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Facts
The assessee, a French company, filed its income tax return for AY 2021-22 on March 15, 2022, within the extended due date. The return comprised dividend income and claimed a refund due to TDS. The assessee challenged the levy of interest under sections 234A and 234B.
Held
The Tribunal held that since the return was filed within the extended due date and the net tax liability was Nil after TDS credit, interest under section 234A was not leviable. Similarly, interest under section 234B was also not leviable as it was consequential to tax payable after TDS credit.
Key Issues
Levy of interest under sections 234A and 234B of the Income Tax Act for late filing of return and tax liability after TDS credit.
Sections Cited
143(3), 144C, 139(1), 234A, 234B, 11, 7
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Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
Before: SHRI AMIT SHUKLA, JM & SHRI RATNESH NANDAN SAHAY, AM
O R D E R
Per Amit Shukla, JM:
The aforesaid appeal has been filed by assessee against the order dated 24.02.2024 passed by Commissioner of Income Tax (Appeals)-58, Mumbai [in short 'the CIT(A)'] for quantum of assessment passed under section 143(3) r.w.s. 144C of the Income Tax Act, 1961 (the Act) for Assessment Year (AY) 2021-22.
Before us, the grounds raised by the assessee are as under:
The Commissioner of Income Tax (Appeals) erred in confirming the levy of interest under section 234A of Rs. 1,80,80,410/-.
The Commissioner of Income Tax (Appeals) erred in confirming the levy of interest under section 234B of Rs. 7,95,53,804/-.
Brief facts are that the assessee is a company incorporated under the laws of France and Residency Certificate has been issued by the French Authority in India. It has filed its return of income for AY 2021-122 of Rs. 361,60,82,100/- which only comprised of dividend income. The assessee also claimed refund of Rs. 18,08,04,110/- arising entirely out of TDS. The return for AY 2021- 22 was filed on 15.03.2022. This was in accordance with time extended for filing of its return for AY 2021-22 by the Central Board of Direct Tax (CBDT) vide Circular No. 01/2022 dated 11.01.2022 extended time limit was till 15.023.2022. Accordingly, the return of income of the assessee was within the time under section 139(1) of the Act.
The only grievance of the assessee is that since it has filed its return of income within the extended due date and therefore, interest under section 234A of the Act which is levied for late filing of return of income cannot be levied and therefore, interest under SPAFI-Societe De participations Financeres Et Industrielles section 234A of Rs. 1,80,80,410/- should be deleted. Further assessee has challenged the levy of interest under section 234B of Rs. 7,95,53,804/-. The assessee’s contention has been that the liability for interest should have been consequential to non-grant of TDS Credit and since there is no tax payable after the TDS Credit, therefore, interest under section 234B of the Act cannot be levied.
The CIT(A) has rejected the contention of the assessee after observing and holding as under: “8. Ground no.6: is related to levy interests. 234A of the Act.
The assessee has mentioned that on account of difficulties faced due to Covid, the CBDT had vide Circular to 1/2022 dated 11.01 2022 had extended the due date for filing the return of income for A.Y 2021-22 to 15.03.2022. The assessee has filed its return of income on 15.03.2022 and hence submitted that led the return of income within the extended due date 234A of the Act for late filing of the return of income cannot be levied. However, as per Clarification 1 to the said circular dated 11.01.2022, this extension shall not apply to Explanation To section 234A of the Act, in cases where the amount of tax on the total income as reduced by the amount as specified in clauses (i) to (vi) of sub-section (1) of that section exceeds one lakh rupees. Further, the charging of interest is consequential to the assessed income and is mandatory. The levy of interest u/s. 234A of the Act is mandatory and arises as a consequence of the income assessed. The appellant has not explained how the charging of interest is not in accordance with the law. The decision of the Hon'ble Apex Court in the case of CIT v Bhagat Construction Co. Pvt. Ltd. 383 ITR 9 (SC) reiterates this position.
Accordingly, this ground of the appeal is Dismissed.
9.Ground no.7 is related to levy interest u/s. 234B of the Act.
The charging of interest is consequential to the assessed income and is mandatory. The levy of interest u/s 234B of the Act is mandatory and arises as a consequence of the income assessed. The appellant has not explained how the charging of interest is not in accordance with the law. The decision of the Hon'ble Apex Court in the case of CIT v Bhagat Construction Co. Pvt. Ltd. 383 ITR (SC) reiterates this position Accordingly, this ground of the appeal is Dismissed.”
After considering the aforesaid facts and findings of the CIT(A), we seen that the assessee received dividend of Rs. 361,60,82,100/- from Saint-Gobain India Pvt. Ltd. and Grindwell Norton Ltd. These two dividend payee company have deducted TDS @ 10% in terms of Article-11 of DTAA between India and France, whereas the assessee had offered this dividend income to tax @ 5% in terms of Most Favoured Nation (MFN) Clause (Article-7) of the Protocol to the DTAA between India & France r.w. Article-10 of the DTAA India and Solvenia & Lithuania and Colombia. Accordingly it claimed refund arising out of TDS of Rs. 18,08,04,110/-. However the CIT (A) held that MFN Clause will not be applicable and upheld the TDS rate of 10% on the dividend income.
SPAFI-Societe De participations Financeres Et Industrielles 7. Now this issue has not been challenged by the assessee before us. The short point is erroneous, levy of interest under section 234A and computation of interest under section 234B of the Act.
If tax payable to the total income is to be calculated @ 10% as held by CIT(A) and also as per Article-11 of India-France DTAA, then the computation of income would be in the following manner:
Particulars Amount (Rs.) Income from Other Sources Dividend income a) Saint Gobain India Private Limited 3,41,21,38,500 b) Grindwell Norton Limited 20,39,43,600 Total Income 3,61,60,82,100
Tax payable on the Total Income @ 10% as per Article 36,16,08,210 11 of India-France DTAA (Note 1) Less: Tax Deducted at Source (Page 12 of the compilation - Form 26AS) -36,16,08,210 Tax payable/ (Refund) Nil
As noted above vide Circular No. 1/2022 dated 11.01.2022 extended the due date for filing of return of income till 15.03.2022.
SPAFI-Societe De participations Financeres Et Industrielles The assessee had filed its return of income on 15.03.2022 and therefore there is no delay in filing the return of income. Since the tax liability on the assessee is Nil after reducing TDS, interest under section 234A cannot be levied. In this case Explanation-(1) to section 234A where the amount of tax on the total income as reduced by the amount as specified in Clause-(i) to (vi) of sub- section (1) of section 234A exceeds Rs. 1,00,000/- will not apply. Accordingly, the AO is directed to delete the interest under section 234A as firstly, there was no delay in filing of return of income; and secondly the tax liability of the assessee is Nil after reducing TDS. Accordingly, Ground No.1 raised by the assessee is allowed.
Insofar as levy of interest under section 234B, admittedly this is consequential to the TDS Credit and since there was no tax payable if the TDS credited then interest under section 234B cannot be levied. Accordingly, the AO is directed to examine the same and grant relief.
In the result, the appeal of assessee is allowed.
Order pronounced in the open court on 23-10-2024. Sd/- Sd/ (RATNESH NANDAN SAHAY) (AMIT SHUKLA) Accountant Member Judicial Member *SK, Sr. PS