ITAT Bangalore: Interest on Return Income Rather than Assessed U/S 234C

The Income Tax Appellate Tribunal (ITAT), Bangalore bench, in its recent ruling in the case of EY Global Delivery Services India said that the interest charged under Section 234C of the Income Tax Act, 1961 against the firm should be collected on the returned income, not on the assessed income.

EY Global Delivery Services India LLP filed the appeal against the directive given under Section 250 of the Income Tax Act corresponding to the levy of extra interest under Section 234C of the Act without understanding that the 234C only applies to returned income and not to assessed income

Chavali Narayan and Gudimella VP Pavan Kumar were the counsel for the appellant and the revenue respectively.

If a taxpayer delays filing the advance tax, then it may be affected by several measures under Section 234C of the Income Tax Act. The tax department expected the advance tax payments to be received on time along with the four scheduled instalments, or once each quarter of a financial year. Failure to do so, the taxpayer may have to deal with an interest penalty under Section 234C of the Income Tax Act.

The Bench comprising of two members, Chandra Poojari (Accountant Member) and George George K (Judicial Member) referring to the Mumbai Bench decision in Aishwarya K. Rai Vs. DCIT ruled that interest under Section 234C of the Income Tax Act was to be collected on the returned income and not on the assessed income.

Moreover, the Assessing Officer (AO) was directed to limit the levy of interest under Section 234C of the Income Tax Act to the returned income rather than the assessed income. The same case with Strides Pharma Sciences Ltd. vs Dy. Commissioner of Income Tax ruled, “As per the provisions of section 234C of the Act, interest is levied either on failure to pay advance tax by the assessee or on shortfall in payment of advance tax as compared to tax due on returned income”. While setting aside the issue to the department for re-computation of interest, the Tribunal ruled, “In the present case, the dispute is whether the interest under section 234C of the Act would be calculated on “returned income” or on “assessed income”.