Calculation of interest u/s 119A - period, round off, month, whole month - Income Tax - 894/CBDT

INSTRUCTION NO. 894/CBDT Dated : October 28, 1975 Section(s) Referred: 139 , Rule 119A of IT Rule Statute: Income - Tax Act, 1961 One of the Commissioners of Income-tax has sought clarification on the following points:- (a) If the period for which interest has to be calculated falls entirely before 1-1-1975 but the interest comes to be calculated now i.e. after 1-1-1975, will the new Rule 119A apply For example, if the return of income for assessment year 1973-74 was filed in January, 1974 and the assessment is completed in March, 1975, will the interest u/s 139 for the delay in filing the return be computed by applying the Rule 119A, merely because the interest is being calculated after 1-1-1975. (b) The period for which interest has to be calculated should be rounded off to a whole month or months. Supposing interest has to be calculated for the period 15th November, 1974 to 10th February, 1975, the interest will to be calculated only for 2 months. Is this correct. 2. The position with regard to the aforementioned points is explained below:- It has been specifically laid down in the Notification dated 19th December, 1974 that the new rule takes effect from 1st January 1975. Therefore, calculation of interest under the new rule can be made only for the period after 1-1-1975, though it may relate to amounts outstanding on that day. In other words, upto and including 31st December, 1974, interest should be calculated as if the new rule was not in existance. As from 1st January, 1975 the outstanding arrears as well as the period should be rounded off, as provided under the new rules, and interest calculated accordingly. As far as the second issue is concerned, the words of the rule are very clear. The rule lays down that the period for which interest is to be calculated is to be rounded off to a whole month, or months and not to the nearest whole month, or months. As such only the whole number of months should be taken into consideration and any fraction of a month, even if it is 29 days is to be ignored. 3. The Board desire that the above position may be brought to the notice of the officers working in your charge.