Section 215(5) — the law in short
What the courts have decided on section 215(5), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Statutory position — ss.215, 216 and 217: the advance tax interest scheme that ran before s.234B and s.234C, and the s.215(4) waiver power
CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
I am defending an old assessment year, or a reassessment for one, and the order charges interest under s.215 or s.217 rather than s.234B. What do those sections actually require, and can the interest be waived?
Sections 215, 216 and 217 are the interest provisions that preceded s.234B and s.234C, and they are all keyed to estimates under s.209A or s.212 — both of which were omitted by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1 April 1988, while s.234C(2) provides that s.234C applies to assessments for the assessment year commencing on 1 April 1989 and subsequent years. Section 215(1) charges simple interest at fifteen per cent per annum where advance tax paid on the assessee's own estimate is less than seventy-five per cent of the assessed tax (eighty-three and one-third per cent for a company), from 1 April following the financial year to the date of the regular assessment; s.216 charges interest at the same rate where the assessee under-estimated and thereby reduced either of the first two instalments, or wrongly deferred payment under s.213; and s.217 charges it where no statement or estimate was sent at all. Section 215(4) — applied to s.217 by s.217(2) — gives the Assessing Officer power to 'reduce or waive the interest payable by the assessee under this section' in such cases and circumstances as may be prescribed.
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DIT (International Taxation) v. Alcatel Lucent USA Inc. — the 'volte face' ground for charging s.234B interest on a non-resident, and its reversal by the Supreme Court
High CourtHelps departmentOverruled
The Assessing Officer is relying on the Delhi High Court's Alcatel Lucent judgment to charge my non-resident client s.234B interest because it first denied a permanent establishment and then accepted the assessment. Is that judgment still good?
It is not. The Delhi High Court did hold, on 7 November 2013, that where a non-resident first denies that it has a permanent establishment and then accepts its tax liability at the first appellate stage, it must take responsibility for its volte face and cannot shift the blame for non-deduction to the Indian payers, so s.234B interest was payable; it answered the question of law in favour of the Revenue and allowed the appeals. But the assessees' special leave petitions were entertained, and in the Supreme Court's judgment of 17 September 2021 in the Mitsubishi Corporation batch the Court, having set out the Alcatel Lucent history at paragraph 23, recorded at paragraph 25: 'Accordingly, these Civil Appeals are allowed.'
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.