Case Law Details
Raveendra Nalluri Vs ACIT (ITAT Hyderabad)
The Tribunal dealt with a limited issue relating to incorrect computation of interest under sections 234A, 234B, and 234C. The assessee contended that the Assessing Officer had wrongly computed interest without reducing the foreign tax relief available under sections 90/90A, resulting in excess interest demand.
The ITAT accepted this contention, noting that the law clearly mandates that tax relief under sections 90/90A must be reduced from the assessed tax before calculating interest liability under these sections. Since the AO failed to grant this reduction, the computation of interest was held to be incorrect.
Accordingly, the Tribunal directed the AO to recompute interest after allowing foreign tax credit relief, thereby granting relief to the assessee.
Interest u/s 234A/B/C must be computed on net tax liability after giving effect to foreign tax credit-failure makes the computation defective.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, dated 30/12/2024, which in turn arises from the order passed by the Assessing Officer (for short, “AO”) under section 143(3) r.w.s 143(3A) & 143(3B) of the Income Tax Act, 1961 (for short, “the Act”), dated 26/02/2021 for the Assessment Year (AY) 2018-19. The assessee has assailed the impugned order of the CIT(A) on the following grounds of appeal:
“1. The order of the learned Commissioner of Income-tax (Appeals) is erroneous both on facts and in law, without giving any proper opportunity to the appellant.
2. The learned Commissioner of Income-tax (Appeals) erred in passing an order Ex-Parte without giving any proper opportunity to the appellant. The order of the CIT(Appeals) is ex-parte, illegal and arbitrary, and violative of the principles of natural justice.
3. The order of the learned Commissioner of Income-tax (Appeals) is arbitrary, illegal, and contrary to the provisions of the law, in confirming the order of the assessing officer in treating an amount of Rs 12,64,672/- as income of the appellant without giving any further opportunity.
4. The very approach of the learned Commissioner of Income-tax (Appeals) /NFEAC in passing an order u/s250 ex-party without giving any proper opportunity to confirm the action of the Assessing officer in determining the total income at 2,60,76,192/- against return of income Rs 2,48,11,520 without giving any proper opportunity, is illegal arbitrary, without assigning any valid reasons, and is perverse, highhanded is contrary to the provisions law, therefore the order passed by the Learned Commissioner of Income Tax(appeals)NFAC is illegal ex-facie and violative of principals of natural justice.
5. The CIT (Appeals) erred in upholding the levy of interest under sections 234A, 234B, and 234C of the Act.
6. Any other ground/grounds may be urged at the time of hearing.”
2. Succinctly stated, the assessee had e-filed his return of income for AY 2018-19, declaring an income of Rs.2,48,11,520/-. Thereafter, the case of the assessee was selected for scrutiny assessment under section 143(2) of the Act.
3. The AO vide his order passed under section 143(3) r.w.s 143(3A) & 143(3B) of the Act, dated 26/02/2021 determined the income of the assessee at Rs.2,60,76,192/-.
4. Aggrieved, the assessee carried the matter in appeal before the CIT(A) but without success.
5. The assessee, aggrieved with the order of the CIT(A) has carried the matter in appeal before us.
6. We have heard the Learned Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record.
7. Shri T. Chaitanya Kumar, Advocate, Learned Authorized Representative (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal, submitted that he is confining his contention qua the computation of the interest liability by the AO aggregating to Rs.10,81,993/-, viz., (i) under section 234A: Rs.73,833/-; (ii) under section 234B: Rs.5,88,311/-; and (iii) under section 234C: Rs.4,19,838/-. The Ld. AR submitted that the AO while computing the interest liability of the assessee had erred in law and facts of the case and in not allowing the reduction of the tax relief under section 90/90A of the Act of Rs.69,16,904/-. The Ld. AR for the sake of clarity had drawn our attention to Page-12of the APB. The Ld. AR submitted that as per the assessee, the aggregate of the interest liability amounted to Rs.4,51,519/-, viz., (i) interest under section 234A: Rs.55,383/-; (ii) interest under section 234B: Rs.3,02,909/-; and (iii) interest under section 234C: Rs.93,227/-. On the other hand, Ld. AR submitted that the interest liability determined by the AO amounts to Rs.10,81,993/-, viz., (i) under section 234A: Rs.73,844/-; (ii) under section 234B: Rs.5,88,311/-; and (iii) under section 234C: Rs.4,19,838/-. Elaborating further on his contention, the Ld. AR submitted that the impugned discrepancy in the aforesaid computation of interest liability by the revenue vis-à-vis the assessee had emanated for the solitary reason that the AO while computing the interest liability had not allowed the reduction of the tax relief under section 90/90A of the Act. The Ld. AR submitted that a direction be given to the AO to allow the reduction of the tax relief under section 90/90A of the Act while computing the interest liability of the assessee under the aforesaid statutory provisions.
8. Per contra, Shri D Praveeen, Learned Senior Departmental Representative (for short, “Ld. Sr-DR”) did not object to the contention of the Ld. AR to the extent he had sought for a direction to the AO for reduction of the tax relief under section 90/90A of Act while computing the interest liability under section(s) 234A, 234B & 234C of the Act.
9. We have thoughtfully considered the contentions advanced by the Learned Authorized Representatives of both parties in the backdrop of the orders of the authorities below.
10. We find that section 234A(1)(iii) and (iv), inter alia, contemplates that any relief of tax allowed under sections 90/90A of the Act is to be reduced from the amount of the tax on the income determined under regular assessment while computing the interest liability under the aforesaid section. Also, we find that Explanation-1(ii)&(iii) to section 234B(1) of the Act similarly provide for the reduction of the relief of tax allowed under section 90/90A of the Act while computing the interest liability under the said section. Further, we find that the Explanation-1(ii) & (iii) to section 234C(1) also contemplates the obligation for reducing from the tax due on the returned income any relief of tax allowed under section 90/90A of the Act while computing the interest liability under the said section.
11. Considering the aforesaid position of law, we herein direct the AO to re-compute the interest liability of the assessee under section(s) 234A, 234B and 234C of the Act after reducing from the tax liability determined on regular assessment the tax relief under section 90/90A of the Act after verifying the facts, as per extant law.
12. Resultantly, the appeal filed by the assessee is allowed in terms of our aforesaid observations.
Order pronounced in the open court on 08th April, 2026.
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