The Income Tax Appellate Tribunal (ITAT), Mumbai bench has held that the amount of interest under section 234C of the Income Tax Act, 1961 shall be calculated on the basis of the “returned income” and not on the “assessed income”.
The Assessing Officer made a reference to the Transfer Pricing Officer for determination of arm’s length price of international transactions entered into by the assessee. During the proceedings before the TPO, the assessee was asked to show cause as to why there should not be any interest imputation on the share application money. Later, the interest was calculated on the basis of assessed income.
Shri Prashant Maharishi, Accountant Member and Shri Sandeep Singh Karhail, Judicial Member has observed 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 short fall 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”. It is pertinent to note that provisions of section 234C of the Act refers to the term “returned income” in comparison to the provisions of section 234B of the Act which refers to the term “assessed income” for imposing interest. The Assessing Officer is directed to re– compute the interest under section 234C of the Act on the basis of “returned income” in case there is default / short fall in payment of advance tax as compared to tax due on returned income.”
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