Capgemini Not Liable To Pay Advance Tax Interest For Period Before Commencement Of Business: ITAT Mumbai

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that Capgemini IT Solutions India Private Limited cannot be charged interest for delay in paying advance tax for the period before it started its business in October 2019.

“The levy of interest under section 234C in respect of the instalments falling due prior to 17.10.2019 is not sustainable in law.”, it observed.

The bench of Judicial Member Kavitha Rajagopal and Accountant Member Makarand Vasant Mahadeokar passed the order on April 30, 2026, while allowing the company's appeal against the Commissioner of Income Tax (Appeals).

The company, which provides IT and IT-enabled services from a Special Economic Zone, began operations only after receiving approval from the Development Commissioner on October 17, 2019. It had filed its return declaring nil income after claiming deduction under section 10AA.

During assessment, the Assessing Officer accepted the returned income but did not grant the deduction in the computation sheet, resulting in taxable income being reflected. The Commissioner (Appeals) later directed verification of the deduction and grant of MAT credit but upheld interest for deferment of advance tax.

Before the tribunal, the company argued that it had no business activity before October 2019 and therefore could not have estimated income or paid advance tax installments due in June and September 2019.

The tribunal agreed, noting that income itself did not exist before the business commenced.

“The condition precedent for applicability of section 234C, namely the existence of income capable of estimation, itself fails in the facts of the present case.”, it said.

It also rejected the Commissioner (Appeals)' view that the company could have anticipated its turnover even before starting operations.

“The Act does not contemplate estimation of income in anticipation of a business which has not yet been set up.”

Allowing the appeal, the tribunal directed the Assessing Officer to recompute the interest by excluding the first and second instalments and limiting any levy to the period after the business commenced.