Exquisite Jewellery Vs ITO (ITAT Mumbai)
In a ruling that offers relief to taxpayers affected by retrospective amendments to tax laws, the Income Tax Appellate Tribunal (ITAT) Mumbai Bench has held that interest under Section 234B of the Income-tax Act, 1961, cannot be charged for a shortfall in advance tax payments if the shortfall arises due to an amendment introduced retrospectively.
The appeal, filed by Exquisite Jewellery vs. ITO (ITAT Mumbai), pertains to the assessment year 2008-09. The core of the dispute revolved around the levy of interest amounting to Rs. 20,15,970/- under Section 234B, which is typically charged for default in payment of advance tax.
Background of the Case
Exquisite Jewellery, a partnership firm engaged in the manufacturing and export of diamond-studded gold jewellery, had initially filed its return of income for AY 2008-09 on September 27, 2008, declaring a low income after claiming exemption under Section 10A of the Act. The firm had also paid advance tax based on this declared income.
However, the case was subsequently selected for scrutiny and referred to the Transfer Pricing Officer (TPO). The TPO, in an order dated October 31, 2011, made an adjustment of Rs. 2,88,55,641/- to the firm’s income. This adjustment was made on the grounds that the assessee had purportedly granted an “Excess credit period” to its associated enterprises compared to non-associated enterprises, thus qualifying as an “international transaction.”
