2023 (2) TMI 274 - HC - Income Tax

Interest Liability u/s 234B - settlement of case u/s 245D(4) - Levy of interest on tax on additional income offered without providing the set off of the prepaid taxes already paid. - The plea on the part of the petitioner is that it has required to pay the interest at a specific rate on the additional amount of Income Tax offered before the Settlement Commission was not executed. - HELD THAT:- The credit of prepaid taxes was requested to be allowed and only on the balance additional tax payable, the interest u/s 234B(2A) of the Act was requested to be charged. The Commission did not accept the request on the ground that the prepaid taxes could not be excluded for computing interest.

In our opinion, this approach is contrary to the settled position of law followed by this Court in case of Bharatbhai B. Shah vs. Income Tax Officer. The petitioner had already paid the tax on income which has gone to the government treasury and therefore, it cannot be expected to pay interest on the taxes already paid. It ought to have been allowed the credit of prepaid tax and only on the balance additional tax payable, interest under Section 234B(2A) ought to have been charged.

This Court in case of Bharatbhai B. Shah [2013 (10) TMI 1025 - GUJARAT HIGH COURT] has extensively dealt with the decision of Dr. Pranay Roy [2001 (12) TMI 68 - DELHI HIGH COURT] which had been confirmed by the Apex Court in case of CIT vs. Pranay Roy [2008 (9) TMI 150 - SUPREME COURT] had taken note of the various other decisions of the Apex Court as well to eventually hold that the double levy of interest is not permissible and that principle is applicable when the interest is chargeable more than once for the same set of infractions. It also has pointed out as to how the provisions of the Act operate in different fields and there is no statutory bar on the levying of the interest as the levy is separately for different infractions.

Section 234B would apply when there is a defect in payment of advance tax. Under Section 245D(2C), the interest liability arises when within the time specified under sub-section (2A) the additional amount of income tax is not paid, whereas the interest needs to be paid under Section 245D(6A) when the tax payable in pursuance of an order under sub-section (4) is not paid within the specified time period.

Resultantly, the petition is allowed to that extent quashing and setting aside the computation of interest directing the respondent no.2 to recover the interest on the additional tax paid as per the settled ratio.