Waiver of Interest under Sections 234A, 234B & 234C Denied Where Assessee Did Not Act Pursuant to Existing HC Order { K.R. Ushasree vs. Chief Commissioner of Income-tax 2026] 189 taxmann.com 667 (Kerala)}
Facts:
The assessee’s had claimed deductions under Section 80HHC in their income-tax returns. Subsequently, due to a change in law by the Supreme Court, the deductions were disallowed, resulting in additional tax liability. The assessee’s sought waiver of interest under Sections 234A, 234B and 234C, relying on Clause 2(c) of the CBDT Waiver of Interest Order, 2006.
Issue:
Whether the assessee’s were entitled to waiver of interest under Clause 2(c) merely because a favorable High Court decision existed subsequently, even though the returns had been filed before such decision, and despite non-payment of the principal tax demand.
Held:
The Kerala High Court rejected the waiver applications and held that:
- Clause 2(c) applies only where the assessee’s non-payment of tax was based on a then-existing jurisdictional High Court order.
- Since the assessee’s had filed their returns before the favorable High Court order came into existence, they could not claim to have acted in accordance with that order.
- Further, even if Clause 2(c) were otherwise applicable, failure to pay the principal tax as per the assessed demand would disentitle the assessee’s from waiver/reduction of interest.
- Therefore, the rejection of the waiver applications was upheld.
