Income Tax Appellate Tribunal - Ahmedabad
Tarika Exports, Baroda vs Assessee on 16 January, 1999
ITA No.3433/Ahd/2008
Asst. Year 1994-95
IN THE INCOME-TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH-D AHMEDABAD
Before S/Shri Mahavir Singh, JM and D.C. Agrawal, A.M.
ITA No.3433/Ahd/2008
AY 1994-95
Tarika Exports, Rutam Opp. Avery, Vs. The Asstt. CIT, Circle 2(2),
Race Course, Baroda. Baroda.
Appellant Respondent
Appellant by : Shri S. N. Soparkar, Sr.
Advocate
Respondent by Smt. Shailaja Rai, DR
ORDER
Per D. C. Agrawal, Accountant Member.
This is an appeal filed by the assessee raising following grounds:
1.1 The ld. CIT(A) has erred in law and on facts in confirming the decision of the ld. AO in rejecting to rectify apparent mistakes on records pointed out by the appellant in charging interest u/s 234A and u/s 234B of the IT Act.
2.1. The ld. CIT(A) erred on facts and in law in holding that the tax paid before the due date of filing the returns of income cannot be reduced while working out interest u/s 234A of the IT Act and thus confirmed the action of the AO.
3.1 The ld. CIT(A) ought to have appreciated the submission of the appellant as made out before the AO in detail vide letter dtd.28.02.2007 in this regard relying on the decision of Hon. Delhi H.C. in the case of Dr. Pronnoy Roy vs. CIT 254 ITR 755 and Hon. Mumbai ITAT in the case of Nitin Murli Reheja 291 1 ITA No.3433/Ahd/2008 Asst. Year 1994-95 ITR (AT) 41 and thus, ought to have held in favour of the appellant and against the AO.
4.1 The ld. CIT(A) completely erred on facts and in law in holding that as per sec.234B(2) the tax paid u/s 140A is to be first adjustable towards interest chargeable u/s 234B which is contrary to the said provision and thus, erred in confirming the decision of the AO.
5.1 The ld. CIT(A) ought to have appreciated the detailed submission of the appellant as made out before the AO vide letter dtd.28.02.2007 and thus ought to have held in favour of the appellant and against the AO.
2. The issue before us is whether taxes paid before due date of filing of return should be treated as advance tax even though paid after close of financial year. In this case, for AY 1994-95, assessment was completed on 16.11.1999. The AO charged interest u/s 234A, 234B & 234C at Rs.2,64,400/-, Rs.4,38,592/- and Rs.1,31,588/- respectively, as per details given by the assessee on pages 13 & 14 of the Paper Book. Assessed income was Rs.76,01,800/-. Total tax liability was Rs.34,05,610/-.The AO treated a sum of Rs.7,61,600/- which was paid upto 15.3.1994 as advance tax. The assessee had further paid taxes after 1.4.1994 which was not treated as advance tax by the AO. The details of such payments are as under :-
Rs.25 lacs on 26.10.1994 Rs.4,46,830/- on 28.02.1995 VDIS tax of Rs.5,23,440/- was paid on 23.10.1997.
3. The assessee preferred an appeal against the order dated 16.1.1999 before ld. CIT(A) who disposed of the appeal vide his order dated 31.8.2000. The claim of the assessee is that appeal effect to this order was 2 ITA No.3433/Ahd/2008 Asst. Year 1994-95 granted by AO vide his order dated 15.1.2007. In this order income was determined at Rs.76,01,800/- which was also the figure as per assessment order dated 16.11.99. Further in this appeal effect giving order dated 15.1.2007 the AO directed to charge interest under section 234A, 234B, 234C & 234D as per law. In this order interest u/s 234A was determined at the same figure of Rs.264,400/- whereas interest u/s 234B was modified to Rs.10,54,110/- and that under section 234C remained unchanged at Rs.1,31,588/- or say Rs.1,31,590/-. Against this order the assessee moved rectification application on 28.2.2007 raising following grounds:-
(i) Tax credit for demand paid of Rs.2,56,676/- on 7.2.07 has not been granted while computing the tax liability against the order passed u/s 154 of the Act dated 20.02.07.
(ii) In correct working of interest u/s 234B of the IT Act at Rs.1054110/- as against Rs.4,60428/- worked out by the assessee.
(iii) In correct working of interest u/s 234A of the IT Act.
3. The AO rejected the application by holding that interest portion has to be recovered from self assessment tax and thereafter remaining amount has to be adjusted against principal demand. The assessee raised following contentions before ld. CIT(A):-
(1) The AO accepted the claim of assessee of granting credit of Rs.2,56,676/-
(2) The AO rejected the contention that tax paid under section 140A before the due date of filing of return i.e. 31.10.1994 be reduced as this amount is not advance tax. He was referring to sum of Rs.25 lacs paid by the assessee on 26.10.1994.3 ITA No.3433/Ahd/2008
Asst. Year 1994-95
4. The ld. CIT(A) rejected the contention of the assessee also by holding that taxes paid after FY cannot be treated as advance tax and, therefore, they cannot be reduced from assessed tax for the purpose of calculating chargeable interest.
5. Before us the ld. AR submitted that any tax paid before the due date of filing of return should be reduced from the assessed tax for the purposes of calculating interest under section 234A, 234B, 1234C. He referred to the decision of Hon. Supreme Court in CIT & Anr. vs. Prannoy Roy & Anr. (2009) 309 ITR 231 (SC) wherein also it is held that if taxes are paid before due date of filing of return then no interest under section 234A should be charged thereon. Hon. Appex Court had affirmed the judgment of Hon. Delhi High Court in Dr. Pronnoy Roy vs. CIT (2002) 254 ITR 777 as under:-
"Having heard counsel on both sides, we entirely agree with the finding recorded by the High Court as also the interpretation of section 234A of the Act as it stood at the relevant time.
Since the tax due had already been paid which was not less than the tax payable on the returned income which was accepted, the question of levy of interest does not arise. Thus, we find no merit in this appeal and the same is dismissed."
He accordingly submitted that taxes paid prior to the due date of filing of return which in this case was 31.10.1994 should be treated as advance tax and, therefore, they should be excluded from reckoning the tax on which interest has to be charged u/s 234A. In other words since sum of Rs.25 lacs was paid on 26.4.1994 which should be excluded for the purpose of computing interest under all the three sections.
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6. On the other hand, the ld. DR supported the orders of lower authorities.
7. We have considered the rival submissions and perused the material on record. So far as the facts are concerned there is no dispute that assessee has paid sum of Rs.25 lacs on 26.10.1994 before due date of filing of return which is 31.10.1994. The assessee wants to treat it as equivalent to advance tax and, therefore, his claim is that it should be excluded from the tax on which interest has to be charged under the three sections. In other words this sum should not be treated as self assessment tax which has been so treated by the ld. AO but should be treated as equivalent to advance tax for the purpose of computing interest. Whereas the case of Revenue is that any taxes paid after 1.4.1994 or after the end of FY cannot be treated as advance tax but can only be treated as self assessment tax and, therefore, it cannot be excluded from the tax at which interest has to be charged. In our considered view, the position of law in respect of sections 234A, 234B & 234C are different in this regard. Section 234A provides as under :-
234A. Interest for defaults in furnishing return of income.--(1) Where the return of income for any assessment year under sub-section (1) or sub-section (4) of section 139, or in response to a notice under sub-section (1) of section 142, is furnished after the due date, or is not furnished, the assessee shall be liable to pay simple interest at the rate of two per cent. for every month or part of a month comprised in the period commencing on the date immediately following the due date, and,--
(a) where the return is furnished after the due date, ending on the date of furnishing of the return; or
(b) where no return has been furnished, ending on the date of completion of the assessment under section 144, on the amount of the tax on the total income as determined under sub-section (1) of section 143 or on regular assessment as reduced by the advance tax, if any, paid and any tax deducted or collected at source.5 ITA No.3433/Ahd/2008
Asst. Year 1994-95 Explanation 1.--In this section, "due date" means the date specified in sub-section (1) of section 139 as applicable in the case of the assessee.
Explanation 2.--In this sub-section, "tax on the total income as determined under sub- section (1) of section 143" shall not include the additional income-tax, if any, payable under section 143.
Explanation 3.--Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this section.
Explanation 4.--Omitted by FA 2001, wref. 1-4-1989.
(2) The interest payable under sub-section (1) shall be reduced by the interest, if any, paid under section 140A towards the interest chargeable under this section.
This section as stood for AY 1994-95 provided that interest has to be charged on the amount of tax determined on assessment, reduced by advance tax and other tax deducted or collected at source. The interest has to be calculated for the period commencing on the date immediately following the due date. The due date is the date specified under section 139 (1) which is the date for filing of the return of income. Thus interest under section 234A has to be calculated for the period falling after due date of filing of return. On this logic, Hon. Delhi High Court in Dr. Pronnoy Roy's case (2002) 254 ITR 755 held that interest is not leviable under section 234A as long as tax was made good by payment within the time allowable for filing of return. Interest under section 234A is chargeable for the period subsequent to the due date,. If no tax is due when the return is filed on the due date or even thereafter, then no interest under section 234A is leviable. A reference to Board Circular No.459 dated 31st March, 1989 is also made. The rationale behind not charging interest on the taxes paid upto the due date of filing of return was that interest under section 234A is not penal but is compensatory 6 ITA No.3433/Ahd/2008 Asst. Year 1994-95 in nature. It is to compensate government for not getting its due within the time provided in the statute. But where the statute does not provide for charging of interest from 1st April of the next FY till the due date of filing of return then assessee has liberty to make the payment of taxes upto the due date of filing of return as the statute does not treat this period under default. Following this reasoning Hon. Delhi High Court in Dr. Prannoy Roy's case (supra) held that no interest would be charged on the taxes paid upto the due date of filing of return. This view is affirmed by Hon. Supreme Court in CIT vs. Dr. Prannoy Roy's case (supra). However, this judgment cannot have an application in respect of default under section 234B & 234C where interest is reckoned from the end of the FY and not from the due date of filing of return as for section 234A.
For the sake of convenience we reproduce the relevant portion of section 234B & 234C to highlight the point that interest under these sections has to be calculated from the end of FY.
234B. Interest for defaults in payment of advance tax.--(1) Subject to the other provisions of this section, where, in any financial year, an assessee who is liable to pay advance tax under section 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of section 210 is less than ninety percent. of the assessed tax, the assessee shall be liable to pay simple interest at the rate of two per cent. for every month or part of a month comprised in the period from the 1st day of April next following such financial year to the date of determination of total income under sub- section (1) of section 143 or regular assessment, on an amount equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax.
*Explanation 1.--In this section, "assessed tax" means the tax on the total income determined under sub-section (1) of section 143 or on regular assessment as reduced by the amount of tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income.
7 ITA No.3433/Ahd/2008Asst. Year 1994-95 On the other hand, section 234C reads as under :-
234C. Interest for deferment of advance tax.--(1) Where in any financial year, the assessee who is liable to pay advance tax under section 208 has failed to pay such tax or the advance tax paid by the assessee on his current income on or before the 15th day of September is less than thirty per cent. of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than sixty per cent. of the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of one and one-half per cent. per month of the shortfall from for a period of three months on the amount of the shortfall from thirty per cent. or, as the case may be, sixty per cent. of the tax due on the returned income.
Provided that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of under-estimate or failure to estimate,--
(a) the amount of capital gains ; or
(b) income of the nature referred to in sub-clause (ix) of clause (24) of section 2, and the assessee has paid the whole of the amount of tax payable in respect of income referred to in clause (a) or clause (b), as the case may be, had such income been a part of the total income, as part of the instalment of advance tax which is immediately due or where no such instalment is so due, by the 31st day of March of the financial year.
Section 234C provides for charging of interest for a period of three months on the amount of shortfall from 30% or as the case may be 60% of the tax due on the returned income. Thus where there is shortfall in advance tax payable then interest under section 234C has to be charged for the period for which default continued. There is no provision that period for charging of interest will be reckoned after due date of filing of return as is the case under section 234A.
8. Further, we are also of the view that any payment made after the end of FY cannot be exactly termed as advance tax within the meaning of section 208 to 219. As per section 211 advance tax has to be paid on or before 15th 8 ITA No.3433/Ahd/2008 Asst. Year 1994-95 September, or on or before 15th December and on or before 15th March at the ratio of 30%, 60% and 100% respectively. The provisio to section 211(1) makes it clear that any amount by way of advance tax on or before 31st day of March shall also be treated as advance tax paid during the FY ending on that day for all purposes of this Act. Therefore, any tax paid after end of the FY cannot be termed as advance tax. However, interest under section 234A is not chargeable from the first day of next FY to the due date of filing of return on the taxes paid during this period because of interpretation of section 234A given by Hon. Supreme Court. Hon'ble Apex Court has nowhere held that any taxes paid after first day of next FY till due date of filing of return would also be called advance tax for the purposes of the Act. And, therefore, required to be excluded for computing interest under section 234B or section 234C. In this regard we may refer to a decision of Hon. Gujarat High Court in the case of Rosanlal S. Jain & Ors (AOP) vs. DCIT (2009) 309 ITR 174 (Guj) wherein it is held that -
"In so far as the contention regarding the provisions of ss.234A & 234B being ultra vires the Constitution no case is made out by the petitioner. It is true that the nature of the levy is compensatory in character but from that it is not possible to come to the conclusion that there is any arbitrariness or unreasonableness which would warrant striking down the provision. Even otherwise, the position in law is well settled. A taxing statute enjoys a greater latitude. An inference in regard to contravention of Art.14 of the Constitution would, however, ordinarily be drawn if the provision seeks to impose on the same class of persons similarly situated a burden which leads to inequality. That is not the case here. The petitioner also cannot successfully contend that there is any unreasonable classification considering majority of assessees who comply with the statutory requirements."
Therefore, assessee is liable to pay interest under section 234B as well as under section 234C in respect of the taxes paid after the end of FY as they are not treated as advance tax. Since the issue regarding interest under 9 ITA No.3433/Ahd/2008 Asst. Year 1994-95 section 234A is covered by the decision of Hon. Supreme Court, therefore, the decision in Dr. Prannoy Roy's case takes precedence over the decision of Hon'ble Gujarat High Court. Since there is no comment in respect of interest under section 234B in the case of Dr. Prannoy Roy's case, the decision of Hon. Gujarat High Court in R.S.Jain's case would hold the field and therefore, interest u/s 234B would be chargeable in respect of taxes paid after end of the FY. As a result, we direct that the sum paid on 26.10.1994 should be excluded from computing interest under section 234A only and not for computing interest under section 234B or 234C.
In the result, the appeal of the assessee is partly allowed.
Order was pronounced in open court on 30.11.10.
Sd/- Sd/-
(Mahavir Singh) (D.C. Agrawal)
Judicial Member Accountant Member
Ahmedabad,
Dated : 30.11.10.
Mahata/-
Fit for Publication.
(Mahavir Singh) (D.C. Agrawal)
Judicial Member Accountant Member
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ITA No.3433/Ahd/2008
Asst. Year 1994-95
Copy of the Order forwarded to:-
1. The Assessee.
2. The Revenue.
3. The CIT(Appeals)-
4. The CIT concerns.
5. The DR, ITAT, Ahmedabad
6. Guard File.
BY ORDER,
Deputy/Asstt.Registrar
ITAT, Ahmedabad
1.Date of dictation 18//11/2010.
2.Date on which the typed draft is placed before the Dictating 23/11/2010 Member................Other Member................
3.Date on which the approved draft comes to the Sr.P.S./P.S.............
4.Date on which the fair order is placed before the Dictating Member for pronouncement..............
5.Date on which the fair order comes back to the Sr.P.S./P.S...............
6.Date on which the file goes to the Bench Clerk...........
7.Date on which the file goes to the Head Clerk.............
8.The date on which the file goes to the Asstt. Registrar for signature on the order........................
9.Date of Despatch of the Order.................
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