9911796707
TMI Blog2006 (2) TMI 595X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 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 month on Rs. 54712806 @ 1.5% per month Rs 8,20,692 For the period from 15th October 1999 to 15th December, 1999 i.e., two months on Rs. 5,39,62,806 @ 1.5% per month Rs. 16,18,884 Rs. 24,39,576 Similarly the shortfall in the third instalment due on 15-12-1999 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling 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 on per month basis. The learned counsel further submitted that provisions of sections 234A, 234B and 234C have been introduced in place of section 216. Section 216, according to the learned counsel for the assessee, restricted the payment of interest to the period of shortfall by using the phrase "for the period during which the payment was deficient" and "for the period during which the payment of advance tax wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld 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 Act, but the nature of such interest has been examined and has been held to be compensatory in character. The Hon'ble Delhi High Court in the case of Dr. Prannoy Roy (supra), was concerned with the levy of interest under section 234A of the Act. Their Lordships went into the purpose and object of the Income-tax Act and also the levy of interest. They observed that purpose and object of the Income-tax Act is to real ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Parliament. The recommendations of the committee are stated to have been examined and with a view to simplifying and rationalize the direct taxes, the amended provisions were introduced, with a view to give directional changes to achieve the object of simplification of the law and procedure relating to direct taxes, in keeping with the policy of reposing trust in the taxpayer while encouraging voluntary compliance. The learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 circumstances for compelling the assessee to discharge his statutory obligation cannot be termed to be a penalty. The collection of tax being an Act of the State for providing protection, security and other amenities to the society, cannot, in all circumstances, be termed to be either a penalty or a punishment. The failure on the part of the assessee to abide by the provisions of the Income-tax Act has been made a basis for forcing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 an example. If the assessee is liable to pay Rs. 1,00,000 by 15th of June of a financial year and has paid it on 16th of June of the same financial year, the assessee should be liable to pay interest for the period of one month at 1.5 per cent on the amount of Rs. 1,00,000 and not for a period of three months on the said amount by ignoring such payment. A citizen who paid advance tax belatedly cannot be worse of than the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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