No s.234B interest when advance tax paid on time; no duty to foresee later events HC held that while interest under s.234B is mandatory once liability arises, such liability depends on a proven default in payment of advance tax. Relying ...
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No s.234B interest when advance tax paid on time; no duty to foresee later events
HC held that while interest under s.234B is mandatory once liability arises, such liability depends on a proven default in payment of advance tax. Relying on SC's decision in Ghaswala, the Court clarified that mandatory recovery applies only after default is established. In this case, there was no dispute that the assessee paid advance tax when due and was not in default. The Tribunal's view that the assessee should have anticipated subsequent events (occurring in March 1992 and the next financial year) and paid higher advance tax was rejected as untenable. The appeal was allowed, and the levy of interest under s.234B was set aside.
Issues: Challenge to order by Income-tax Appellate Tribunal regarding assessment year 1991-92, validity of return signed by secretary instead of director, exemption claim under section 47(v) on sale of capital assets, liability to pay interest under section 234B, retrospective levy of interest, constitutionality of section 234B, interpretation of Supreme Court judgment in CIT v. Anjum M. H. Ghaswala, applicability of interest under section 234B, liability for interest based on subsequent event, waiver of interest by Settlement Commission, establishment of default for charging interest, anticipation of future events for advance tax payment.
Analysis: The appeal challenges the order of the Income-tax Appellate Tribunal related to the assessment year 1991-92. The appellant filed a return signed by the company's secretary, leading to a dispute as the return should have been signed by a director or managing director. The Assessing Officer considered the original return invalid and imposed interest under section 234A for late filing. Additionally, an exemption claim under section 47(v) was disputed due to a reduction in the holding company's shares, resulting in interest under section 234B being charged. The appellant argued that the exemption was valid at the time of filing and cited a previous judgment supporting their position. The counsel contended that interest under section 234B should not apply as there was no default in advance tax payment. The respondent argued for interest under section 234B even in case of a bona fide mistake. The court analyzed the provisions of section 234B and previous judgments, emphasizing that interest is payable only in case of default in advance tax payment. The court held that as no default was established in the present case, the appellant was not liable to pay interest under section 234B. The court also dismissed the notion of anticipating future events for advance tax payment. The appeal was allowed, and the interest amount was directed to be refunded to the appellant in a related writ petition. Both the appeal and writ petition were disposed of accordingly.
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