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Facts
The assessee, a senior citizen, filed a return of income declaring a total income of Rs. 37,20,12,440/- on 09.01.2021. The primary income source was capital gains, with other income from salary and sources, and a loss from business. The CPC processed the return under section 143(1) and levied interest under section 234C for default in advance tax payment.
Held
The Tribunal held that the assessee, being a senior citizen with no income chargeable under the head 'profits and gains of business or profession', is exempt from paying advance tax as per Section 207(2) of the Income Tax Act. Therefore, the levy of interest under Section 234C is not justified.
Key Issues
Whether interest under section 234C is leviable when the assessee is a senior citizen with no income chargeable under the head 'profits and gains of business or profession' and thus not liable for advance tax.
Sections Cited
234C, 143(1), 4, 207(2)(a), 207, 208, 219, 10(2A)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI AMARJIT SINGH & SHRI RAHUL CHAUDHARY
O R D E R
PER AMARJIT SINGH, ACCOUNTANT MEMBER:
This appeal of the assessee for the assessment year 2020-21 is directed against the order dated 19.12.2023 passed by the ld. Commissioner of Income Tax, Appeal, ADDL/JCIT(A)-5, Chennai. The assessee has raised the following grounds of appeal:
“i. On the facts and in laws, the ld. AO erred in levying interest u/s 234C in spite of the fact that the appellant (Senior Citizen) did not have ‘any income chargeable’ to tax under the head ‘profit or gain from business and profession’ (PGBP). ii. On the facts and in the law, the ld. AO failed to appreciate that the provisions of section 4 ‘Charge of income tax’ referring to income tax shall be charged/levied in respect of total income. In other words, tax can be collected on positive income and not on negative income. Therefore, income chargeable referred in section 207(2)(a) has limited interpretation and shall be limited to positive income and not to negative income.
Ganesh Chhaganlal Jain A.Y. 2020-21 iii. On the facts and in the law, the earned Appellate Authority (ld. AA) erred in upholding the action of CPC for imposing interest u/s 234C merely on the ground that the appellant had filed ITR-3 and therefore, per se admits chargeable income under the head PGBP. iv. On the facts and in the law, the ld. AA ought to have appreciated that SC in the case of Hariprasad & Co. held that ‘income’ includes loss but that analogy cannot be extended to expression ‘any income chargeable’ as mentioned in section 207(2)(a) of the I.T. Act.”
Fact in brief is that return of income declaring total income of Rs. 37,20,12,440/- was filed on 09.01.2021. The main source of income in the year under consideration was capital gain of Rs. 35.16 crs and other income was earned from salary, income from other source and there was loss from business which was started in January, 2020. The CPC has processed the return filed u/s 143(1) of the Act on 12.10.2021 and levied interest u/s 234C of the Act on account of default in payment of advance tax.
The assessee filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee stating that assessee has filed return of income on ITR-3.
During the course of appellate proceedings before us, the ld. Counsel after referring the provisions of section 207 of the Income Tax Act, 1961 submitted that the liability for payment of advance tax in the case of the assessee did not arise for the Financial Year relevant to Assessment Year under consideration. The ld. Counsel further submitted that assessee has also not earned any income under the head business and profession during the year under consideration as most of the income assessee has earned from long term capital gain on the transfer of the asset.
Ganesh Chhaganlal Jain A.Y. 2020-21 5. He further submitted that ld. CIT(A) is unjustified in sustaining the interest levied u/s 234C merely on the ground that assessee had filed return of income on ITR Form 3. He also placed reliance on the judicial pronouncement in the case of CIT vs Smt. Premlata Jalani (2003) 264 ITR 744 (Rajasthan) and Emem Freight Forwarders vs DCIT (2017) 80 Taxmann.com 294 (Mumbai-Trib.). The ld. Counsel also filed paper book comprising copies of documents and details filed before the AO and CIT(A) highlighting the fact that assessee has not earned any income under the head business and profession.
On the other hand, ld. DR supported the order of ADDL/JCIT.
Heard both the sides and perused the material on record. The solitary issue in the ground of appeal filed by the assessee is relating to charging of interest u/s 234C of the Act. The interest was levied on the basis of intimation issued u/s 143(1) of the Act by the CPC after processing the return filed by the assessee for the year under consideration. Against the intimation u/s 143(1), the assessee has filed appeal before the First Appellate Authority. The assessee had brought the material fact before the First Appellate Authority that assessee was a senior citizen having no chargeable income under the head business and profession, therefore, submitted that no interest u/s 234C of the Act was liable in the case of the assessee. The ld. First Appellate Authority has upheld the interest levied merely on the reasoning that assessee has filed return of income in Form No. ITR-3. In the light of the above facts and circumstances, we have perused the provision of section 207 of the Act which is reproduced as under: “207. [(1) Tax shall be payable in advance during any financial year in accordance with the provision of sections 208 to 219 (both inclusive) in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year such income being hereafter in this Chapter referred to as ‘current income’]
[(2) The provisions of sub-section (1) shall not apply to an individual resident in India who-
(a) does not have any income chargeable under the head ‘profits and gains of business or profession and (b) is of the age of sixty years or more at any time during the previous year]”
It is undisputed fact that assessee was a senior citizen and earned income during the year under consideration only from capital gains, salary, income from other sources. As per provision of section 207(2) of the Act the liability of payment of advance tax as referred in section 207(1) of the Act shall not apply to any individual resident in India who does not have any chargeable income under the head “profits and gains of business or profession” and is of the age of 60 years or more at any time during the previous year.
We have also perused the judicial pronouncement as referred by the ld. Counsel. In the case of CIT vs Smt. Premlata Jalani as referred above, the Hon’ble High Court of Rajasthan held that liability to pay tax by way of advance tax in respect of transaction resulting in capital gain arises only after transaction has taken place or event has occurred. We have also perused the decision of ITAT, Mumbai in the case of Emem Freight Forwarders as referred above on the proposition that when the assessee was not liable to pay advance tax interest cannot be levied u/s 234c of the Act.
We have further gone through the decision of ITAT in the case of Neeta Rohit Patel as cited above in this order and the relevant extract of the decision is reproduced as under:
“5. We find in this relevant F.Y 2015-1l6, the assessee has claimed exemption of share of profit from partnership firm u/s 10(2A) of the Act, therefore no income is chargeable to tax under the head profit and gains Ganesh Chhaganlal Jain A.Y. 2020-21 of business or profession. Further, on perusal of intimation u/s 143(1) of the Act page 1 of Income tax computation Col -4 "As provided by the tax payer in the return of income" and Col-5 'As computed under section 143(1)" Income from Business or Profession is indicated Rs. 0’ in both the columns of intimation u/s 143(1) of the Act. The provisions of Sec. 207(2) of the Act shall not apply to the individual as per first limb, being who do not have income chargeable under the head profits and gains of business or profession and applying the same analogy to the facts of present case, the assessee has claimed exemption of share of profit from partnership firm as a partner u/s 10(2A) of the Act and hence there is no other income chargeable under the head profit and gains of business or profession and was disclosed as 'zero'. On applicability of second Limb of sec 207(2) (b) of the Act, the assessee is a senior citizen over 60 years of age during the previous year which is not disputed.”
In light of the above facts and findings, we consider that ld. First Appellate Authority has not disproved the material fact that during the year under consideration the assessee had not earned any income chargeable under the head profits and gains of business and profession and assessee was also a senior citizen over 60 years of age during the previous year relevant to year under consideration. Therefore, as per provision of section 207(2) of the Act, the liability for payment of advance tax as prescribed u/s 207(1) of the Act shall not apply in the case of the assessee as discussed supra in this order. Therefore, considering the above facts and judicial pronouncements as discussed supra, we consider that the decision of ld. ADDL/JCIT (A) in upholding the levy of interest u/s 234C is not justified. Therefore, ground no. 1 to 4 of appeal filed by the assessee are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 27.08.2024.
Sd/- Sd/- (RAHUL CHAUDHARY) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 27.08.2024 Biswajit, Sr. P.S.
Copy to:
The Appellant:
The Respondent:
The CIT,
The DR