Advance tax and section 234B interest cannot be imposed for a liability created only by a later change in law.

Advance tax must be estimated on the basis of the law in force when it is computed and paid. Where the assessee had correctly estimated income and paid advance tax under the then-existing legal position, a later deferment of the applicability of ICDS, occurring after the relevant advance-tax dates, could not create a default for section 234B purposes. Interest under section 234B was therefore held not leviable on the additional liability arising only from the subsequent change in law, and the interest addition was deleted in favour of the assessee.

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Issues: Whether interest under section 234B of the Income-tax Act, 1961 could be levied where the assessee had computed and paid advance tax on the basis of the law then in force, and the additional tax liability arose only because of a later deferment of the applicability of ICDS.

Analysis: Advance tax is to be estimated with reference to the law prevailing on the date of computation and payment. On the facts, the assessee had estimated income and discharged advance tax on the basis of the then-existing legal position. The subsequent deferment of ICDS came after the relevant year and after the advance-tax dates had passed. In such circumstances, the assessee could not be treated as a defaulter for failure to pay advance tax, and interest under section 234B could not be imposed on a liability created by the later change in law.

Conclusion: Interest under section 234B was not leviable, and the addition of interest was deleted in favour of the assessee.

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