Interest u/s 234B and 234C of the Income Tax Act can’t be levied on Additional Income declared under Modified Return: ITAT [Read Order]

Income Tax Act - Additional Income - ITAT - Taxscan

The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the levy of interest under sections 234B and 234C of the Income Tax Act, 1961 for non/short payment of advance tax installment and delay in payment of income tax respectively cannot be levied on additional income agreed as per advance pricing agreement entered between the assessee and the CBDT.

The appellant-assessee, M/s Colt Technology Services provides Information Technology Enabled Services (‘ITES’) and contract software development (‘CSD’) solutions to its associated enterprises (‘AEs’). The assessee performs back-end operations in all business areas such as network operations and engineering, IT service provisioning, sales and marketing support, human resources and finance.

The assessee contended that since, assessee cannot estimate the additional income at the time of advance tax instilment and at the time of filing income tax return, did not pay advance tax on such income. Therefore, submitted that interest u/s 234C and 234B of the Act for non/short payment of advance tax installment and delay in payment of income tax respectively should not be levied on such additional income declared by the assessee in its modified return of income.

Relying on a catena of decisions, the Tribunal bench comprising Shri B. R. R. Kumar, Accountant Member and Sh. Yogesh Kumar U.S., Judicial Member observed that in the present case it is nobody’s case that the appellant has committed a default in payment of advance tax when it actually paid it, the appellant cannot be held liable to pay interest under section 234B.

“In so far as the observations in the order of the Tribunal, that the appellant should have anticipated the events that took place in March, 1992 are concerned, in our opinion, they have no substance. In our opinion, it is rightly submitted that it was not possible for the appellant to anticipate the events that were to take place in the next financial year and pay advance tax on the basis of those anticipated events,” the Tribunal said.

Following the decision of the Karnataka High Court in the case of Prime Securities Ltd. Vs. Assistant Commissioner of Income Tax (Investigation), the Tribuna held that the levy of interest u/s 234B and 234C of the Income Tax Act on additional income agreed as per advance pricing agreement entered between appellant and the CBDT is illegal.

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