Section 207

Section 207 — the law in short

What the courts have decided on section 207, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• A.S. Glittre D/5 I/S Garonne v CIT Supreme CourtHelps taxpayer
  We paid tax on each voyage under section 172(4) and then elected under section 172(7) for a regular assessment, which came out much lower and produced a refund. The Department has refunded the tax but refused interest, saying what we paid was not advance tax. Is that right?
  No. Section 172(7) creates a legal fiction by which the payments already made under s.172(4) are treated as a payment in advance of the tax leviable for that assessment year, and the Supreme Court held that in construing that fiction all the consequences flowing from it must be assumed. The ad hoc assessment under s.172(4) is superseded and a regular assessment is made as per the provisions of the Act, so all the provisions of the Act relating to advance tax apply, and on excess payment the assessee is entitled to the excess and to interest on it.
• CIT v Smt. Premlata Jalani High CourtHelps taxpayer
  My capital gain arose after 15 March, so I could not have paid advance tax on it in any instalment. The Assessing Officer has charged s.234C interest from the first instalment date. Can he?
  No. The Rajasthan High Court held that the liability to pay advance tax on a capital gain arises only once the gain has accrued, so interest under s.234C on the shortfall attributable to that gain can run only from the date the advance tax on it became payable, and not from any earlier instalment date. Where the gain arose after 15 March, the proviso required only that the tax be paid by 31 March, and interest ran for that period alone.
• Statutory position — ss.207(1) and 208: who has to pay advance tax at all, and the ten thousand rupee threshold CBDT Circulars & InstructionsCuts both ways
  The notice charges me interest under s.234B for not paying advance tax. Before I argue about the computation, was I even liable to pay advance tax in the first place?
  Two conditions have to be satisfied before any advance tax liability arises. Section 207(1) makes tax payable in advance during a financial year, in accordance with ss.208 to 219, in respect of the total income of the assessee which would be chargeable for the assessment year immediately following that financial year — that income being called the "current income"; and s.208 then says advance tax shall be payable during a financial year only in every case where the amount of such tax payable by the assessee during that year, computed in accordance with Chapter XVII-C, is ten thousand rupees or more.
• Statutory position — s.219: advance tax is a payment of tax for the year, and credit for it must be given in the regular assessment CBDT Circulars & InstructionsCuts both ways
  The assessment order taxes the year but the computation sheet has not given credit for the advance tax my client paid, or has credited it to the wrong year. What is the statutory basis for insisting on the credit?
  Section 219 is the answer and it is a single sentence: any sum, other than a penalty or interest, paid by or recovered from an assessee as advance tax in pursuance of Chapter XVII shall be treated as a payment of tax in respect of the income of the period which would be the previous year for an assessment for the assessment year next following the financial year in which it was payable, and credit therefor shall be given to the assessee in the regular assessment. So the section does two things: it characterises advance tax as a payment of tax rather than a deposit, and it fixes the year to which that payment belongs by reference to the financial year in which the tax was payable.
• Statutory position — s.207(2): a resident individual of sixty or more with no business income is outside advance tax altogether CBDT Circulars & InstructionsCuts both ways
  My client is 71, resident, retired, and lives on pension, interest and capital gains. The CPC intimation charges her interest under s.234B and s.234C. Is she liable to advance tax at all?
  No. Section 207(2) says in terms that the provisions of sub-section (1) shall not apply to an individual resident in India who (a) does not have any income chargeable under the head 'Profits and gains of business or profession' and (b) is of the age of sixty years or more at any time during the previous year. Once s.207(1) does not apply, there is no advance tax liability to default on, and s.234B and s.234C — which both operate on an assessee liable to pay advance tax under s.208 — have nothing to attach to.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.