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Facts
The assessee filed its return of income on 09.03.2022 and paid the entire self-assessment tax liability of Rs.2,47,89,580/- on 26.02.2022. Despite this, interest under section 234A was levied for March 2022. The assessee contended that no interest should be levied as the tax was paid before the due date.
Held
The Tribunal held that interest under section 234A cannot be levied when the entire tax liability has been discharged before the due date or before the actual filing of the return. The court cited CBDT Circular No. 2/2015 and the Supreme Court judgment in Prannoy Roy.
Key Issues
Whether interest under Section 234A is leviable when self-assessment tax is paid before the due date of filing the return.
Sections Cited
234A, 140A(1), 143(1)
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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI MANU KUMAR GIRI & SHRI S.R.RAGHUNATHA
आदेश / O R D E R PER MANU KUMAR GIRI, JM:
The captioned appeal by the assessee is arising out of the order of the Ld. Commissioner of Income Tax (Appeals)
ADDL/JCIT(A) AGRA dated 31.07.2025 for AY 2021-22, wherein the ITA2621/CHNY/2025 (AY 2021-22) GVR ASHOKA CHNY CORR LTD VS ADIT levy of interest under section 234A for the month of March 2022 has been upheld. The assessee contests only the levy of such interest despite having fully discharged its self-assessment tax liability prior to 01.03.2022.
Brief facts of the case are that the assessee filed its return of income on 09.03.2022, within the extended due date of 15.03.2022.
Prior to filing the return, the assessee paid the entire self- assessment tax liability amounting to Rs.2,47,89,580/- on 26.02.2022. The return was processed by CPC under section 143(1). While the issue relating to short grant of TDS was subsequently rectified, CPC continued to levy interest under section 234A up to March 2022, which the assessee disputed.
The ld.CIT(A) upheld the levy on the basis of Explanation to section 140A(1) and Rule 119A, holding that payments must first be appropriated towards interest and thereafter to tax, and since the return was filed on 09.03.2022, interest up to that date was correctly charged.
ITA2621/CHNY/2025 (AY 2021-22) GVR ASHOKA CHNY CORR LTD VS ADIT :: 3 ::
The ld.AR for the assessee contended that interest under section 234A being compensatory in nature cannot be levied for March 2022 when no tax remained unpaid as on 01.03.2022.
He further submitted that CBDT Circular No. 2/2015 and the judgment of the Hon’ble Supreme Court in Prannoy Roy & Anr. vs. CIT (309 ITR 231) clearly hold that interest under section 234A cannot be levied on self-assessment tax paid before the due date of filing of return. Hence, levy beyond the actual period of default is contrary to the statutory scheme and settled judicial principles.
Therefore, the ld.AR pleaded that interest under section 234A is chargeable only on the amount of tax payable. Once the entire tax was discharged on 26.02.2022, there was no outstanding liability, and therefore, no basis for levy of interest for any day in March 2022. The assessee once again reiterated and placed reliance on CBDT Circular No. 2/2015 dated 10.02.2015, which clarifies that interest under section 234A should not be levied on the self- assessment tax paid before the due date of filing the return.
Per contra, ld.DR for the revenue relied upon the impugned order and pleaded for the dismissal of the appeal.
ITA2621/CHNY/2025 (AY 2021-22) GVR ASHOKA CHNY CORR LTD VS ADIT :: 4 ::
We have considered the rival submissions and perused the material on record. The undisputed fact is that the assessee discharged its entire self-assessment tax liability on 26.02.2022.
Therefore, on 01.03.2022, the period for which the impugned levy has been made, there was no outstanding tax. Section 234A imposes compensatory interest only where tax is unpaid. It is well settled that once the tax has been fully paid before the due date or before the actual filing of the return, no interest is leviable for the period during which no default exists. CBDT Circular No. 2/2015 also expressly provides that interest under section 234A cannot be levied on self-assessment tax paid before the due date of filing. The circular is binding on the Department, and the lower authorities erred in ignoring the same. The Hon’ble Supreme Court in Prannoy Roy (309 ITR 231) has categorically held that interest under section 234A cannot be levied where the assessee has already discharged the tax liability before the stipulated date.
ITA2621/CHNY/2025 (AY 2021-22) GVR ASHOKA CHNY CORR LTD VS ADIT :: 5 ::
The Department’s reliance on Explanation to section 140A(1) is misplaced. The said Explanation governs appropriation of payments where composite liabilities exist. In the present case, however, the assessee's tax liability itself stood fully discharged before even the month for which interest has been levied. Once no tax remained outstanding after 26.02.2022, the statutory provision for appropriation is rendered inapplicable for the period thereafter. In our considered view, levy of interest under section 234A for the month of March 2022 is not sustainable either in law or on facts.
The default, if any, ceased on 26.02.2022, and computation of interest up to 28 February 2022 alone is permissible.
In light of the above discussion, we hold that the levy of interest under section 234A for the month of March 2022 is unsustainable.
The impugned order of ld.CIT(A) is therefore set aside, and the Assessing Officer is directed to delete the interest levied under section 234A for March 2022.
ITA2621/CHNY/2025 (AY 2021-22) GVR ASHOKA CHNY CORR LTD VS ADIT 9. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 10th day of December, 2025 at Chennai.