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Applicability of Section 234 c of the income tax act

Birendra Singh (Executive) (71 Points)

09 August 2011

My Comapny was incorporated under Companies Act, 1956 on 12.07.2007 and entitled to commence business from 31.07.2007.

Entered its first Agreement 01.10.2007.As per Agreement, we raised 1^st Invoice on 23.11.2007 towards Advance payment after execution of Contract and before commencement of Work.

we started the work on this project from 24.01.2008 onwards, Income for the AY 2008-09 booked in the 4^th Qtr only and paid Advance tax for last Qtr.

Does Sec 234(C) will applicable for other all four qtr or for 4th Qtr only.

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9 Replies

PRITESHKUMAR S MANIYAR (NONE) (24 Points)
Replied 09 August 2011

In my opinion in the absence of any specific exclusion or exemption from applicability, sec 234C will be applicable in the above case.

Mihir (Wealth Manager) (5293 Points)
Replied 09 August 2011

Advance tax

15th June - 15% of advance tax

15th September - 30% of advance tax

15th December - 30% of advance tax

15th March - 25% of advance tax

In my opinion, interest will not be payable for earlier quarters u/s 234C.

Birendra Singh (Executive) (71 Points)
Replied 09 August 2011

will you plz elaborate for how many Qtr sec 234(C) will applicable, as my company was incorporated in july 2007 and we started work on a project from jan 2008 onwards.

i think sec 234(C) can't be applicable for 1st Qtr because incorporation of company was in 2nd Qtr. but not sure about its applicability for 2nd and 3rd Qtr.

Mihir (Wealth Manager) (5293 Points)
Replied 09 August 2011

3rd and 4th quarter will be included in the calculation.

3rd quarter because the invoice date is 23rd November 2007.

But, let others share their opinion.

TRILOCHAN (SENIOR ACCOUNTANT) (698 Points)
Replied 09 August 2011

Yes, 234 C applicable to all the quarters,irrespective of the quarter in which income recd.

Somshekar (Rankholder) (-) (158 Points)
Replied 09 August 2011

First Quarter : - when the company is not incorporated in the first quarter i.e 15th june not having bank account and existence how can 234c is applicable to it ?

Second Quarter :- As from the facts, the first contract is entered in third quarter, no income for 2nd quarter, as even there is bank account having the fund, no income is said to accrue at that time as first contract was entered in third quarter, advance tax is applicable on income and not the capital. so the company is in no position to pay or estimate the income at second quarter. for calculating the advance tax for each quarter, one needs to estimate the income for full year and excercise judgement as to the income it will earn. but this is absent at this point of time

Third quarter : - advance is received and hence we can make some judgement as to how much income will be accrued till 31 march. as from the facts service is provided in last quarter and income is booked . so the interest for 3rd quarter will be applicable, as the tax authority may take a view that even though income is recognised in fourt quarter ans the company has executed a contract and also commenced the work and also the advance was lying,

Fourth quarter :- yes, the interest is applicable as the income is recognised.

Please also go through the circular on reduction or waiver of interest, to find some reasoning where the waiver can be applied to your query.

1 Like

Mihir (Wealth Manager) (5293 Points)
Replied 10 August 2011

Advance tax is paid on the "estimated" income. How does one estimate the income within one year of incorporation? Therefore, only 3rd and 4th quarters.