Interest under Section 234C is mandatory and automatic, and the reason for the delay and justification for deferment of advance tax loses significance and importance.

SANJIV KHANNA,J: (ORAL)

By order dated 17th August, 2011 the following substantial questions of law were framed :

“1. Whether the learned Tribunal had erred in interpretation of the letter dated 04.11.2004 issued by the Principal and consequently upholding the interest charged by Assessing Officer under Section 234C amounting to Rs.4,17,074.00? 2. Whether the payment of installment is based upon the intimation dated 04.11.2004 given by the principal about earning of commission is a matter of deliberation and debate?”

2. The appellant is a company and the assessment year in question is 2004-05. During the said assessment year the appellant had paid advance tax as per the details given below : “Advance Tax Date Advance tax paid 12.06.2004 4,75,000.00 12.06.2004 75,000.00 14.09.2004 6,00,000.00 14.12.2004 1,25,00,000.00 15.12.2004 23,00,000.00 15.03.2005 50,00,000.00 31.03.2005 25,00,000.00”

3. It is noticeable that the assessee had paid advance tax of Rs.1,25,00,000/- on 14.12.2004. The contention raised by the appellant is that vide letter dated 4.11.2004, it was informed by their Principal, Amway India Enterprises Ltd., that they were entitled to additional incentive of Rs.6,07,44,583/-. This incentive was paid in view of the sale of Rs.636 crores in the previous year i.e. 2003-04 in which growth of 9.8% over last year was recorded. The contention of the appellant is that prior to letter dated 4.11.2004 they were not aware and did not have any knowledge that this income towards growth incentive would become payable. Thus, the appellant could not have presumed that they would be entitled to this substantial payment towards growth incentive before the letter dated 4.11.2004 was received by them. It is accordingly submitted that the assessee had bonafidely paid their advance tax as per their tentative estimates and once the letter dated 4.11.2004 was received by them, the appellant accordingly, had paid advance tax of Rs.1,25,00,000/- on 14.12.2004.

4. Section 234C postulates payment of interest on deferment of payment of advance tax. The said provision reads as under: “(1) Where in any financial year, - (a) The company which is liable to pay advance tax under section 208 has failed to pay such tax or - (i) The advance tax paid by the company 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 company shall be liable to pay simple interest at the rate of one and one-half 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 company on its current income on or before the 15th day of March is less than the tax due on the returned income, then, the company shall be liable to pay simple interest at the rate of one and one-half 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 company on its 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, it shall not be liable to pay any interest on the amount of the shortfall on those dates;

(b) The assessee, other than a company, who is liable to pay advance tax under section 208 has failed to pay such tax or, -

(i) The advance tax paid by the assessee on his current income on or before the 15th day of September is less than thirty per cent of the tax due on the returned income or the amount of such advance