officer charged interest based on the tax actually deducted at source, leading to the appellant's appeal before the CIT(A). The CIT(A) upheld the Assessing Officer's decision. However, the Tribunal referred to legal provisions and precedents to determine the correct method of computing interest under Sections 234A, 234B, and 234C. It was noted that the appellant's liability to pay advance tax should exclude the tax deductible at source, as per Chapter XVII of the Act.

The Tribunal highlighted the distinction between interest under Sections 234A, 234B, and 234C. Section 234A pertains to default in filing returns, while Sections 234B and 234C relate to advance tax payment defaults. The Tribunal clarified that interest under Section 234A should be computed based on tax actually deducted, while interest under Sections 234B and 234C should consider the tax deductible at source. The Tribunal set aside the lower authorities' orders and directed the Assessing Officer to recalculate the interest accordingly.

In conclusion, the Tribunal partially allowed the appeals, emphasizing the correct computation of interest under different sections of the IT Act. The judgment clarified the application of tax deductions at source in determining interest liabilities, providing guidance for future tax assessments and appeals.