The Income Tax Appellate Tribunal (ITAT), Mumbai bench has in the case of M/s Strides Pharma Science Ltd has held that the amount of interest under section 234C of the Income Tax Act, 1961 shall be calculated on the basis of the “returned income” and not on the “assessed income”.
The present appeal has been filed by the assessee challenging the final assessment order dated 31.10.2019, passed by the Assessing Officer under section 143(3) r/w section 144C(13) of the Income Tax Act, 1961, for the assessment year 2015–16.
The Assessing Officer has charged interest under section 234C of the Act on the basis of tax computed on the “assessed income” instead of “returned income” which was inter alia the ground of appeal.
Shri Prashant Maharishi, Accountant Member and Shri Sandeep Singh Karhail, Judicial Member noted that as per the provisions of section 234C of the Act, interest is levied either on failure to pay advance tax by the assessee or on short fall in payment of advance tax as compared to tax due on returned income. Further they stated that in the present case the dispute is whether the interest under section 234C of the Act would be calculated on “returned income” or on “assessed income”.
ITAT noted that provisions of section 234C of the Act refers to the term “returned income” in comparison to the provisions of section 234B of the Act which refers to the term “assessed income” for imposing interest.
In view of the above, the ITAT adjudged that the Assessing Officer is directed to re–compute the interest under section 234C of the Act on the basis of “returned income” in case there is default / short fall in payment of advance tax as compared to tax due on returned income.
It may be noted here that Section 234C deals with interest to be levied on defaulters of Advance Tax Instalment Payments and the calculation of the same is tabulated below for ready reference of our readers:
| Particulars | Rate of Interest | Period of Interest | Amount on which interest is calculated |
| If Advance Tax paid on or before June 15 is less than 15% of the Amount* | Simple interest @1% per month | 3 months | 15% of Amount* (-) tax already deposited before June 15 |
| If Advance Tax paid on or before September 15 is less than 45% of the Amount* | Simple interest @1% per month | 3 months | 45% of Amount* (-) tax already deposited before September 15 |
| If Advance Tax paid on or before December 15 is less than 75% of the Amount* | Simple interest @1% per month | 3 months | 75% of Amount* (-) tax already deposited before December 15 |
| If Advance Tax paid on or before March 15 is less than 100% of the Amount* | Simple interest @1% per month | – | 100% of Amount* (-) tax already deposited before March 15 |
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
