Interest on advance-tax shortfall when tax is computed on deemed income under s. 115J upheld under ss. 234B, 234C.

The dominant issue was whether interest under ss. 234B and 234C applies where tax is computed on deemed income under s. 115J. The HC held that ss. 234B and 234C are triggered by failure to pay adequate advance tax under s. 208 and by prescribed shortfalls in instalments, and neither provision excludes assessments involving s. 115J. Since advance tax liability subsists irrespective of s. 115J, interest is mandatorily leviable when the assessee pays less than the statutory thresholds. The Tribunal's view sustaining interest was affirmed, and the question was answered in favour of the Revenue and against the assessee.

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Issues involved: Interpretation of sections 234B and 234C of the Income-tax Act in relation to the liability of the assessee to pay interest under those sections.

Summary:
The High Court of Madhya Pradesh addressed a reference under section 256(1) of the Income-tax Act, 1961 regarding the liability of the assessee to pay interest under sections 234B and 234C of the Act. The Tribunal referred the question of law to the court, questioning the correctness of holding the assessee liable for interest under these sections. The case involved discrepancies in income assessment due to depreciation calculation methods under sections 32 and 115J of the Act. The Assessing Officer issued a demand notice for underassessment, leading to appeals and differing interpretations by the Commissioner of Income-tax (Appeals) and the Tribunal.

Upon review, the High Court noted that sections 234B and 234C of the Act do not specifically mention section 115J. Section 234B outlines the liability for interest when advance tax is not paid as required, while section 234C pertains to interest for deferment of advance tax. The court emphasized that the applicability of these sections is not contingent on section 115J, and any shortfall in tax payment may attract interest, regardless of the specific income calculation method used by the assessee.

Ultimately, the High Court upheld the Tribunal's decision, ruling in favor of the Revenue and against the assessee. The court affirmed that the assessee is liable to pay interest under sections 234B and 234C of the Income-tax Act, irrespective of the provisions of section 115J.

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