2024 (12) TMI 557 - AT - Income Tax

Assessee not liable for Section 234C interest on advance tax for capital gains paid within due date

M/s. IDFC Financial Holdings-Co. Ltd. Versus The DCIT, Corporate Circle-2 (2), Chennai.

M/s. IDFC Financial Holdings-Co. Ltd. Versus The DCIT, Corporate Circle-2 (2), Chennai. - TMI Issues Involved:1. Calculation of interest under Section 234C of the Income Tax Act, 1961.2. Applicability of interest under Section 234B of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Calculation of Interest under Section 234C of the Income Tax Act, 1961:The primary issue in the appeal was the computation of interest under Section 234C of the Income Tax Act, 1961, concerning the advance tax liability on capital gains realized in the fourth quarter of the financial year. The assessee argued that the capital gains arose on 28.03.2019, and thus, the liability to pay advance tax arose only on 31.03.2019. The assessee computed the interest under Section 234C at Rs. 29,51,188/-, while the Centralized Processing Center (CPC) enhanced it to Rs. 1,48,04,175/-. The CPC's computation included the capital gains amount as part of the total income for all quarters, which the assessee contested.The Tribunal noted that the facts of the case were similar to a previous case (M/s. Hamilton Industries Pvt. Ltd.), where the Tribunal had accepted the assessee's grounds and deleted the interest charged by the CPC. The Tribunal emphasized the second proviso to Section 234C, which provides relief from interest liability in cases where the shortfall in advance tax payment is due to capital gains arising after the due dates for advance tax installments. The Tribunal held that the liability to pay advance tax in respect of capital gains arises only after the transaction has occurred, and since the assessee paid the advance tax on 31.03.2019, no interest under Section 234C was warranted. Consequently, the Tribunal directed the deletion of the interest amounting to Rs. 1,18,52,988/-.2. Applicability of Interest under Section 234B of the Income Tax Act, 1961:The issue concerning interest under Section 234B was deemed consequential and did not require further adjudication. The Tribunal dismissed this ground, indicating that the resolution of the Section 234C issue effectively addressed any concerns related to Section 234B.Conclusion:The Tribunal allowed the appeal in part, specifically directing the deletion of the interest charged under Section 234C, while dismissing the ground related to Section 234B as consequential. The decision was pronounced on the 4th of December, 2024, in Chennai.