2013 (6) TMI 630 - AT - Income Tax

Tribunal Upholds Interest Computation Decision

The Tribunal upheld the CIT (A)'s decision regarding the computation of interest under section 234 B of the IT Act for the assessment year 1998-99. It ... Interest under section 234B - defaults in payment of advance tax - AO excluded not only the interest u/s 234C included in the self assessment tax but also the interest chargeable from 1.4.98 to 30.11.98 from the sum of Rs. 81.30 crore - Held that:- Action of the AO was not justified. The interest till the date of self assessment tax payment has to be computed u/s 234B (2) (i) in the prescribed manner and from the said interest, interest u/s 234B included in the self assessment tax is required to be reduced. The interest for the period beyond the date of self assessment tax payment i.e. 30.11.98 is requried to be computed under section 234B (2) (ii) on the amount by which self assessment and advance tax paid falls short of the assessed tax at the specified rates. In this case self assessment tax after excluding the interest u/s 234C was only Rs. 24.50 crore. Therefore, only this sum is required to be reduced from the shortfall of Rs. 81.30 crore for further computation of interest. The sum of Rs. 13,00,00,000/- which is the interest computed for the period from 1.4.98 to 30.11.98 is not required to be excluded from self assessment tax as the same was not payable under section 140 A but became payable on regular assessment. In favour of assessee. Interest u/s 234D - excess refund - Held that:- The provisions of section 234 D apply only in cases where the refund has been granted u/s 143(1) which is later found excessive on regular assessment. Therefore, if there is no refund granted u/s 143(1) the question of levy of interest u/s 234 D does not arise. AO, therefore, is directed to verify the claim of assessee and delete the ineterest if no refund had been granted to assessee under section 143 (1). In favour of assessee. Issues:1. Computation of interest under section 234 B of the IT Act.2. Levy of interest under section 234 D of the IT Act.Issue 1: Computation of interest under section 234 B of the IT Act:The appeal by the revenue concerns disputes related to the computation of interest under section 234 B of the IT Act and levy of interest under section 234 D for the assessment year 1998-99. The primary contention revolves around the calculation of interest under section 234 B, where if the advance tax paid is less than 90% of the assessed tax, the assessee is liable to pay simple interest. The dispute arose from the treatment of self-assessment tax and the interest components included therein. The AO's computation method differed from that of the assessee, leading to a variance in the amount of shortfall considered for interest calculation under section 234 B. The CIT (A) directed the AO not to reduce a specific sum from the self-assessment tax for further interest calculation, a decision challenged by the revenue before the Tribunal.Issue 1 Analysis:The Tribunal analyzed the provisions of section 234 B of the IT Act and the specific circumstances of the case. It was established that the interest computation under section 234 B is intricately linked to the shortfall between advance tax paid and the assessed tax. The dispute centered on whether a certain interest amount should be deducted from the self-assessment tax for calculating the shortfall. The Tribunal upheld the CIT (A)'s decision, emphasizing that the interest in question was not payable under section 140 A but became due upon regular assessment. The Tribunal found no error in the CIT (A)'s order, supported by previous Tribunal decisions, and concluded that the AO's approach was unjustified. Therefore, the Tribunal upheld the CIT (A)'s decision regarding the computation of interest under section 234 B.Issue 2: Levy of interest under section 234 D of the IT Act:The second dispute pertained to the levy of interest under section 234 D of the IT Act. Section 234 D imposes interest liability on the assessee if a refund granted under section 143 (1) is later found to be excessive on regular assessment. The crux of the matter was whether interest under section 234 D was applicable in the case at hand. The assessee contended that as no refund had been granted under section 143 (1), the provision of section 234 D was not applicable, while the revenue argued otherwise based on subsequent rectification of the assessment order.Issue 2 Analysis:The Tribunal scrutinized the provisions of section 234 D and the specific facts of the case. It was established that interest under section 234 D is triggered when an excessive refund granted under section 143 (1) is identified upon regular assessment. Since no refund had been granted to the assessee under section 143 (1), the Tribunal concurred with the assessee's position that the levy of interest under section 234 D was unwarranted. The Tribunal directed the AO to verify the claim and delete the interest if no refund had been granted to the assessee under section 143 (1). Consequently, the Tribunal dismissed the revenue's appeal in this regard.In conclusion, the Tribunal's judgment addressed the disputes concerning the computation of interest under section 234 B and the levy of interest under section 234 D of the IT Act for the assessment year 1998-99. The detailed analysis provided clarity on the interpretation and application of the relevant statutory provisions, resulting in the dismissal of the revenue's appeal and upholding the decisions made by the CIT (A) in both issues.