High Court sets interest charge date for IT Act settlement at application date, not final order, under Section 234B.

The High Court of Madras determined that the terminal date for charging interest under Section 234B of the Income Tax Act, 1961, in a case involving a Settlement Commission order, should be the date on which the settlement application was entertained, i.e., 04.07.1997. The court set aside the impugned order and directed that interest under Section 234A be charged up to the date of entertaining the application, not the later date of the final order. The writ petition was allowed with no costs awarded, leading to the closure of the connected miscellaneous petition.

---

---

Issues:
1. Determination of the terminal date for charging interest under Section 234B of the Income Tax Act, 1961.

Analysis:
The High Court of Madras addressed the issue of the terminal date for charging interest under Section 234B of the Income Tax Act, 1961, in a writ petition challenging an order by the Settlement Commissioner Additional Bench, Chennai. The petitioner had filed a return of income for the Assessment Year 1995-96 and subsequently approached the Settlement Commission under Section 245C of the Act. The Settlement Commission entertained the settlement application on 04.07.1997 and issued the final order on 28.10.2002. The key contention revolved around the terminal date for charging interest, as determined by the Settlement Commission, which was challenged by the petitioner. The High Court referred to a decision by the Constitution Bench of the Supreme Court in Brij Lal and Ors. Vs. Commissioner of Income Tax (2010) 328 ITR 477, which clarified that the terminal date for charging interest would be the date on which the order under Section 245D(1) is passed, i.e., the date of entertaining the settlement application.

The Court, applying the Supreme Court's decision, held that the appropriate date for charging interest in the instant case would be 04.07.1997, the date on which the Settlement Commission entertained the application. Consequently, the impugned order dated 03.02.2004 was set aside, and it was ordered that interest under Section 234A would be charged up to the date of the order under Section 245D(1) and not the later date of the final order under Section 245D(4). The fourth respondent was directed to pass the consequential order in accordance with this direction. The writ petition was allowed, and no costs were awarded, leading to the closure of the connected miscellaneous petition.

---