“interest under section 234C”
The decision most relied on for interest under section 234C is CIT v. Anjum M.H. Ghaswala (252 ITR 1), cited in 452 judgments on BharatTax.
Leading authorities on interest under section 234C
Levy of interest under sections 234A, 234B, and 234C of the Income Tax Act is mandatory. Tax statutes are to be interpreted strictly, allowing no room for purposive interpretation.
Transfer pricing adjustments for outstanding receivables are permissible only if the Tax Officer establishes, through analysis over a period, a pattern indicating an international transaction intended to benefit an associated enterprise. The Tax Officer cannot question purely business decisions like royalty payments or exceed jurisdiction by applying cost-benefit analysis to determine the arm's length price of services.
The interest rate for benchmarking foreign currency loans advanced to Associated Enterprises should be the market-determined rate applicable to the currency of the loan, such as LIBOR for US Dollar loans, rather than a domestic lending rate like the Indian PLR.
The Supreme Court's decision establishes principles or grounds for seeking a waiver of mandatory interest levied under Sections 234A, 234B, and 234C of the Income Tax Act, 1961.
Where a duty is cast on the payer to deduct and pay tax at source under Section 195, the payee-assessee cannot be levied interest under Section 234B for failure to pay advance tax if the payer defaults on its TDS obligation. This principle may also extend to interest under Section 234C.
When determining the arm's length price for interest on a foreign currency loan advanced to an Associated Enterprise, the Indian Prime Lending Rate is not applicable. Instead, the interest rate should be benchmarked based on the prevailing foreign currency rate, such as EURIBOR, or the rate in the country where the loan is received/consumed.
An insurance claim received on stock in trade constitutes business income and is not an independent source of income.
Capital receipts, such as interest and power subsidy, are not includible in book profit under Section 115JB as they do not fall within the definition of income under Section 2(24).
