IDFC FINANCIAL HOLDING COMPANY LIMITED,CHENNAI vs. DCIT, CORPORATE CIRCLE-2(2), HENNAI

आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee company against the

order of the Learned Commissioner of Income Tax (Appeal)/Addl./JCIT

(A) (hereinafter in short "theLd.CIT(A)”), Mysore, dated 04.12.2023 for

the Assessment Year (hereinafter in short "AY”) 2019-20.

Ld.CIT(A) confirming the interest of Rs.1,18,52,988/- u/s.234C of the

Income Tax Act, 1961 (hereinafter in short “the Act “) without

ITA No.241/Chny/2024 (AY 2019-20) M/s. IDFC Financial Holdings Co. Ltd. :: 2 ::

appreciating that the book profit includes Capital Gain income arose in the 4th quarter. Therefore, according to assessee, the liability to pay advance

tax arise only on 31.03.2019 and the First Appellate Authority erroneously

endorsed the action of CPC.

Company Limited is a public company, incorporated in India. The

assessee is a wholly owned subsidiary of IDFC Limited. The assessee e- filed its return of income (RoI) on 24th October 2019 declaring total

income at Rs.58,23,49,060/- as per normal provisions and deemed total

income of Rs.142,31,14,669/- as per section 115JB of the Act and

claimed refund of Rs.46,860/-. The assessee paid taxes as per the

provisions of section 115JB of the Act since it was higher than taxes

payable as per the normal provisions. The RoI was processed by CPC

under section 143(1) of the Act (Intimation) and the CPC enhanced the

interest u/s.234C of the Act to the tune of Rs.1,48,04,175/- whereas

assessee computed the interest u/s.234C of the Act at Rs.29,51,188/-.

Such a demand has been determined on account of levy of interest

u/s.234C of the Act in respect of advance tax payable on transaction

pertaining to capital gains on sale of investment. In this regard, the

Ld.AR pointed out that the book profit for MAT to the tune of

Rs.1,42,31,14,669/- (includes capital gains on sale of investments of Rs.1.40 Crs) and which event arose in the 4th quarter only i.e.

ITA No.241/Chny/2024 (AY 2019-20) M/s. IDFC Financial Holdings Co. Ltd. :: 3 ::

28.03.2019. Accordingly, assessee asserted that it rightly computed and

paid advance tax on 31.03.2019 for the capital gains arising on

28.03.2019. However, the intimation u/s.143(1) of the Act from CPC

accepted all the calculations of income returned and other figures shown

in the Return of Income were accepted by the CPC except interest

u/s.234C of the Act was enhanced from Rs.29,51,188/- to

Rs.1,48,04,175/-. According to the assessee, the CPC erred in computing

the interest u/s.234C of the Act which arose in the 4th quarter only by

including capital gains amount as part of the total income for all the

quarters as under:

Working of interest by CPC under section 234C

Total Tax Advance Advance Advance tax Shortfall Interest Liability Tax (%) tax due paid u/s.234C 29,74,49,012 15 4,46,17,352 5,00,000 4,41,17,352 13,23,521 29,74,49,012 45 13,38,52,055 19,00,000 13,19,52,055 39,58,562 29,74,49,012 75 22,30,86,759 32,00,000 21,98,86,759 65,96,603 29,74,49,012 100 29,74,49,012 49,00,000 29,25,49,012 29,25,490 Total 1,48,04,175

28.03,2019, it correctly worked out the interest u/s.234C of the Act at

Rs.29,51,188/- as under:

Working of interest by the assessee under section 234C

Total Tax Advance Advance Advance tax Shortfall Interest Liability Tax (%) tax due paid u/s.234C 47,82,674 1 7,17,401 5,00,000 2,17,401 6,522 47,82,674 45 21,52,203 19,00,000 2,52,203 7,566 47,82,674 75 35,87,005 32,00,000 3,87,005 11,610 29,74,49,013 100 29,74,49,013 49,00,000 29,25,49,013 29,25,490 Total 29,51,188

ITA No.241/Chny/2024 (AY 2019-20) M/s. IDFC Financial Holdings Co. Ltd. :: 4 ::

assessee is in appeal before us.

on record. The facts stated supra are not repeated for the sake of brevity.

The only issue is regarding calculation of interest u/s.234C of the Act in

the facts of the case and book profit includes Capital Gains of Rs.1.40 Crs.

which arose in the 4th quarter i.e only on 28.03.2019 and accordingly, the

assessee has paid advance tax on 31.03.2018 for the capital gains which

arose on 28.03.2019 by paying 1% advance tax. We note that similar

issue had come up before this Tribunal in the case of M/s.Hamilton

Industries Pvt. Ltd., in ITA No.218/Mum/2022 for AY 2018-19 dated

10.08.2022, wherein, the facts as noted by the Tribunal are as under:

ITA No.241/Chny/2024 (AY 2019-20) M/s. IDFC Financial Holdings Co. Ltd. :: 5 ::

raised by the assessee and deleting the interest charged by the CPC by

holding as under:

“Interest for deferment of advance tax.

234C. (1) [Where in any financial year, —

[(a) an assessee, other than [the assessee referred to in clause (b)], who is liable to pay advance tax under section 208 has failed to pay such tax or—

(i) the advance tax paid by such assessee on its current income on or before the 15th day of June is less than fifteen per cent of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of September is less than forty- five per cent of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than seventy-five per cent of the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of one per cent per month for a period of three months on the amount of the shortfall from fifteen per cent or forty-five per cent or seventy-five per cent, as the case may be, of the tax due on the returned income;

(ii) the advance tax paid by the assessee on the current income on or before the 15th day of March is less than the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of one per cent on the amount of the shortfall from the tax due on the returned income:

Provided that if the advance tax paid by the assessee on the current income, on or before the 15th day of June or the 15th day of September, is not less than twelve per cent or, as the case may be, thirty-six per cent of the tax due on the returned income, then, the assessee shall not be liable to pay any interest on the amount of the shortfall on those dates;]

(b) [an assessee who declares profits and gains in accordance with the provisions of subsection (1) of section 44AD or sub-section (1) of section 44ADA, as the case may be], who is liable to pay advance tax under section 208 has failed to pay such tax or the advance tax paid by the assessee on its current income on or before the 15th day of March is less than the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of one per cent on the amount of the shortfall from the tax due on the returned income:]]

ITA No.241/Chny/2024 (AY 2019-20) M/s. IDFC Financial Holdings Co. Ltd. :: 6 ::

[Provided that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of underestimate or failure to estimate—

(a) the amount of capital gains; or

(b) income of the nature referred to in sub-clause (ix) of clause (24) of section 2; [or]

[(c) income under the head "Profits and gains of business or profession" in cases where the income accrues or arises under the said head for the [first time; or]]

[(d) the amount of dividend income,] and the assessee has paid the whole of the amount of tax payable in respect of income referred to in clause (a) or clause (b) [or clause (c) [or clause (d)]], as the case may be, had such income been a part of the total income, as part of the [remaining instalments of advance tax which are due or where no such instalments are due], by the 31st day of March of the financial year:]

[Provided further that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of increase in the rate of surcharge under section 2 of the Finance Act, 2000 (10 of 2000), as amended by the Taxation Laws (Amendment) Act, 2000 (1 of 2001), and the assessee has paid the amount of shortfall, on or before the 15th day of March, 2001 in respect of the instalment of advance tax due on the 15th day of June, 2000, the 15th day of September, 2000 and the 15th day of December, 2000 :]

[Provided also that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of increase in the rate of surcharge under section 2 of the Finance Act, 2000 (10 of 2000) as amended by the Taxation Laws (Amendment) Act, 2001 (4 of 2001) and the assessee has paid the amount of shortfall on or before the 15th day of March, 2001 in respect of the instalment of advance tax due on the 15th day of June, 2000, the 15th day of September, 2000 and 15th day of December, 2000.]

[Explanation 1]. —In this section, "tax due on the returned income" means the tax chargeable on the total income declared in the return of income furnished by the assessee for the assessment year commencing on the 1st day of April immediately following the financial year in which the advance tax is paid or payable, as reduced by the amount of, —

(i) any tax deductible or collectible at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income;

[(ia) any relief of tax allowed under section 89;]

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(ii) any relief of tax allowed under section 90 on account of tax paid in a country outside India;

(iii) any relief of tax allowed under section 90A on account of tax paid in a specified territory outside India referred to in that section;

(iv) any deduction, from the Indian income-tax payable, allowed under section 91, on account of tax paid in a country outside India; and

(v) any tax credit allowed to be set off in accordance with the provisions of section 115JAA [or section 115JD].]

[Explanation 2.—For the purposes of this sub-section, the term "dividend" shall have the meaning assigned to it in clause (22) of section 2, but shall not include sub-clause (e) thereof.]

(2) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989 and subsequent assessment years.]]”

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“Kumari Kumar Advani vs. ACIT (CPC) in [IT Appeal No. 7661 (MUM) of 2013 dated 13.07.16]

Express Newspapers Ltd v. Jt. CIT [2007] 15 SOT 41

Mahendra U. Shah v. ACIT [IT Appeal No. 3048 (MUM) of 2003

Hindustan International v. ITO (2010) 96 ITR 123 (Chnd)

[2003] 264 ITR 744 (Rajasthan) Commissioner of Income-tax v. Smt. Premlata Jalan

Section 234C of the Income-tax Act, 1961 – Interest chargeable – Assessment year 2000-01 – Whether 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 - Held, yes – Whether 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 – Held yes - Advance tax was payable by assessee on capital gains earned by her after 15-3-2000 when date of payment of last installment of advance tax had already expired - Assessee paid interest under section 234C for period of one month, until said liability was discharged in April 2000 - 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 instalment of advance tax became due - Tribunal, however, held that Assessing Officer was not justified in charging interest for period prior to date when liability to tax arose - Whether order of Tribunal was justified - Held, yes

[2010] 127 ITD 257 (MUM.) Torrential Investments (P.) Ltd. * v. Income-tax Officer, Ward2(3)(3), Mumbai

Section 234C of the Income-tax Act, 1961 - Interest, chargeable as - Assessment year 199697 - Capital gains accrued to assessee on account of sale of an asset in months of May 1995 and July 1995 - It filed its return for assessment year 1996-97 showing long-term capital gains - Assessee had paid advance tax in instalments after date of sale of assets in view of amendment to proviso to section 234C by Finance (No. 2) Act, 1996 with effect from 1-4-1997 - Revenue authorities held that capital gains in instant case had accrued in months of May, 1995 and July, 1995 and assessment year in question being assessment year 1996-97, amended provision was not applicable as it came into effect from assessment year 1997-98 - Whether amendment to proviso to section 234C by Finance (No. 2) Act, 1997, with effect from 1-4-1997 is clarificatory in nature and same is to be applied retrospectively - Held, yes - Whether since assessee had paid taxes as part of instalments due after date of sale of asset in accordance with amended provisions of section 234C, as such, there was no default on assessee’s part and, thus, no interest was chargeable from it - Held, yes

[2011] 12 taxmann.com 64 (Calcutta) Emami Ltd. v. Commissioner of Income-tax, CentralI, Kolkata

ITA No.241/Chny/2024 (AY 2019-20) M/s. IDFC Financial Holdings Co. Ltd. :: 9 ::

Interest, chargeable as - Assessment year 2001-02 - Whether in order to hold an assessee liable for payment of advance tax, liability to pay such tax must exist on last date of payment of advance tax as provided under Act or at least on last date of financial year preceding assessment year in question - Held, yes - Whether if such liability arises subsequently when last date of payment of advance tax or even last date of financial year preceding assessment year is over, it is inappropriate to suggest that still assessee had liability to pay 'advance tax' within meaning of Act - Held, yes - Whether, therefore, where assessee had no liability to pay any advance tax under section 208 on any of due dates for payment of advance tax instalments and it became liable to pay tax by virtue of a retrospective amendment made long after close of financial year, assessee could not be branded as a defaulter in payment of advance tax and no interest could be imposed upon it under sections 234B and 234C – Held- Yes.”

ITA No.241/Chny/2024 (AY 2019-20) M/s. IDFC Financial Holdings Co. Ltd. :: 10 ::

amounting to Rs. 12, 31,304/- u/s. 234C and allowed the ground of appeal raised by the appellant. 14. In the result, appeal filed by the assessee is allowed. 8. There is no dispute that provisions of sec 234C is applicable in the

case of book-profit/income chargeable to tax u/s 115JA/115JB of the Act;

and in this case, the question raised will be answered on a reading of

second proviso to section 234C of the Act. Further, we note that there is

no challenge to the fact that assessee promptly computed and paid

Advance tax u/s 234A, 234B and 234C of the Act. But due to

unanticipated transactions under the head capital gains arose in the case

of assessee on 28-03-2019, this issue has arisen. According to the

assessee, it promptly discharged its liability of advance tax u/s 234C on

31-03-2019. In such an event, we are of the view that 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. And

assessee has discharged its liability of Advance Tax u/s.234C on

31.03.2019 (refer Chart below Para No.4 supra). And since, it is not the

case of the Department that assessee has not paid the whole of the

amount of tax payable in respect of its total income (including capital

gains, if any), as part of the remaining installments of advance tax which

are due (after accrual of capital gain) or where no such installments are

due, i.e., in cases of capital gain accruing after 15th of March of financial

year, by the 31st day of March of the financial year, no addition of interest

ITA No.241/Chny/2024 (AY 2019-20) M/s. IDFC Financial Holdings Co. Ltd. :: 11 :: u/s 234C was required in this case. In the light of the discussion, we respectfully following the decision of the Tribunal in the identical case supra, direct the deletion of the interest of Rs.1,18,52,988/- (i.e. Rs.1,48,04,175 – 29,51,188).

Order pronounced on the 04th day of December, 2024, in Chennai.

Sd/- Sd/- (मनोज कुमार अ�वाल) (एबी टी. वक�) (MANOJ KUMAR AGGARWAL) (ABY T. VARKEY) लेखा सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER चे�ई/Chennai, �दनांक/Dated: 04th December, 2024. TLN, Sr.PS आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF