Tribunal: No Interest on Dividend Income in Q3/Q4 only under Section 234C

The Tribunal ruled in favor of the assessee, stating that interest under Section 234C cannot be charged on dividend income received in the third and fourth quarters only. The Tribunal found that the old proviso exempting dividend income from such interest if advance tax was paid for the quarters received applied for the relevant assessment year, leading to the allowance of the assessee's appeal.

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Issues:
- Charging interest u/s.234C on dividend income earned in third and fourth quarters only

Analysis:
1. The appeal in ITA No.403/Mum/2022 for A.Y.2018-19 questions if interest u/s.234C of the Act can be levied on dividend income received in the third and fourth quarters only, not for the entire year.

2. The assessee, a private discretionary trust, filed its return for A.Y.2018-19, showing dividend income taxable u/s.115BBDA of Rs.62,99,76,250. CPC Bangalore processed the return, charging interest u/s.234C at Rs.21,05,041, considering the dividend income for the whole year. The assessee argued that the dividend was earned in the third and fourth quarters, paying advance tax accordingly.

3. The assessee filed a rectification application against the intimation, but it was rejected. Various grievance procedures were followed, leading to the NFAC dismissing the appeal, citing Section 234C as amended by the Finance Bill 2021, applying prospectively from A.Y.2021-22.

4. The NFAC concluded that interest u/s.234C is chargeable on dividend income as per the deeming fiction u/s.8 of the Act, without any exception for dividend income. The assessee appealed, challenging this decision.

5. The provisions of Section 234C, as amended by the Finance Bill 2021, were applied by the ld. CIT(A). However, the old proviso during 2017-21 applied for A.Y.2018-19, exempting dividend income u/s.115BBDA from interest u/s.234C if paid in the quarters received. The Tribunal found merit in the assessee's argument and allowed the appeal.

6. The Tribunal held that under the old proviso, interest u/s.234C cannot be charged on dividend income received in the third and fourth quarters only, as advance tax was duly paid for those quarters. Consequently, the appeal of the assessee was allowed.

7. In conclusion, the Tribunal ruled in favor of the assessee, emphasizing that interest u/s.234C cannot be levied on dividend income earned in specific quarters only, based on the old proviso applicable for the relevant assessment year.

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