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Charging of interest u/s 234A when tax is paid within due date

  1. It is submitted that the case of the assessee is squarely covered by the decision of Honourable Supreme Court in case of CIT & Anr. vs Dr. Prannoy Roy & Anr. (2009) 222 CTR (SC) 6 wherein it was held that “Assessee having paid the tax before the due date of filling of return of income which was not less than the tax payable on the returned income which has been accepted, interest u/s 234A is not chargeable for delayed filling of return”.
  2. The Central Board of Direct Taxes vide order dated 20th August, 2014 extended the due date for obtaining and furnishing of Tax Audit Report under section 44AB of the Act for Assessment Year 2014-15 from 30th September, 2014 to 30thNovember, 2014. Subsequently, a number of representations were received in the Board requesting for extension of the due date for furnishing of return of income also for A.Y 2014-15. On the said issue, the Honourable Gujarat High Court vide its Special Civil Application No. 12656 of 2014 with Special Civil Application No. 12571 of 2014 held that “… Therefore, considering the larger cause of public good and keeping in mind the requirement of promotion of justice, we chose to exercise the writ of mandamus directing the CBDT to extend the date of filing of return of income to 30th November 2014, which is due date for filing of the TAR, as provided in the Notification dated 20th August, 2014. Such extension needs to be granted with the qualification that the same may not result into non-charging of interest under section 234A. Simply put, while extending the period of filing of the tax return and granting benefit of such extension for all other provisions, interest charged under section 234A for late filing of return would be still permitted to be levied, if the Board so chooses for the period commencing from 1.10.2014 to the actual date of filing of the return of income. Those tax payers covered under these provisions if choose to pay the amount of tax on or before the 30th September, 2014, no interest in any case would be levied despite their filing of return after the 30th September, 2014.”
  3. In pursuance of the said direction, CBDT vide its power u/s 119 issued notification for the same vide Notification No. F. No. 153/53/2014-TPL (Pt.I) dated 26.09.2014 wherein the due date for filing return of income was extended to 30.11.2014.
  4.  In the present case, the assessee has duly paid taxes before 30.09.2014 and filed the return on 25.11.2014. Therefore, levy of interest u/s. 234A is not valid and not in accordance with law as per the grounds of appeal and in view of the judgements referred above.
  5. Further, subsequently CBDT has also issued Circular No. 2/2015 [F.NO.385/03/2015-IT(B)] dated 10.02.2015 which is reproduced as follows and also attached herewith:
  • Interest under Section 234A of the Income-tax Act, 1961(hereinafter the Act) is charged in case of default in furnishing return of income by an assessee. The interest is charged at th specified rate on the amount of tax payable on the total income, as reduced by the amount of advance tax, TDS/TCS, any relief of tax allowed under section 90 and section 90A, any deduction allowed under section 91 and any tax credit allowed in accordance with the provisions of section 115JAA and section 115JD of the Act. Since self¬ assessment tax is not mentioned as a component of tax to be reduced from the amount on which interest under section 234A of the Act is chargeable, interest is being charged on the amount of self-assessment tax paid by the assessee even before the due date of filing of return.
  • It has been held by the Hon'ble Supreme Court in the case of CIT vs Prannoy Roy, 309 ITR 231 (2009) that the interest under section 234A of the Act on default in furnishing return of income shall be payable only on the amount of tax that has not been deposited before the due date of filing of the income-tax return for the relevant assessment year. Accordingly, the present practice of charging interest under section 234A of the Act on self-assessment tax paid before the due date of filing return was reviewed by CBDT.
  • The Board has decided that no interest under section 234A of the Act is chargeable on the amount of self-assessment tax paid by the assessee before the due date of filing of return of income.
  • This Circular may be brought to the notice of all officers for compliance.