SIDHMICRO EQUITIES PVT. LTD.,MUMBAI vs. A.C.I.T. (CPC), MUMBAI

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.

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.

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 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.

In the result, appeal of the assessee is allowed.