The Bangalore Bench of Income Tax Appellate Tribunal (ITAT) has held that the interest charged under Section 234C of the Income Tax Act, 1961 against EY global Delivery Services India should be levied on the returned income and not upon the assessed income.
The appeal was filed by EY Global Delivery Services India LLP, against order dated passed under Section 250 of the Income Tax Act in relation to levy of additional interest under section 234C of the Act without appreciating that 234C was applicable only on returned income and not on the assessed income.
Chavali Narayan, appeared on behalf of the assessee and Gudimella VP Pavan Kumar appeared on behalf of the revenue.
If a taxpayer is late with the payment of advance tax, there are a number of measures in Section 234C of the Income Tax Act that may apply. The tax department anticipated the advance tax payments to be made on time and in accordance with the four scheduled instalments, or once each quarter of a fiscal year. If you don’t, the tax department may charge an interest penalty under Section 234C of the Income Tax Act.
The two-member Bench of Chandra Poojari, (Accountant Member) and George George K, (Judicial Member) referring to the Mumbai Bench decision in Aishwarya K. Rai Vs. DCIT held that interest under Section 234C of the Income Tax Act was to be levied on the returned income and not on the assessed income.
The Bench further directed the Assessing Officer (AO) to restrict the levy of interest under Section 234C of the Income Tax Act to the returned income instead of the assessed income. Similar issue has been decided in Strides Pharma Science Ltd. vs Dy. Commissioner of Income Tax which held that, “As per the provisions of section 234C of the Act, interest is levied either on failure to pay advance tax by the assessee or on shortfall in payment of advance tax as compared to tax due on returned income. While remitting the matter to the department for re-computation of interest, the Tribunal held that “In the present case, the dispute is whether the interest under section 234C of the Act would be calculated on “returned income” or on “assessed income”
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