Interest u/s 234C is chargeable on returned income not on assessed income – ITAT

Interest u/s 234C is chargeable on returned income only and not on the assessed income – ITAT

In a recent judgment, ITAT has held that interest u/s 234C is chargeable on returned income only and not on the assessed income 

ABCAUS Case Law Citation:
ABCAUS 3841 (2024) (01) ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming charging of interest u/s 234C of the Income Tax Act, 1961 (the Act) on assessed income in place of return income filed by the assessee.

The appellant assessee was a company and filed its return of income. Subsequent an intimation u/s 143(1) of the Act was issued to the assessee by assessing the income inter alia by making addition of interest u/s 234C of the Act.

Before the Tribunal, the assessee contended that, the view taken by the CIT(A) charging of interest on assessed income is contrary to the provisions of law.

The Tribunal observed that the issue involved was in relation with charging of interest u/s 234C of the Act on assessed income in place of return income filed by the assessee while passing the impugned order by CIT(A) against the assessee.

The assessee stated that interest u/s 234C of the Act is applicable only on the returned income filed by the assessee. However, the CIT(A) while passing the order held that charging of interest u/s 234C of the Act on the assessed income.

In order to substantiate his claim, the assessee brought to the notice to the ITAT the provisions of section 234C of the Act.

The Tribunal observed that as per the provisions of section 234C, the certain conditions of shotfall in payment of advance tax, a company shall be liable to pay simple interest at the rate of one per cent per month for a period of three months on the amount of the shortfall from fifteen per cent or forty-five per cent or seventy-five per cent, as the case may be, of the tax due on the returned income

The Tribunal observed that it is clear that interest u/s 234C of the Act has to be collected on returned income. As per explanation to section 234C(1) of the Act “tax due on returned income” means the tax chargeable on the total income declared in the returned income furnished by assessee only relevant assessment year.

Thus, the Tribunal held that interest was chargeable to the assessee u/s 234C of the Act on the returned income in place of assessed income as viewed by the CIT(A) in his order.

Accordingly the ground was allowed in favour of the assessee with the direction to AO to calculate the interest u/s 234C of the Act on the returned income as made by the assessee.

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