Interest U/S 234 B & 234C is not applicable for 44 AD income for Assessment Year 2015-16

[KASHYAP PRITHANI]

My client has filed his ROI for Assessment Year 2015-16 in the year 2022.

The A.O while passing the order has added interest U/S 234B, & 234C in his computation of income.

Interest u/s 234B & C has been included for 44AD income after the amendment of Advance Tax provisions by the Finance Act 2016 (No. 28 of 2016) which is effective from 01-06-2016 for Assessment Year 2017-18.

Is there any case law available in support of the above facts.

[Padmanathan KV]

To my understanding, Interest u/s 234B & C was not excluded before the amendment vide Finance Act, 2016. I am clarifying the position as follows:

The advance tax was payable in respect of an eligible business referred to in section 44AD-

Pre-amendment

Due date of instalment	Amount payable
On or before the 15th September	Not less than thirty per cent of such advance tax.
On or before the 15th December	Not less than sixty per cent of such advance tax, as reduced by the amount, if any, paid in the earlier instalment.
On or before the 15th March	The whole amount of such advance tax as reduced by the amount or amounts, if any, paid in the earlier instalment or instalments :

Post Amendment

to the extent of the whole amount of such advance tax during each financial year on or before the 15th March

Thus, Finance Act, 2016 has provided a benefit to eligible assessee in respect of eligible business declaring profit from business under section 44AD by way of one time advance tax payment before 15th March.
It does not mean that there was no advance tax before the amendment.

 

[Padmanathan KV]

Sorry about my previous post. I omitted to read Sub-section (4) of Section 44AD before amendment which states that provisions of Chapter relating to advance tax shall not apply.

Therefore your view is correct that upto Finance Act, 2016 amendment No advance tax need to be paid for income from eligible business u/s 44AD.

You may refer to CIT v. Vatika Township Private Limited 2014 (9) TMI 576 - SUPREME COURT wherein the SC has clarified prospective and retrospective operation of tax amendments elaborately. Since this amendment is not beneficial to assessee, under the normal rule of presumption, the amendment will not have a retrospective effect.

AI Summary

Advance tax exclusion for presumptive business: interest under advance-tax provisions not applicable for the earlier assessment year.
Prior to the Finance Act, 2016 amendment, Section 44AD(4) excluded eligible presumptive businesses from advance tax provisions, so interest under Sections 234B and 234C did not apply to such income for the assessment year in question; the 2016 amendment introduced a one-time advance tax obligation for presumptive income prospectively, and principles of non-retroactivity noted in cited authority support prospective application.