The Income Tax Appellate Tribunal (ITAT), Mumbai bench has held that the interest on delay in payment of advancements shall be charged only on the returned income and not on the assessed income.
The assessee is a company incorporated in USA and also a tax resident of USA. It is engaged in the business of diamond grading and preparation of diamond dossiers. The assessee filed its return of income for the A.Y.2017-18 on 30/11/2017 declaring total income of Rs.597,75,36,450/-. Later a revised return was filed on 30/11/2018 declaring total income at Rs.348,35,96,480/-. The assessee is one of the companies of GIA group, a trusted name of gems and diamond grading and gemstone identification industry and is regarded as an authority in Gemology. During the year under consideration, the assessee has rendered diamond grading services to its associated enterprises in India i.e. GIA India Laboratory Pvt. Ltd., and to third parties.
The income tax department imposed interest under section 234C of the Income Tax Act on the assessee.
The assessee objected to the chargeability of interest under section 234C of the Act by contending that the interest is not leviable on the income assessed by the income tax department against the returned income.
Allowing the plea of the assessee, Accountant Member Mr. Shameem Yahya observed that “this ground would be consequential in nature as we have directed the ld. AO to re-determine the income in terms of the aforesaid directions. In any event, we hold that interest u/s.234C of the Act shall be charged only on the returned income and not on the assessed income. The law is very well settled in this regard.”
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