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PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee is directed against the order of ld. Commissioner of Income-tax (Appeals)-12, hereinafter referred as ld CIT (A), Mumbai dated 16.11.2017 for Assessment Year 2015-16. The assessee has raised the following grounds of appeal:
1. Under the facts and circumstances of your appellant, the Hon’ble Commissioner of Income Tax (Appeals)-12, erred in confirming the interest levied u/s 234C of the Income Tax Act, 1961 of Rs. 405,839/-. 1.01. The Hon’ble CIT(A) erred in stating that appellant has not fulfilled conditions specified in the second proviso to Section 234C of the Income Tax Act, 1961. 1.02 Under the facts and in law, the Learned CIT(A) failed to appreciate the fact that since the entire tax liability on capital gain was not paid by way of Mum 2018-Sidhmicro Equities Private Ltd.
advance tax and TDS by the appellant, Interest u/s 234C can be levied only in respect of amount of default of last installment of advance tax as capital gain accrued after 15th December, 2014 and entire tax liability is on the said capital gains.
Brief facts of the case are that the assessee-company is engaged in the business of share and securities filed its return of income for Assessment Year 2014-15 on 28.09.2015 declaring income of Rs. 4,80,29,790/- under the normal provisions of the Act and book profit of Rs. 5,48,12,227/- under the provisions of section 115JB. The return was processed under section 143(1) of the Act by Central Processing Centre (CPC), Bangalore vide intimation dated 02.12.2015, however, while processing the return of assessee, interest under section 234C was computed at Rs. 4,05,839/- as against the interest computed by assessee of Rs. 54/- in the return of income. Thus, resulting in raising of demand of Rs. 4,05,780/-, the assessee filed application for rectification under section 154 before the CPC, Bangalore on 17.12.2015 interalia contending that the interest under section 234C has been computed erroneously and the same be rectified. The application of assessee was rejected by CPC on 04.02.2016. On appeal before the ld. CIT(A), the action of Assessing Officer/CPC, Bangalore was upheld. The ld CIT(A) concluded that the benefit of second proviso is applicable to the assessee only if the assessee had paid the entire tax liability on the capital gain income had been paid in fourth installment of advance tax. The assessee Mum 2018-Sidhmicro Equities Private Ltd. has not fulfilled this condition and that the assessee has paid the advance tax of Rs.1.00 Crore only in fourth installment of tax liability of Rs. 1,09,66,694/-. Thus, further aggrieved, the assessee has filed the present appeal before us.
We have heard the submission of ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the revenue and perused the material available on record. The ld. AR of the assessee submits that the assessee pointed out the mistake by filing rectification application under section 154 made to CPC, Bangalore on 17.12.2015.
However, the CPC, Bangalore again while passing the order under section 154 worked out the same interest under section 234C of the Act, which was intimated in the original intimation. The ld. AR of the assessee further submits that during the period relevant to the assessment under consideration, the assessee sold a flat at Prithvi Apartment CHS Ltd. vide agreement dated 29.12.2014 for Rs. 9.50 Crore. The assessee earned Long Term Capital Gain (LTCG). The LTCG of Rs. 4.78 Crore was offered to tax. The LTCG was earned on 29.12.2014. The same was reflected in the computation of income furnished along with the return of income in Schedule-CG clause F in Information about accrual/receipt of capital gain. The assessee paid advance tax of Rs. 1.00 Crore as Capital Gain on 15.03.2015 and Rs. 9.00 lakhs (Approx) was paid by way of TDS. The assessee also paid interest on delayed period from the date of 3 Mum 2018-Sidhmicro Equities Private Ltd. accrual till deposit and there was only miscalculation/shortfall interest of Rs. 54/- only. The Assessing Officer/CPC, Bangalore while calculated for the entire period. The ld. AR of the assessee further submits that the liability to pay tax by way of advance tax resulting in capital gain arisen only after transaction took place. The ld. CIT(A) failed to appreciate the second proviso of section 234C(1) of the Act and the submission made before him. The ld. AR of the assessee further submits that the interest under section 234C can only be charged on the shortfall and not on the entire amount of tax. In support of his submission, the ld. AR of the assessee relied upon the following three decisions: (i) Hon’ble Rajasthan High Court in CIT vs. Smt. Premlata Jalani [2003] 264 ITR 744 (Rajasthan). (ii) Smt. Premlata jalani v. ACIT [2002] 75 TTJ 172 (Jodhpur). (iii) Gautam Vinod Daftary vs. DCIT [2016] 69 taxmann.com 85 (Mum.Trib.).
On the other hand the ld. DR for the revenue supported the order of lower authorities.
We have considered the submission of parties and have gone through the orders of authorities below. There is no dispute about the transaction of sale of flat at Prithvi Apartment on 29.12.2017. The assessee while filing return of income calculated the interest from the date of accrual/receipt of gain earned on sale of said flat. The assessee filed application under section 154 for rectification for calculating the interest from 31.12.2013.
The application of the assessee was rejected by Assessing Officer/CPC, Mum 2018-Sidhmicro Equities Private Ltd. Bangalore vide order dated 04.02.2016. The ld. CIT(A) confirmed the action of Assessing Officer/CPC holding that the benefit of second proviso of section 243C(1) is applicable to the assessee only if the assessee had paid the entire tax liability on the capital gain income had been paid in fourth installment of advance tax.
The Hon’ble Rajasthan High Court in CIT vs. Premlata Jalani (supra) held that the liability to pay tax by way of advance tax in respect of transaction resulting in capital gains arises only after transaction has taken place or event has occurred. Where interest is chargeable on delayed or deferred payment of advance tax, it shall be payable only with effect from date when liability to pay advance tax in respect thereof has been incurred. It was further held that advance tax was payable by assessee on capital gains earned by assessee in that case after 15-3-2000 when date of payment of last installment of advance tax had already expired. The assessee paid interest under section 234C for period of one month, until said liability was discharged in April 2000. However, the Assessing Officer held that assessee was liable to pay interest for entire period to extent there was short fall in payment of advance tax calculated as per income returned by assessee including capital gains from 15-9- 1999, when first installment of advance tax became due. On appeal before the Tribunal it was held that Assessing Officer was not justified in ITA No. 710 Mum 2018-Sidhmicro Equities Private Ltd. charging interest for period prior to date when liability to tax arose. The Hon’ble High Court upheld the finding of Tribunal.
Further, the co-ordinate bench of Tribunal in Gautam Vinod Daftray vs. DCIT (supra) by following the decision of Hon’ble Rajasthan High Court in Premlata Jalani (supra) held that the when the assessee received long term capital gain on 28-3-2007, interest under section 234C should be worked out with effect from date when liability to pay advance tax in respect thereof had accrued. It was further held that the under section interest under section 234A can only be charged on short fall and not on entire amount of assessed tax.
In the present case, the Assessing Officer levied the interest under section 234C for the entire period and not from the date of accrual/receipt of capital gain. The ld. CIT(A) instead of appreciating the fact that the assessee earned capital gain only on 29.12.2017, by that time, the time period for depositing the advance tax has already expired.
The assessee while filing return of income calculated the interest from the date of accrual/receipt of gain till deposit of tax. Thus, the assessee has calculated the interest as per second proviso of section 234C(1). In our view, the assessee cannot be saddled with the liability of interest prior to the earning of income/gain. Therefore, the Assessing Officer is directed to delete the excess interest of Rs. 4,05,780/-. So far as short fall of Rs. 54/- is concerned by miscalculation, the assessee is liable to pay 6 Mum 2018-Sidhmicro Equities Private Ltd. only Rs. 54/- only. Therefore, the assessing officer is directed to work out the interest under section 234C from the date of accrual of capital gain form 29.12.2014 only. In the result the appeal of the assessee is allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 27/03/2019.