2016 (3) TMI 538 - AT - Income Tax

Charging of Interest u/s. 234C - default to pay advance tax under section 208 - Held that - Respectfully, following the decision of Shakti Insulated Wires (P) Ltd. for assessment year 2005-06 (2014 (2) TMI 1246 - ITAT MUMBAI), which ruling, in our view, is squarely applicable to the case on hand, confirm the impugned order of the Ld. CIT(A) in holding that the assessee in the case on hand cannot be charged interest under section 234C of the Act as it had no liability to pay advance tax under section 208 of the Act on any of the due dates for payment of advance tax in the period under consideration and became liable to pay tax by virtue of a retrospective amendment made after the close of the relevant financial year. In these circumstances, the assessee could not be branded as a defaulter and be charged interest under section 234C of the Act - Decided in favour of assessee

Summary

Issues:
Charging of interest u/s. 234C of the Income Tax Act.

Detailed Analysis:

1. Background and Facts: The case involves an appeal by the Revenue against the order of the CIT(Appeals)-13, Mumbai for assessment year 2005-06. The assessee, a company engaged in cellular services, filed its return declaring NIL income after claiming deduction u/s. 80IA of the Income Tax Act, 1961. The assessment was completed u/s.143(3) of the Act, and the 'book profit' u/s. 115JB was determined, which was later challenged by the assessee.

2. Charging of Interest u/s. 234C: The Revenue raised grounds against the deletion of interest charged u/s. 234C of the Act by the CIT(A). The Revenue contended that the interest was deleted without appreciating that the assessee failed to pay advance tax due to a retrospective amendment to Section 115JB. The assessee argued that no interest should be charged for liabilities arising due to retrospective amendments, citing judicial precedents supporting their stance.

3. Judicial Analysis: The Tribunal considered similar cases where interest under sections 234B and 234C could not be charged due to retrospective amendments. Referring to the decision in the case of Shakti Insulated Wires (P) Ltd., the Tribunal held that interest cannot be levied where the tax liability arose only due to retrospective amendments. The Tribunal relied on various court decisions to support its conclusion that the assessee could not be considered a defaulter in such circumstances.

4. Decision and Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the interest charged u/s. 234C of the Act. The Tribunal concurred with the view that the assessee should not be charged interest for liabilities arising from retrospective amendments. The grounds raised by the Revenue were therefore dismissed, and the appeal for assessment year 2005-06 was ultimately rejected.

In conclusion, the judgment primarily focused on the issue of charging interest u/s. 234C of the Income Tax Act, emphasizing the impact of retrospective amendments on tax liabilities and the consequent applicability of interest charges. The detailed analysis provided a comprehensive understanding of the legal reasoning and precedents considered in arriving at the decision to dismiss the Revenue's appeal.