S. 234C: Though levy of interest for deferment of advance-tax is mandatory and cause & justification for the deferment are irrelevant, the same is not leviable if the income was not predictable and the assessee could not have anticipated its receipt e.g. the receipt of a gift

(i) The liability to pay advance tax enshrined under the Act is based on the principle of ‘pay as you earn’, as has been aptly noted by the Delhi High Court in the case of Bill and Peggy Marketing India Pvt. Ltd. vs. ACIT, 350 ITR 465 (Del). Section 234C of the Act prescribes that the advance tax is payable in installments on the dates falling within financial year itself. Any failure or shortfall in payment of such installments attracts interest under section 234C of the Act. In the present case, the assessee has been charged interest under section 234C of the Act primarily on the ground that the requisite installments were not paid on the specified dates of 15/9/2011 and 15/12/2011. The assessee resists the levy on the ground that the income which has prompted the Revenue to levy interest was not received by the assessee on such specified dates, but it was received on 17/12/2011. Ostensibly, the income in question is by way of gifts received, which has been received by the assessee after the date of instalments due on 15/9/2011 and 15/12/2011. Quite clearly, assessee could not have anticipated the receipt or accrual of such income before the event, and such event has taken place after the due dates of instalments. At this stage, one may gainfully refer to section 207 of the Act, which creates liability for payment of advance tax whereby, every person is obliged to pay advance tax in the financial year on total income chargeable to tax for assessment year immediately following that financial year. Section 209 of the Act provides the computational mechanism of calculating advance tax to be paid. Notably, section 209 envisages calculation of advance tax based on the ‘estimate of current income’. A reading of section 209 would reveal that in order to calculate the amount of advance tax payable, an assessee is liable to estimate his income. Considered in this light, the facts of the present case clearly show that the gift of Rs.10.00 crores, which has been received by the assessee on 17/12/2011 could not have been foreseen by the assessee so as to enable him to estimate such income for the purpose of payment of advance tax on an anterior date, may it be 15/09/2011 or 15/12/2011. In such a situation, the decision of the Hyderabad Bench of the Tribunal in the case of ACIT v. Jindal Irrigation Systems Ltd. (56 ITD 164)(Hyd.), relied upon by the appellant, clearly militates against charging of interest under section 234C of the Act. As per the Hyderabad Bench of the Tribunal, an assessee could not be defaulted for a duty, which was impossible to be performed. The Hyderabad Bench of the Tribunal was also considering levy of interest under section 234C of the Act in a situation where on the relevant dates assessee was not in a position to estimate receipt of such income. To the similar effect is the decision of the Chennai Bench of the Tribunal in the case of Express Newspaper Ltd (103 TTJ 122)(Chennai). Therefore, in this background, the levy of interest under section 234C of the Act in the present case is untenable.

(ii) In so far as plea of the Revenue that charging of interest under section 234C of the Act is mandatory in natures is concerned, the same in our view, cannot lead to a situation where levy of interest can be fastened even in situations, where there is impossibility of performance by the assessee. Charging of interest would be mandatory, only if, the liability to pay advance tax arises upon fulfilment of the parameters, which in the present case is not fulfilled on account of the peculiar fact situation. Thus, such plea of the Revenue is untenable.

(iii) Furthermore, the reliance placed by the Revenue in the case of Peggy Marketing India Pvt. Ltd.(supra) is also not appropriate considering the peculiar facts of the present case. No doubt, Hon’ble Delhi High Court upholds the proposition that the cause and delay and justification for deferment of advance tax loses significance for the purposes of levy of interest under section 234C of the Act. The Hon’ble High Court noted that the proviso to section 234C(1) of the Act prescribes cases for condoning levy of interest if the under estimate or failure to estimate is on account of capital gains or income by way of winnings from lottery, cross word, puzzles, etc. The Hon’ble High Court did not find the fact-situation, before it, to be falling within the scope of the proviso to section 234C of the Act. Notably, the income which was considered by the High Court related to the business receipts of the assessee, whereas in the instant case, the income is by way of a windfall gain, being receipt of gifts. In our considered opinion, the two situations are incomparable. Therefore, the judgment of the Hon’ble Delhi High Court in the case Peggy Marketing India Pvt. Ltd.(supra) stands on its own facts and is not attracted to the facts of the present case.