Income Tax Appellate Tribunal - Bangalore
Shri.M.Seetharam , Mangalore vs The Assistant Commissioner Of Inome Tax ... on 24 September, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" BENCH : BANGALORE
BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER
AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER
ITA No.505/Bang/2018
Assessment year : 2014-15
Shri M. Seetharam, Vs. The Assistant Commissioner of
J.V. Son & Co., Income Tax,
Hampankatta, Circle 2(1),
Mangaluru - 575 001. Mangaluru.
PAN: AKTPS 4036K
APPELLANT RESPONDENT
Appellant by : Shri A. Ravish Rao, CA
Respondent by : Shri Siddappaji, R.N., Addl.CIT(DR)(ITAT), Bengaluru.
Date of hearing : 03.09.2018
Date of Pronouncement : 24.09.2018
ORDER
Per N.V. Vasudevan, Judicial Member
This is an appeal by the Assessee against the order of the CIT(Appeals), Mangaluru dated 12.01.2018 of relating to assessment year 2014-15.
2. The Assessee is an individual. He filed a return of income for AY 2014-15 on 30.9.2015 declaring total income of Rs.3,85,45,600 after deductions under Chapter VIA of the Income Tax Act, 1961 (The Act) [Total income declared Rs.3,86,45,600 - Rs.1,00,000 being deduction under Chapter VIA of the Act]. The total income declared by the Assessee comprised of the following heads:-
ITA No. 505/Bang/2018 Page 2 of 6 Income from House Property Rs. 5,26,399
Income from business Rs. 52,457
(Under Sec.44AD of the Act)
Capital Gain Rs.3,76,86,131
Income from other sources Rs. 3,80,615
Rs.3,86,45,602
3. An intimation u/s.143(1) of the Act was issued dated 13.8.2016 accepting the income declared by the Assessee. The AO levied interest u/s.234B and 234C of the Act at Rs.17,24,686 and Rs.3,11,807 respectively.
4. The Assessee was aggrieved by the levy of interest u/s.234B and 234C of the Act and he therefore filed an application u/s.154 of the Act, for rectification of the intimation u/s143(1) of the Act dated 13.8.2016. The plea of the Assessee in the said application was that he was a senior citizen and had declared income u/s.44AD of the Act. As per provisions of Sec.44AD(4) of the Act provisions of Chapter XVIIC with regard to payment of advance tax are not applicable to him. According to Sec.234B and 234C of the Act, levy of interest is permissible only where there is an obligation to pay advance tax under Chapter XVIIC of the Act and there is failure to pay advance tax. Since the provisions of payment of advance tax are not applicable to the Assessee, there cannot be any levy of interest u/s.234B and 234C of the Act.
5. The AO however dismissed the application u/s.154 of the Act for the following reasons:-
"2. The contention of the assessee has been examined. it is seen that the provisions of Chapter are not applicable to certain assesses who are doing eligible business as specified u/s 44AD. As per subsection, (4) of section 44AD the provisions are not applicable to an eligible assessee in so far as they relate to the eligible business. Relevant extracts as under:ITA No. 505/Bang/2018 Page 3 of 6
44AD(4):
The provisions of Chapter XVIIC shall not apply to an eligible assessee in so far as they relate to the eligible business. (emphasis supplied) In this case, the assessee has declared income from Capital gains amounting to Rs.3,76,86,131/- and accordingly, the same is not exempt from the provisions of Chapter XVIIC. Further, the assessee being a Senior Citizen also does not entail any exemption u/s 207(2) of the Income tax Act, 1961 as the income relates to Capital gains and the assessee is having income from business.
3. The contention of the assessee that the provisions of Chapter XVIIC which mandate payment of advance tax are not applicable, is therefore, not correct. The assessee has declared income from Capital gains and declared the same as being accrued / received during the second quarter of the previous year (before September, 2014) and accordingly, ought to have paid advance tax on the same.
4. The rectification application u/s 154 is therefore liable to be rejected as without any merit."
6. On appeal by the Assessee, the CIT(Appeals) confirmed the order of the AO with the following observations:
"5.7 The section 44AD and 207 are independent provisions. The language of the sections is clear and unambiguous. As per the 44AD provisions, the appellant is not liable to pay advance tax on the income from the eligible business, which in this case is only Rs.52,457/-. Section 44AD(4) does not exclude the applicability of Chapter XVIIC provisions altogether in the case of eligible assessee.
5.8 To fall under the provisions of section 207(2), one has to fulfill both the conditions:
(i) Sr. citizen and (ii) not have any income under the head profits & gains of business or profession.ITA No. 505/Bang/2018 Page 4 of 6
It is undisputed that the appellant is a Sr. Citizen. The appellant has business income of Rs.52,457/- u/s 44AD. It is also undisputed that the income u/s.44AD also falls under Business income. Hence, the appellant does not fulfill the twin conditions. By virtue of 44AD provisions, the assessee need not pay advance tax to the extent of eligible business income of Rs. 52,457/- only.
5.9 There is no merit in the submissions of the appellant. In view of the above discussion, the grounds are rejected."
7. Aggrieved by the order of the CIT(A), the Assessee is in appeal before the Tribunal. We have heard the rival contentions. The learned counsel for the Assessee reiterated submissions made before the lower authorities. The learned DR relied on the order of the CIT(A).
8. The levy of interest u/s. 234B & 234C of the Act is dependent on the liability to pay advance tax u/s. 209 and 210 of the Act which are appearing in Chapter XVIIC of the Act (Sections 207 to 219 of the Act).
9. It is clear from a reading of section 44AD(1) of the Act that it overrides the other provisions of the Act. In particular, Section 44AD(4) of the Act makes it very clear that provisions of Chapter XVIIC are not applicable when income is declared by an assessee u/s. 44AD of the Act. Therefore, to the extent of Rs.52,457 which is income from business declared by the assessee u/s. 44AD of the Act, there cannot be levy of interest u/s. 234B & 234C of the Act. This is because section 44AD(4) excludes applicability of Chapter XVIIC of the Act "in so far as they relate to eligible business". To this extent, the assessee is entitled to partial relief. Therefore, levy of interest u/s. 234B & 234C on assessed income excluding income declared u/s. 44AD has to be upheld.
10. The argument of the ld. counsel for the assessee was that u/s. 207(2) of the Act, the assessee being a senior citizen is not liable to pay ITA No. 505/Bang/2018 Page 5 of 6 advance tax. This argument of the assessee was rightly held to be not acceptable by the CIT(Appeals). For applicability of section 207(2) of the Act, two conditions have to be cumulatively satisfied viz., (i) the assessee must be a senior citizen, and (ii) he must not have income under the head income from business. The fact that income from business is computed u/s. 44AD of the Act will not take the case of the assessee out of the ambit of section 207(2)(a) of the Act. Since the assessee has income under the head 'income from business', the assessee cannot seek recourse to the provisions of Section 207(2) of the Act. Once the provisions of section 208 are applicable, then what becomes relevant is the estimate of income and when such estimate falls short of assessed income, the assessee is liable to pay interest u/s. 234B & 234C of the Act.
11. For the reasons given above, we partly allow the appeal of the assessee.
Pronounced in the open court on this 24th day of September, 2018.
Sd/- Sd/-
( A.K. GARODIA) ( N.V. VASUDEVAN)
Accountant Member Judicial Member
Bangalore,
Dated, the 24th September, 2018.
/ Desai Smurthy /
ITA No. 505/Bang/2018
Page 6 of 6
Copy to:
1. The Appellant
2. The Respondent
3. The CIT
4. The CIT(A)
5. The DR, ITAT, Bangalore.
6. Guard file
By order
Senior Private Secretary
ITAT, Bangalore.