What the courts have decided on section 234C(1)(b), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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CIT v Smt. Premlata Jalani
High CourtHelps taxpayerValidity unconfirmed
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.
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Statutory position — the first proviso to s.234C(1): no interest for a shortfall caused by capital gains, casual income, first-year business income or dividend income
CBDT Circulars & InstructionsCuts both ways
My client sold a property in February and paid the whole tax on it with the March instalment. The intimation still charges s.234C interest on the June, September and December instalments. Is there a defence in the section itself?
Yes, and it is in the section itself rather than in any circular. The first proviso to s.234C(1) disapplies the sub-section to any shortfall in the payment of tax due on the returned income where the shortfall is on account of under-estimate or failure to estimate (a) the amount of capital gains, (b) income of the nature referred to in s.2(24)(ix) — casual income such as winnings from lotteries, crossword puzzles and races, (c) income under the head 'Profits and gains of business or profession' in cases where the income accrues or arises under that head for the first time, or (d) the amount of dividend income. The relief is conditional: the assessee must have paid the whole of the tax payable in respect of that income, computed as if it were part of the total income, as part of the remaining instalments of advance tax which are due, or where no such instalments are due, by 31 March of the financial year.
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Statutory position — s.211: the four advance tax instalments, and the single 15 March instalment for a s.44AD or s.44ADA presumptive assessee
CBDT Circulars & InstructionsCuts both ways
My client returns income under s.44AD. The CPC has charged s.234C interest on four instalments. Is a presumptive assessee not entitled to pay the whole advance tax by 15 March?
He is. Section 211(1) now splits assessees into two classes: clause (a) covers 'all the assessees, other than the assessee referred to in clause (b)', who pay in four instalments — fifteen per cent by 15 June, forty-five per cent by 15 September, seventy-five per cent by 15 December and the whole by 15 March, each cumulative and reduced by earlier instalments; clause (b) covers 'an assessee who declares profits and gains in accordance with the provisions of sub-section (1) of section 44AD or sub-section (1) of section 44ADA', who pays 'to the extent of the whole amount of such advance tax during each financial year on or before the 15th March'. Section 234C(1)(b) mirrors this exactly, charging a presumptive assessee interest only on the shortfall from the tax due on the returned income as at 15 March.
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.