2022 (7) TMI 627 - AT - Income Tax

Interest u/s. 234C charged on the dividend income earned for all the four quarters when actually the said dividend has been received by the assessee only in third and fourth quarters of the financial year - Advance Tax Liability - computation of tax payable u/s.115BBDA of the Act for dividend - Scope of amendment as inserted by the Finance Act 2017 w.e.f. 01/04/2017 - HELD THAT - As for the year under consideration i.e. A.Y.2018-19, the old proviso as it stood during 2017-21 would apply. If the said provision is applied, the dividend income contemplated u/s.115BBDA of the Act falls under the Exception clause in Clause (d). Admittedly in the instant case, the dividend from M/s. Marico Ltd., was received by the assessee only in third and fourth quarters of the financial year. Admittedly, the assessee had duly paid the advance tax on the said dividend income taxable u/s.115BBDA of the Act in the third and fourth quarters of the financial year. Hence, as per the old proviso to Section 234C (1) of the Act, there cannot be any levy of interest u/s.234C of the Act that could be fastened on the assessee for the first two quarters by apportioning dividend income for the whole year. Hence, we find lot of force in the arguments advanced by the ld. AR and accordingly, allow the grounds raised by the assessee.

Summary

Issues:
- Charging interest u/s.234C on dividend income earned in third and fourth quarters only

Analysis:
1. The appeal in ITA No.403/Mum/2022 for A.Y.2018-19 questions if interest u/s.234C of the Act can be levied on dividend income received in the third and fourth quarters only, not for the entire year.

2. The assessee, a private discretionary trust, filed its return for A.Y.2018-19, showing dividend income taxable u/s.115BBDA of Rs.62,99,76,250. CPC Bangalore processed the return, charging interest u/s.234C at Rs.21,05,041, considering the dividend income for the whole year. The assessee argued that the dividend was earned in the third and fourth quarters, paying advance tax accordingly.

3. The assessee filed a rectification application against the intimation, but it was rejected. Various grievance procedures were followed, leading to the NFAC dismissing the appeal, citing Section 234C as amended by the Finance Bill 2021, applying prospectively from A.Y.2021-22.

4. The NFAC concluded that interest u/s.234C is chargeable on dividend income as per the deeming fiction u/s.8 of the Act, without any exception for dividend income. The assessee appealed, challenging this decision.

5. The provisions of Section 234C, as amended by the Finance Bill 2021, were applied by the ld. CIT(A). However, the old proviso during 2017-21 applied for A.Y.2018-19, exempting dividend income u/s.115BBDA from interest u/s.234C if paid in the quarters received. The Tribunal found merit in the assessee's argument and allowed the appeal.

6. The Tribunal held that under the old proviso, interest u/s.234C cannot be charged on dividend income received in the third and fourth quarters only, as advance tax was duly paid for those quarters. Consequently, the appeal of the assessee was allowed.

7. In conclusion, the Tribunal ruled in favor of the assessee, emphasizing that interest u/s.234C cannot be levied on dividend income earned in specific quarters only, based on the old proviso applicable for the relevant assessment year.