Interest u/s 234 if assessable u/s 44ad

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Chanchal Bajaj (Querist)
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30 November 2012 I am a Article Student.

One of our client is assessable U/s 44AD. But then the client got the notice U/s 143(1) demanding an amount payable. On persual it was noticed that he was levied Interest U/s 234B, 234C for non-payment of advance tax. The Assessment year of the notice is 2011 - 12. There is a rule that Assessee is not liable for Advance Tax if he is assessable U/s 44AD. Then why was the demand raised by the Department. Please if possible answer this query of mine with the valid proof say a notification of the above rule.

Thank you.

CA. Subhash Dangi

CA. Subhash Dangi (Expert)
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30 November 2012 Section 44AD(4)
“The provisions of Chapter XVII-C shall not apply to an eligible assessee in so far as they relate to the eligible business.”
Chapter XVII-C deals with provisions relating to Advance Payment of Tax.

On plain reading of this subsection, we conclude that eligible assessees are exempt from payment of Advance Tax.But the second part of Provision creates a blunder so far it relates to eligible business, which creates lot of doubt.
The following example will better clear your understanding :
Profit under section 44AD Rs 4.00 lac
Say Turnover is RS.50 lakhs)
Interest Income Rs.5.00 Lac
Total Income Rs.9.00 lac

In this situation, whether the assessee is exempted from provisions of advance tax in all or whether the assessee is liable to Pay advance Tax on interest income of Rs.5.00 lac.

From the understanding of Law, it is clear that the assessee have to pay advance tax on interest income of Rs.5.00 lac.
But how this tax calculation is to be made is no where define in legislature?

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