INCOME TAX ACT, 1961

Section 234B

Interest under section 234B - Validity of - Difference in tax in assessee's return and as determined by AO -

Assessee was engaged in business of providing services in connection with prospecting, extraction and production of mineral oil. Assessment order was passed, under section 143(3) levying tax and in addition, interest was charged under section 234B and under section 234D. Credit was given for prepaid taxes, except for a sum as no TDS certificate for the said amount had been filed. Tax at the rate of 42% was also levied on the interest received by assessee on refund of Income Tax. Held: It was evident from material placed before Department had deducted tax at source from the amount paid to assessee as interest on the Income-Tax refund. Assessee's liability to pay tax was on account of the difference in tax which they declared in their Return of the tax and as determined by AO. AO held that this interest, which was paid to assessee on refund, was also liable to be taxed at 42% and not at 15% which assessee had declared in its Return. AO had held assessee liable to pay tax even on this interest amount at 42%. Assessee ought to have paid advance tax on this differential amount and, for their failure to do so, AO had rightly levied interest under section 234B.

REFERRED :

FAVOUR : Against the assessee

A.Y. :

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