The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) in a recent ruling deleted the excess interest under Section 234C of the Income Tax Act 1961 observing that the Portfolio Management Company could not be able to determine the performance fee on an estimated basis to pay the Advance Tax.
Assessee -ASK Investment who was engaged in the business of Portfolio Management Services Filed a return of income and CPC, Bangalore after processing the return of income passed an order charging the interest under Section 234B and 234C of the Income Tax Act1961. The assessee filed the appeal before the Commissioner of Income Tax CIT(A) against the order of charging excess interest as under Section 234C and 234B Income Tax Act 1961 by the CPC, Bangalore.
Section 234C of the Income Tax Act 1961 deals with the payment of advance tax or on time or interest for the deferment of advance tax. Section 234B deals with the interest levied for default of advance tax.
J.D. Mistri, on behalf of the assessee submitted that the Commissioner of Income Tax CIT (A) had not considered that, because of the uncertainty of stock market, the performance fees which the assessee earned from its client could be ascertained only on the last day of the year. He also submitted that estimation of performance fees was impossible as its earnings were based on the performance of the stock market up to the last date of the year.
He further contended that no failure was upon the assessee to pay advance tax in accordance with provision of Section 208 and 209 of the Income Tax Act 1961.
On the other hand, Mehul Jain who appeared for the revenue referred to the provisions of Sec. 234C of the Income Tax Act 1961and supported the order of lower authorities.
The Mumbai Bench ofAmarjith Singh (Accountant Member) and Rahul Chaudhari (Judicial Member) observed that the assessee could not be able to anticipate the events which would take place in the next financial year and pay advance tax on the basis of those anticipated events. The bench thereby deleted the excess interest under Section 243C of the Act.
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