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TMI Blog2024 (12) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... ecember 13, 2023, of the Commissioner of Income Tax (Appeals), Addl./JCIT (A)-1, Vadodara, and relates to the Assessment Year 2018-19. 1. The Appellant LLP objects to the tax determined payable. 2. The Assessing Officer and the learned Commissioner of Income-tax (Appeals) erred in holding that self assessment tax paid on April 30, 2018 and September 28, 2018, is to be apportioned first towards interest. The Appellant LLP submits that the Assessing Officer and the learned Commissioner of Income Tax (Appeals) are misreading and misconstruing the provisions of Section 140A read with Section 234B of the Act. Having regard to the facts and circumstances of the case and the provision of law, the Appellant LLP submits that the Assessing Officer be directed to re-compute the said interest correctly. 3. The relevant facts in brief are that the Appellant filed the return of income for the Assessment Year 2018-19 on 28/09/2018, declaring Total Income at INR.29,91,68,010/- which was processed under Section 143(1) of the Act and Intimation Order, dated 21/10/2019, was issued to the Appellant accepting the total Income as returned by the Appellant. However, a demand of INR.2,52,635/- was ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee pays only part of the amount due at the time of filing the return, such payment shall first be adjusted towards the interest payable, and balance, if any, shall be adjusted towards the tax payable. The aforesaid position becomes clear on perusal of the relevant extract of the Circular No. 549 of 1989, dated 31/10/1989, issued by the Central Board of Direct Taxes explaining the provisions contained in Direct Tax Laws (Amendment) Act, 1987 [as amended by Direct Tax Laws (Amendment) Act, 1989]. "DIRECT TAX LAWS (AMENDMENT) ACT, 1987-III 4.16 For delay in filing the return of income and for delay or default in payment of advance tax, mandatory interest is now payable under the provisions of new sections 234A to 234C inserted by the Amending Act, 1987. Further, under the new scheme of assessment also being introduced by the Amending Act, 1987 (refer para 5.2 of these Explanatory Notes), if the tax and interest due on the basis of returned income have been correctly paid, the return will be accepted as such and no further action on it will be necessary. For successful implementation of the new scheme of assessment, it is necessary that the assessees should also pay interest due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 01/07/2003 (d) Patson Transformers Ltd Vs. DCIT, Special Range - VIII Vs. AY 1992-93 & 1993-94, ITA No.1941 & 1942/AHD/1998, dated 07/11/2005 9. Per contra the Learned Departmental Representative supported the order passed by the CIT(A) by placing reliance on the Explanation to Section 140A(1) of the Act and submitted that any payment (including an adhoc payment) made by the assessee after 1st April of the Assessment Year was in the nature of self assessment tax which should first be appropriated towards interest and thereafter, towards tax. 10. We have given thoughtful consideration to the rival submission, applicable provisions and the judicial precedents cited during the course of the hearing. 11. We are, in the present appeal, concerned with the method of computation of interest under Section 234B(2) of the Act for default/delay in payment of advance tax. Section 234B of the Act, as applicable at the relevant time, reads as under: "234B. (1) Subject to the other provisions of this section, where, in any financial year, an assessee who is liable to pay advance tax under section 208 has failed to pay such tax or, where the advance tax paid by such assessee under the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid under section 140A towards the interest chargeable under this section; (ii) thereafter, interest shall be calculated at the rate aforesaid on the amount by which the tax so paid together with the advance tax paid falls short of the assessed tax" (Emphasis Supplied) 12. A perusal of Section 234B of the Act shows that Section 234B(1) of the Act deals with a general method of calculating interest for default/delay in payment of advance tax as it provides for levy of interest for the period commencing from 1st April next following the relevant previous year to the date of determination of total income under Section 143(1) of the Act or regular assessment, as the case may be. The amount on which interest for the aforesaid period is to be calculated is the 'assessed tax' or the amount by which the advance tax paid falls short of the 'assessed tax'. The expression 'assessee tax' has been defined in Explanation 1 to Section 234B of the Act to mean tax on total income computed under Section 143(1)/143(3) of the Act as reduced by the tax deducted at source, any tax relief allowed under Section 90/90A of the Act etc. Thus, the basis of computation of 'assessed tax' or shortfall in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. For the purposes of this sub-section, "assessed tax" means the tax on the total income as declared in the return as reduced by the amount of: (i) tax deducted or collected at source, in accordance with the provisions of Chapter XVII, on any income which is subject to such deduction or collection and which is taken into account in computing such total income; (ii) any relief of tax or deduction of tax claimed under section 90 or section 91 on account of tax paid in a country outside India; (iii) any relief of tax claimed under section 90A on account of tax paid in any specified territory outside India referred to in that section; and (iv) any tax credit claimed to be set off in accordance with the provisions of section 115JAA or section 115JD. (2) After a regular assessment under section 115WE or section 115WF or section 143 or section 144 or an assessment under section 153A or section 158BC has been made, any amount paid under subsection (1) shall be deemed to have been paid towards such regular assessment or assessment, as the case may be. (3) If any assessee fails to pay the whole or any part of such tax, interest or fee in accordance with the provisions of sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1)/(3) of the Act, and therefore, for the purpose of payment of self- assessment tax (including interest under Section 234B of the Act) under Section 140A(1) of the Act, the returned income has been taken as basis. At the time of filing return of income the payments made by an assessee are appropriated between interest paid under Section 234B of the Act and towards regular tax as per Explanation to Section 140A(1) of the Act. The appropriation so made remains constant as it does not vary depending upon the income assessed. Thus, amount of interest under Section 234B paid under Section 140A of the Act gets determined at the time of filing return of income. In our view, Section 234B(2)(i) of the Act provides for adjustment/reduction of the aforesaid amount. As noted hereinabove, the computation of interest under Section 234B of the Act is based upon assessed income (and not tax on returned income). Section 234B(2)(i) of the Act provides for adjustment of the amount of interest computed and payable under Section 234B(1) of the Act [computed on the basis of the assessed income] by the amount of interest computed on the basis of returned income and paid under Section 140A of the Act be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the total income as declared in the return as reduced by the amount of Tax Deducted or collected at source. This definition of the "assessed tax" is for the purpose of computation of interest u/s 234B at the time of filing of the return. The finance Act, 2001 clarified that for the purpose of computation of interest u/s. 234B, the returned income becomes the basis. Explanation-1 to Section 234B(1) has been inserted by the Finance Act, 2001 w.e.f. 1.4.89 which defines the "assessed tax" on completion of the regular assessment. According to this definition, the assessed tax means the tax on the total income determined u/s 143(3) reduced Tax or collected at source. Further, sub Sec.2 of Sec. 234B has stipulated the procedure for calculation of 234B interest, where tax is paid by way of self assessment tax or otherwise before completion of the regular assessment. To the facts of present case, the provisions of Section 234B(2) are applicable. In accordance with the provision of Section 234B(2), interest has to be calculated from 1st day of April next following ach Financial year till the date in which self assessment tax paid. The interest so calculated requires to be reduced by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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