TMI Blog2006 (2) TMI 595X X X X Extracts X X X X X X X X Extracts X X X X ..... Total Rs. 124359492 Less: Tax deducted at source Rs. 2775478 Rs. 121574014 Less: Advance tax paid on 1-10-1999 Rs. 750000 10-12-1999 Rs. 50000000 15-1-2000 Rs. 30200000 25-1-2000 Rs. 30000000 15-3-2000 Rs. 10000000 Rs. 120950000 Rs. 634014 Add: Interest under section 234C Rs. 4029918 Balance payable Rs. 4663932" The shortfall in the second instalment is admittedly Rs. 5,47,12,806. It may be stated that the assessee has paid a sum of Rs 7,50,000 on 1-10-1999 which is beyond the due date of 15th September, 1999. The Assessing Officer considered this payment as the payment of third instalment of advance tax. For the shortfall in life second instalment of the advance tax, the Assessing Officer computed the interest for a period of three months at 1.5 per cent per month. The assessee s working of interest for this instalment is as under : For the period from 15th September, 1999 to 15th October 1999, i.e., one mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal in the case of Kailash Associates v. Dy. CIT [1994] 50 ITD 431. The contentions of the assessee did not find favour with the CIT(A) and the assessee is aggrieved. 4. Before us, the learned counsel for the assessee reiterated the contentions that were taken before the CIT(A). Section 234C of the Act, according to him, charges interest for deferment of advance tax for a maximum period of three months falling within the instalment period. Section 234C, according to him, is compensatory in nature as held by the Karnataka High Court in Union Home Products Ltd. v. Union of India [1995] 215 ITR 758 and in Dr. S. Reddappa s case (supra) and also by the Bombay High Court in CIT v. Kotak Mahindra Finance Ltd. [2004] 265 ITR 119. Once the compensatory character is accepted interest should be levied on the shortfall only for the period during which the payment of advance tax instalment was not paid. In other words, the interest payable should be restricted to the period of shortfall. Once the shortfall is made good, he submitted, there is no amount on which interest is payable. Section 234C of the Act, according to the learned counsel for the assessee, lays down the rate of interet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y liable for interest for a period of three months. The learned standing counsel further pointed out that the Amritsar Bench decision of the Tribunal has failed to appreciate the intention of the Legislature in enacting section 234C of the Act and has interpreted the provisions contrary to the clear wordings of the section and so, according to him, should not be followed and the working of the Assessing Officer should be confirmed in the light of the clear provisions of the Act. 6. We have carefully considered the rival contentions and have gone through the record. The Hon ble Bombay High Court in the case of Kotak Mahindra Finance Ltd. (supra) has held that interest which is levied under sections 234B and 234C is compensatory in nature. It has no element of penalty in it. Therefore, it is clear that if there is non-payment or short payment of the tax on the current income, then the assessee has to pay the interest as the income has accrued to the assessee in the previous year. Although their Lordships of the Bombay High Court were seized of a matter relating to leyy of such interest for the failure to pay the tax arising out of the computation of income under section 115J of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other amenities to the citizens. It is a compulsory acquisition of property by the State, ostensibly on behalf of the assessee for the purpose of providing amenities and looking after the vital interest of the society. It is unfortunate that the tax laws in our country are technically couched, making their interpretation difficult, with the result that the courts are burdened with litigation and unscrupulous litigants take advantage of the wrangles of procedure by trading in the phrases and words used in the taxing statute. The language used in the fiscal laws has been found to be such, the wriggling out of which is left to the wisdom of a few. The time has come which may necessitate, not only the restructuring of the taxation law system, but also to provide a plain, capable and smooth interpretation, reflecting and demonstrating the object sought to be achieved by the Legislation. The Statement of Objection and Reasons for the introduction of the Direct Tax Laws (Amendment) Act, 1987, shows that it was not an isolated act of introducing legislation in the place of an earlier existing one. The Bill appears to have proceeded by constitution of committee, at the instance of Parlia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dictionary meaning of the word "compensate" is to mean good the financial loss or injury sustained; the neutralisation of opposing forces; payment; process of compensating for sense of failure or inadequacy by concentrating on achievement or superiority, real or fancied, in some other sphere; and the dictionary meaning of the word penal is imposing, constituting a punishment, a penalty; to put under a disadvantage. In the fiscal statute, the word compensatory would mean to make good the loss suffered by the revenue on account of acts of commission and omission attributable, to the assessee. If, under the tax laws, the assessee is obliged to pay to the State, for the purposes of providing amenities to society, his failure to do the needful can be enforced by making provision, compelling such assessee to perform and statutory and social obligation and not to avoid the payment of tax, compulsorily resorted to by illegal means. In the case of failure to perform the statutory and social obligation, an assessee can be directed to compensate society for his acts of commission and omission, as appears to have been done by incorporating the impugned section in the Act. Creating circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly material difference in the two situations is that while the old provisions conferred power to waive or reduce the levy of interest, the impugned provisions make the same automatic." In the light of the decision of the Bombay High Court in the case of Kotak Mahindra Finance Ltd. (supra), and also the decision of the Karnataka High Court in the case of Dr. S. Reddappa (supra), we agree with the reasoning given by the Amritsar Bench of the Tribunal in the case of Kailash Associates (supra), wherein identical computation of income made by the assessee has been accepted. The interest, in our view, is chargeable for the period of default subject to a maximum period of three months and not compulsorily for a period of three months irrespective of the period of default. In other words, if the assessee has delayed the payment of such advance tax, such payment cannot be receipted to, and accounted for to the next instalment due, but has to be considered as delayed payment. Subject to the rules for rounding cf the period of default the interest should not be charged if the assessee has paid the money after the due date prescribed for the payment of advance tax. We would like to give a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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