Belated advance tax must be credited in interest computation under sections 234A and 234B; section 234C left undisturbed.

Advance tax paid after the due date must still be credited in computing interest under sections 234A and 234B, because interest is compensatory and can run only until the tax deficiency is actually made good. The Tribunal therefore directed recomputation of interest under section 234A after giving credit for belated tax payment, and restored the section 234B computation for fresh calculation in accordance with law on the same basis. No interference was warranted in the computation of interest under section 234C.

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Issues: (i) Whether credit had to be given for tax paid after the due date while computing interest under section 234A of the Income-tax Act, 1961. (ii) Whether interest under section 234B had to be recalculated after taking into account advance tax paid after the due date. (iii) Whether the computation of interest under section 234C required interference.

Issue (i): Whether credit had to be given for tax paid after the due date while computing interest under section 234A of the Income-tax Act, 1961.

Analysis: Interest under section 234A is charged on the tax payable as reduced by advance tax, tax deducted at source, and tax collected at source. The Tribunal applied the settled principle that tax paid in advance, though belatedly, remains advance tax paid for the purpose of limiting the levy of interest, because interest compensates the State only for delay during which money is retained. Once the tax is paid, the element of non-payment ceases, and interest cannot be levied beyond the date of such payment.

Conclusion: Credit for tax paid after the due date had to be given while recomputing interest under section 234A, and the issue was decided in favour of the assessee.

Issue (ii): Whether interest under section 234B had to be recalculated after taking into account advance tax paid after the due date.

Analysis: The mode of computation under section 234B was treated as clear and mandatory. The Tribunal found that the Assessing Officer had not made the calculation in accordance with the statutory method and that belated advance tax payment had to be reflected in the computation. The earlier Tribunal decision relied on the same principle that interest is chargeable only up to the date on which the tax deficiency is made good.

Conclusion: The order was set aside on this aspect and the matter was restored for fresh computation under section 234B in accordance with law and after giving credit for belated tax payments, in favour of the assessee.

Issue (iii): Whether the computation of interest under section 234C required interference.

Analysis: No dispute was pressed regarding the levy or computation of interest under section 234C, and no infirmity was found in the calculation made by the authorities.

Conclusion: No interference was called for on section 234C.

Final Conclusion: The appeal succeeded only in part, with relief confined to recomputation of interest under sections 234A and 234B, while the computation under section 234C was left undisturbed.

Ratio Decidendi: For the purposes of sections 234A and 234B, advance tax paid after the due date must still be credited in the interest computation, and interest can run only up to the date on which the tax is actually paid.

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