Month is Period of 30 days instead of British calendar month

By | December 22, 2015

MonthIssue : How to Calculate interest payable by the assessee under S.201(1A) i.e by taking a period of 30 days as a month instead of British calendar month ?

IN THE ITAT HYDERABAD BENCH ‘B’

Navayuga Quazigund Expressway (P.) Ltd.

v.

Deputy Commissioner of Income-tax, Circle 15 (1), Hyderabad

P.M. JAGTAP, ACCOUNTANT MEMBER
AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER

IT APPEAL NO. 1651 (HYD.) OF 2014
[ASSESSMENT YEAR 2012-13]

MARCH  13, 2015

Brief Facts  of the case

Interest under S.201(1A) was computed by the assessing officer by considering part of the calendar month as full month, whereas such interest was chargeable by taking the month as a period of 30 days. The following example was also given by the assessee to support and substantiate its stand.

“……if we take the first transaction as an example:

Date of payment 04.04.2011
Due date of remittance 07.05.2011
Actual date of remittance 01.06.2011

(c) The assessing officer charged interest for three calendar months as under:

05.05.2011 to 30.04.2011 One month
01.05.2011 to 31.05.2011 One month
01.06.2011 One month

(d) The appellant’s version is since the interest is compensatory in nature, which is levied on late remittance of tax deducted, the basis should be a month of 30 days period as under:

05.04.2011 to 30.04.2011 One month
05.05.2011 to 01.06.2011 One month
Total Two months

Procedure to Cacluate Interest is as per Rule 119A of Income-tax Rules, 1962 :-

The procedure to be followed for calculating the interest payable by the assessee or by the Central Government is given in Rule 119A of Income-tax Rules, 1962 as under—

“119A. In calculating the interest payable by the assessee or the interest payable by the Central Government to the assessee under any provisions of the Act—

(a) where interest is to be calculated on annual basis, the period for which such interest is to be calculated shall be rounded off to a whole month or months and for this purpose any fraction of a month shall be ignored; and the period so rounded off shall be deemed to be the period in respect of which the interest is to be calculated;
(b) where the interest is to be calculated for every month or part of a month comprised in a period, any fraction of a month shall be deemed to be a full month and the interest shall be so calculated;
(c) the amount of tax, penalty or other sum in respect of which such interest is to be calculated shall be rounded off to the nearest multiple of one hundred rupees and for this purpose any fraction of one hundred rupees shall be ignored and the amount so rounded off shall be deemed to be the amount in respect of which the interest is to be calculated.”

Held

By applying the ratio of  decision Hon’ble Gujarat High Court in the case  of CIT v. Arvind Mills Ltd. No 2486 OF 2009 SEPTEMBER 13, 2011):-

Term ‘month’ must be given the ordinary meaning of the term of 30 days period and not the British calendar month as defined in S.3(35) of the General Clauses Act. It was held that the definition given in General Clauses Act cannot be adopted for the purposes of sub- section (1) of S.244A as such importation of the definition would lead to anomalous situation.

we respectfully follow the decision of the Hon’ble Gujarat High Court in the case of Arvind Mills Ltd. (supra) and direct the Assessing Officer to recompute the interest payable under S.201(1A) by taking a period of 30 days as a month instead of British calendar month.

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