Section 234A

Section 234A — the law in short

What the courts have decided on section 234A, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Mansarovar Commercial P Ltd v CIT Supreme CourtHelps department
  My company is registered outside the taxable territory but run from Delhi. Where is it resident?
  Where it is actually run. The Supreme Court held that the residence of a company turns on de facto control and management, not on the place of registration: five companies incorporated under the Registration of Companies (Sikkim) Act, 1961 were resident in India because the management and control of all five was wholly situated in Delhi, at the office of a chartered accountant. The appeals were dismissed and the Delhi High Court's decision affirmed.
• CIT v Anjum M.H. Ghaswala Supreme CourtHelps department
  Can interest under ss.234A, 234B and 234C be waived?
  Not by the authority hearing your case. The levy is mandatory and automatic, and even the Settlement Commission cannot reduce or waive it. The only route to relief is a CBDT circular issued under s.119.
• M/s Gie Jewells v PCIT High CourtHelps departmentNo later treatment found
  My client is a firm, not a company. It paid alternate minimum tax under s.115JC when it filed its return, along with the accountant's report. The Assessing Officer has charged interest under s.234B for not paying that tax as advance tax. Can advance tax provisions apply to AMT?
  Yes, on this Court's view. The Rajasthan High Court dismissed the assessee's appeals, holding that having retained the amount which was supposed to be paid under s.115JC, s.234B was rightly invoked, and that no substantial question of law arose from the Tribunal's treatment of s.115JC on the same footing as s.115JA and s.115JB for the purpose of the advance-tax obligation under s.208.
• CIT, Agra v M/s Oswal Exports High CourtHelps taxpayerNo later treatment found
  My assessment order just says 'interest will be charged as per rules'. It never names s.234A, s.234B or s.234C. Is that enough to levy the interest?
  The Allahabad High Court held it is not. The direction must be specific and clear, so that the assessee knows the Assessing Officer applied his mind and ordered interest under a particular section; a general direction to charge interest as per rules or as per law is not a specific order and no interest can be levied on it. The Court expressly considered the Supreme Court's order in Karanvir Singh Gossal and held that it does not displace this requirement.
• Dr. Prannoy Roy v CIT High CourtHelps taxpayer
  I paid the whole tax before the due date but filed the return eleven months late. The Assessing Officer has still charged interest under s.234A. Can he?
  No, not on tax already in the Revenue's hands before the due date. The Delhi High Court held that s.234A creates a compensatory levy, not a penalty, so where the tax was deposited before the due date of filing the return the Revenue has suffered no loss and no interest under s.234A is payable; interest runs only on tax not deposited before that date.
• Pascal Postel v DDIT (Inv.) ITATHelps taxpayerNo later treatment found
  The officer has charged interest under s.40 of the Black Money Act on top of the tax. Is there any machinery for it, and can I still fight the quantum in the appeal against the rectification order?
  Interest under s.40(2) was held unworkable, because the advance-tax machinery on which ss.234B and 234C of the Income-tax Act operate is absent from the Black Money Act, so there is no statutory liability to pay advance tax on which the interest can bite. Interest under s.40(1) was held not to arise where the foreign source itself was disclosed, the expression 'not disclosed' meaning complete suppression of the source and not a difference in the quantum assessed. On the procedural point, where an assessment order under s.10 is altered by a rectification order under s.12, the two are read together as one composite order, so the appeal against the rectified order carries the underlying quantum with it.
• Saguna Rural Foundation v Exemption Ward 2(3), Mumbai ITATHelps taxpayerNo later treatment found
  CPC denied my s.11(2) accumulation because Form 10 was filed after the s.139(1) due date, and the CIT(A) said s.13(9) settles it. Can the Tribunal still help me?
  Yes. Following the jurisdictional High Court in CIT v Sakal Relief Fund, the Mumbai Tribunal held that filing Form No. 10 before completion of assessment satisfies s.11(2), so a s.143(1) denial founded only on the s.139(1) due date cannot stand. The matter was restored to the Assessing Officer for the limited purpose of checking that the stated purpose of accumulation matches the objects and is backed by a trustees' resolution, with an express direction not to deny exemption on merely technical grounds.
• CDO Jain Education Society v ACIT (CPC) ITATHelps taxpayerNo later treatment found
  My institution filed its audit report on time but in Form 10B when Form 10BB was the right form, and the CPC has denied the exemption and raised a demand on the gross receipts. Is filing the wrong audit form fatal?
  No. Where the accounts were in fact audited by a chartered accountant and an audit report was uploaded within time, the choice of the wrong form is a procedural lapse and not a failure of the substantive condition, and exemption cannot be denied on that ground alone. The Tribunal set aside the appellate order and directed the Assessing Officer to verify substantive compliance and, if satisfied, to condone the procedural lapse, allow the exemption and reduce the demand to nil.
• Ravi Ramakrishnan v ITO (International Taxation) — the section 56(2)(vii)(b) addition must be added back as cost under section 49(4), even though it was never claimed in the return ITATHelps taxpayerNo later treatment found
  The DRP has refused my client's alternative plea for the section 49(4) cost step-up because it was not made in the return, citing Goetze. Is that the end of it?
  No. The Tribunal directed the Assessing Officer to recompute the capital gain in accordance with section 49(4), notwithstanding that the DRP had rejected the same plea on the footing that additional cost of acquisition could only be claimed through the return of income. Where the officer has taken a particular value into account for the section 56(2)(vii)(b) addition, that value is the deemed cost of acquisition and the capital gain must be recomputed on it.
• Sarvajanik Seva Trust v DCIT ITATHelps taxpayer
  The CPC has processed my trust's return at the maximum marginal rate, saying s.115TD applies. But the trust gave up its registration back in March 2015. Can s.115TD reach it at all?
  Not on those facts. Section 115TD was inserted by the Finance Act 2016; the order records it as taking effect from 1 June 2016 in one place and from assessment year 2016-17 in another. On either date, where the trust's registration had already ceased with effect from 20 March 2015 there was no registered trust for the section to bite on, and the total income had to be charged at the slab rates and not at the maximum marginal rate.
• Computer Modelling Group Ltd. v. ACIT — for a year after 1 April 2012, the proviso to s.209(1)(d) is not attracted where tax was in fact deducted at source ITATHelps taxpayerNo later treatment found
  My non-resident client's Indian customers did deduct tax at source, but the Assessing Officer has still charged s.234B interest for an assessment year after 2012-13, saying the Finance Act, 2012 proviso removes the s.209(1)(d) credit. Is that right?
  No. The Delhi Tribunal held that the proviso inserted in s.209(1)(d) by the Finance Act, 2012 with effect from 1 April 2012 'would apply only in a scenario where person responsible for deducting tax has paid or credited such income without deduction of tax', and that where the income was received by the assessee after deduction of tax at source the proviso is not applicable. Reading s.209(1)(d) with its proviso, it held that where in the case of a non-resident company the tax deductible at source has been paid, it is not permissible for the Revenue to charge interest under s.234B for an alleged failure to pay advance tax, and it allowed the ground for both assessment year 2012-13 and assessment year 2019-20.
• Prashant Vijay Kale v CPC, Bengaluru ITATHelps taxpayerNo later treatment found
  I filed my return on time and then revised it. CPC has ignored the original, treated the revised return as my first return, and charged s.234F fee and s.234A interest. Can that be undone?
  Yes. The Mumbai Bench found that the original return had been filed within the s.139(1) due date and that CPC and the CIT(A) had simply ignored it, and deleted both the Rs 5,000 fee under s.234F and the interest under s.234A charged on the footing that the revised return's date was the date of filing. Revising a return does not make a timely return late.
• ITO v Karanvir Singh Gossal (on remand from the Supreme Court) ITATHelps departmentNo later treatment found
  My assessment order under s.143(3) says nothing at all about interest, but Form ITNS 150 issued the same day charges s.234B and s.234C interest. Is the levy good?
  On these facts the Tribunal upheld it. Following the Supreme Court's own order in the assessee's case (Civil Appeal No. 1937 of 2007, judgment dated 6 September 2012), it held that where interest is leviable under s.234B or s.234C the levy is mandatory and compensatory in nature, and that the assessee's remedy is not to resist the charge but to apply to the Chief Commissioner for waiver or reduction under the Board's circular.
• Section 84 of the Black Money Act - the Income-tax Act provisions applied CBDT Circulars & InstructionsCuts both waysNo later treatment found
  Which provisions of the Income-tax Act apply to the Black Money Act, and can the officer borrow one that is not on the list?
  Section 84 applies a closed list: clauses (c) and (d) of s.90(1), clauses (c) and (d) of s.90A(1), ss.119, 133, 134, 135 and 138, the whole of Chapter XV, and ss.237, 240, 245, 280, 280A, 280B, 280D, 281, 281B and 284 of the Income-tax Act, with necessary modifications, as if they referred to undisclosed foreign income and asset instead of to income-tax. The list is expressed as an enumeration and the decided points located in this area turn on what is left out of it. Sections 234A, 234B and 234C are not on it, which is why the Chennai Bench in Pascal Postel held that the interest charge in s.40(2) has no advance-tax machinery to operate on; s.230 is not on it either, which is the omission on which Preetha Krishna (Madras High Court) is understood to turn, though no copy of that judgment was opened for this note.
• Ranchi Club Ltd v CIT (Patna) High CourtHelps taxpayerOverruled
  I filed my return on time and paid the self-assessment tax; the officer then added a disputed item in a best-judgment assessment and charged s.234A interest because I did not comply with a s.142(1) notice. Is that right?
  The Patna High Court said no. Where the return was filed within time with proof of payment, the mere issue of a s.142(1) notice calling for accounts or information does not attract s.234A, because the s.142(1) notice that s.234A speaks of is the notice to FURNISH A RETURN issued to a person who has not filed one — not the notice under clauses (ii) and (iii) calling for accounts or particulars.

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.