CHAPTER XVII - COLLECTION AND RECOVERY OF TAX - C.-ADVANCE PAYMENT OF TAX
CHAPTER XVII - COLLECTION AND RECOVERY OF TAX - C.-ADVANCE PAYMENT OF TAX
Section 215 - Interest Payable by Assessee
Case Laws & Commentary - Income-tax Act, 1961 (as amended by the Finance Act, 2026) - bharattax.co Treatise
Status: Spent for assessment years 1989-90 onwards (section 214(3)); succeeded by section 234B. Live only for earlier years.
Finance Act, 2026: No amendment.
Mechanism: The assessee pays simple interest (15% p.a.) on the shortfall where advance tax paid is less than 75% (companies: 83-1/3%) of the assessed tax, from 1 April following the financial year to the regular assessment; reduction/waiver lay under sub-section (4)/Rule 40 - for assessment years up to 1988-89.
Litigation profile: Historically rich and foundational on the character of advance-tax interest; now spent, its principles inherited by sections 234B/234C.
A. SECTION COMMENTARY
Section 215 is the mirror-image of section 214: where the assessee has paid advance tax (under the old sections 209A or 212) that falls short of a stipulated proportion of the assessed tax, he must pay simple interest at fifteen per cent per annum on the shortfall, from 1 April next following the financial year up to the date of the regular assessment. The stipulated proportion was seventy-five per cent of the assessed tax for assessees generally, and eighty-three and one-third per cent for companies (the proviso to sub-section (1)). Sub-section (4) confers a power to reduce or waive the interest in prescribed cases (worked through Rule 40); sub-section (5) defines 'assessed tax'; and, by section 214(3), the section applies only to assessment years up to 1988-89.
Like section 214, section 215 is spent for assessment years 1989-90 onwards. Its function - charging interest for shortfall in advance tax - is now performed by section 234B, with the deferment counterpart in section 234C. The crucial change in the successor regime is that section 234B/234C interest is mandatory and is no longer subject to the discretionary reduction/waiver that section 215(4) (and Rule 40) allowed; the waiver power now operates only through the Board's general powers and notified schemes. The large body of section 215 authority remains valuable because it settled the character of advance-tax interest that the successor provisions inherited.
Compensatory, part of the assessment, and appealable
The Supreme Court in Central Provinces Manganese Ore settled three propositions that govern section 215 (and, by extension, sections 234B/234C): the interest is compensatory, not penal; it forms part of the process of assessment; and it may be challenged in appeal on the ground that the levy is not attracted at all (for instance, that there was no shortfall, or that the assessee was not liable to advance tax). Whether interest must be specifically directed in the assessment order was the subject of the Ranchi Club line and was ultimately resolved, for the successor provisions, by Bhagat Construction, which treated the computation in Form ITNS-150 as part of the assessment order.
Not deductible; waiver under sub-section (4)
Interest payable under section 215 is not deductible as business expenditure: in Bharat Commerce & Industries the Supreme Court held that interest on delayed payment of income-tax is inextricably connected with the tax liability and partakes of its character, so it cannot be claimed under section 37(1). The reduction/waiver power in sub-section (4), exercised under Rule 40, was confined to the prescribed circumstances and was a discretionary relief - a discretion that the mandatory successor regime (as confirmed in Anjum Ghaswala) has since largely withdrawn.
B. STATUTORY POSITION (verbatim text)
Reproduced verbatim from the Income-tax Act, 1961 (as amended up to the Finance Act, 2025); the Finance Act, 2026 makes no amendment to this section. Editorial "[Omitted...]" notes are those of the Legislature.
215. (1) Where, in any financial year, an assessee has paid advance tax under section 209A or section 212 on the basis of his own estimate (including revised estimate), and the advance tax so paid is less than seventy-five per cent of the assessed tax, simple interest at the rate of fifteen per cent per annum from the 1st day of April next following the said financial year up to the date of the regular assessment shall be payable by the assessee upon the amount by which the advance tax so paid falls short of the assessed tax:
Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have effect as if for the words "seventy-five per cent", the words "eighty-three and one-third per cent" had been substituted.
(2) Where before the date of completion of a regular assessment, tax is paid by the assessee under section 140A or otherwise,—
(i) interest shall be calculated in accordance with the foregoing provision up to the date on which the tax is so paid ; and
(ii) thereafter, interest shall be calculated at the rate aforesaid on the amount by which the tax as so paid (in so far as it relates to income subject to advance tax) falls short of the assessed tax.
(i) in a case where the interest is increased, the Assessing Officer shall serve on the assessee, a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly;
(ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded.
(4) In such cases and under such circumstances as may be prescribed, the Assessing Officer may reduce or waive the interest payable by the assessee under this section.
(5) In this section and sections 217 and 273, "assessed tax" means the tax determined on the basis of the regular assessment (reduced by the amount of tax deductible in accordance with the provisions of sections 192 to 194, section 194A, section 194C, section 194D, section 195 and section 196A so far as such tax relates to income subject to advance tax and so far as it is not due to variations in the rates of tax made by the Finance Act enacted for the year for which the regular assessment is made.
(6) Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this section and sections 216, 217 and 273.
C. AUTHORITIES
Section 215 is spent for assessment years 1989-90 onwards; its function is now discharged by section 234B. The authorities - which the successor regime inherited - are arranged by (1) the character and appealability of the interest, (2) the charging mechanism and the need for a direction, and (3) deductibility and waiver. All citations have been web-verified.
Cluster 1 - Character of the interest: compensatory, part of assessment, appealable
Central Provinces Manganese Ore Co. Ltd. v. CIT (1986) 160 ITR 961 (SC)
Held: Interest under section 215 is compensatory in character and is levied as part of the process of assessment; it is not a penalty. An assessee may dispute the levy in appeal, provided he limits himself to the ground that he is not liable to the levy at all.
Significance: The foundational authority on the character and appealability of advance-tax interest, governing both section 215 and its successor sections 234B/234C.
Modi Industries Ltd. v. CIT (1995) 216 ITR 759 (SC)
Relevance: Fixes the meaning of 'regular assessment' up to which section 215 interest runs (the first assessment under section 143/144), and the definition of 'assessed tax' in sub-section (5) against which the shortfall is measured.
Use: Settles the terminal date and the base for the section 215 computation.
Cluster 2 - The charging mechanism and the requirement of a direction
CIT v. Ranchi Club Ltd. (2001) 247 ITR 209 (SC)
Held: Affirming the Patna High Court, interest is leviable on the tax on the returned income, not the assessed income; and (as then understood) a specific direction in the assessment order was necessary to charge interest, which could not be levied for the first time through the section 156 demand notice.
Significance: The high-water mark of the 'specific direction' requirement, later qualified for the successor provisions by Bhagat Construction.
CIT v. Bhagat Construction Co. (P) Ltd. (2018) 404 ITR 187 (SC)
Held: Interest under section 234B is automatic once the conditions are satisfied; the computation of interest in Form ITNS-150, signed by the Assessing Officer, is itself part of the assessment order, so the absence of an express direction in the body of the order does not defeat the levy.
Significance: Qualifies the Ranchi Club 'direction' requirement for the successor regime; read with section 215 it shows the trajectory of the charging-mechanism question.
Cluster 3 - Deductibility, waiver and the mandatory successor regime
Held: Interest paid under sections 215 and 139 is not deductible as business expenditure under section 37(1); interest on delayed payment of income-tax is inextricably connected with the tax liability and takes its character, and income-tax (and interest thereon) is not a permissible business deduction.
Significance: Settles that section 215 interest is a non-deductible accretion to the tax liability.
CIT v. Anjum M. H. Ghaswala (2001) 252 ITR 1 (SC) [Constitution Bench]
Held: Interest under the successor sections 234A/234B/234C is mandatory; even the Settlement Commission has no power to waive or reduce it under section 245D(6).
Significance: Marks the contrast with section 215(4)/Rule 40: the discretionary waiver of advance-tax interest under the old section did not survive into the mandatory successor regime.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is omitted, spent or substantially unlitigated, the candour rule is observed - the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.
CHAPTER XVII - COLLECTION AND RECOVERY OF TAX - C.-ADVANCE PAYMENT OF TAX
Section 215 - Interest Payable by Assessee
Case Laws & Commentary - Income-tax Act, 1961 (as amended by the Finance Act, 2026) - bharattax.co Treatise
Status: Spent for assessment years 1989-90 onwards (section 214(3)); succeeded by section 234B. Live only for earlier years.
Finance Act, 2026: No amendment.
Mechanism: The assessee pays simple interest (15% p.a.) on the shortfall where advance tax paid is less than 75% (companies: 83-1/3%) of the assessed tax, from 1 April following the financial year to the regular assessment; reduction/waiver lay under sub-section (4)/Rule 40 - for assessment years up to 1988-89.
Litigation profile: Historically rich and foundational on the character of advance-tax interest; now spent, its principles inherited by sections 234B/234C.
A. SECTION COMMENTARY
Section 215 is the mirror-image of section 214: where the assessee has paid advance tax (under the old sections 209A or 212) that falls short of a stipulated proportion of the assessed tax, he must pay simple interest at fifteen per cent per annum on the shortfall, from 1 April next following the financial year up to the date of the regular assessment. The stipulated proportion was seventy-five per cent of the assessed tax for assessees generally, and eighty-three and one-third per cent for companies (the proviso to sub-section (1)). Sub-section (4) confers a power to reduce or waive the interest in prescribed cases (worked through Rule 40); sub-section (5) defines 'assessed tax'; and, by section 214(3), the section applies only to assessment years up to 1988-89.
A spent provision, superseded by section 234B
Like section 214, section 215 is spent for assessment years 1989-90 onwards. Its function - charging interest for shortfall in advance tax - is now performed by section 234B, with the deferment counterpart in section 234C. The crucial change in the successor regime is that section 234B/234C interest is mandatory and is no longer subject to the discretionary reduction/waiver that section 215(4) (and Rule 40) allowed; the waiver power now operates only through the Board's general powers and notified schemes. The large body of section 215 authority remains valuable because it settled the character of advance-tax interest that the successor provisions inherited.
Compensatory, part of the assessment, and appealable
The Supreme Court in Central Provinces Manganese Ore settled three propositions that govern section 215 (and, by extension, sections 234B/234C): the interest is compensatory, not penal; it forms part of the process of assessment; and it may be challenged in appeal on the ground that the levy is not attracted at all (for instance, that there was no shortfall, or that the assessee was not liable to advance tax). Whether interest must be specifically directed in the assessment order was the subject of the Ranchi Club line and was ultimately resolved, for the successor provisions, by Bhagat Construction, which treated the computation in Form ITNS-150 as part of the assessment order.
Not deductible; waiver under sub-section (4)
Interest payable under section 215 is not deductible as business expenditure: in Bharat Commerce & Industries the Supreme Court held that interest on delayed payment of income-tax is inextricably connected with the tax liability and partakes of its character, so it cannot be claimed under section 37(1). The reduction/waiver power in sub-section (4), exercised under Rule 40, was confined to the prescribed circumstances and was a discretionary relief - a discretion that the mandatory successor regime (as confirmed in Anjum Ghaswala) has since largely withdrawn.
B. STATUTORY POSITION (verbatim text)
Reproduced verbatim from the Income-tax Act, 1961 (as amended up to the Finance Act, 2025); the Finance Act, 2026 makes no amendment to this section. Editorial "[Omitted...]" notes are those of the Legislature.
215. (1) Where, in any financial year, an assessee has paid advance tax under section 209A or section 212 on the basis of his own estimate (including revised estimate), and the advance tax so paid is less than seventy-five per cent of the assessed tax, simple interest at the rate of fifteen per cent per annum from the 1st day of April next following the said financial year up to the date of the regular assessment shall be payable by the assessee upon the amount by which the advance tax so paid falls short of the assessed tax:
Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have effect as if for the words "seventy-five per cent", the words "eighty-three and one-third per cent" had been substituted.
(2) Where before the date of completion of a regular assessment, tax is paid by the assessee under section 140A or otherwise,—
(i) interest shall be calculated in accordance with the foregoing provision up to the date on which the tax is so paid ; and
(ii) thereafter, interest shall be calculated at the rate aforesaid on the amount by which the tax as so paid (in so far as it relates to income subject to advance tax) falls short of the assessed tax.
(3) Where as a result of an order under section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub-section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and—
(i) in a case where the interest is increased, the Assessing Officer shall serve on the assessee, a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly;
(ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded.
(4) In such cases and under such circumstances as may be prescribed, the Assessing Officer may reduce or waive the interest payable by the assessee under this section.
(5) In this section and sections 217 and 273, "assessed tax" means the tax determined on the basis of the regular assessment (reduced by the amount of tax deductible in accordance with the provisions of sections 192 to 194, section 194A, section 194C, section 194D, section 195 and section 196A so far as such tax relates to income subject to advance tax and so far as it is not due to variations in the rates of tax made by the Finance Act enacted for the year for which the regular assessment is made.
(6) Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this section and sections 216, 217 and 273.
C. AUTHORITIES
Section 215 is spent for assessment years 1989-90 onwards; its function is now discharged by section 234B. The authorities - which the successor regime inherited - are arranged by (1) the character and appealability of the interest, (2) the charging mechanism and the need for a direction, and (3) deductibility and waiver. All citations have been web-verified.
Cluster 1 - Character of the interest: compensatory, part of assessment, appealable
Central Provinces Manganese Ore Co. Ltd. v. CIT (1986) 160 ITR 961 (SC)
Issue: The nature of interest under section 215 (and section 139(8)) and whether it is appealable.
Held: Interest under section 215 is compensatory in character and is levied as part of the process of assessment; it is not a penalty. An assessee may dispute the levy in appeal, provided he limits himself to the ground that he is not liable to the levy at all.
Significance: The foundational authority on the character and appealability of advance-tax interest, governing both section 215 and its successor sections 234B/234C.
Modi Industries Ltd. v. CIT (1995) 216 ITR 759 (SC)
Relevance: Fixes the meaning of 'regular assessment' up to which section 215 interest runs (the first assessment under section 143/144), and the definition of 'assessed tax' in sub-section (5) against which the shortfall is measured.
Use: Settles the terminal date and the base for the section 215 computation.
Cluster 2 - The charging mechanism and the requirement of a direction
CIT v. Ranchi Club Ltd. (2001) 247 ITR 209 (SC)
Held: Affirming the Patna High Court, interest is leviable on the tax on the returned income, not the assessed income; and (as then understood) a specific direction in the assessment order was necessary to charge interest, which could not be levied for the first time through the section 156 demand notice.
Significance: The high-water mark of the 'specific direction' requirement, later qualified for the successor provisions by Bhagat Construction.
CIT v. Bhagat Construction Co. (P) Ltd. (2018) 404 ITR 187 (SC)
Held: Interest under section 234B is automatic once the conditions are satisfied; the computation of interest in Form ITNS-150, signed by the Assessing Officer, is itself part of the assessment order, so the absence of an express direction in the body of the order does not defeat the levy.
Significance: Qualifies the Ranchi Club 'direction' requirement for the successor regime; read with section 215 it shows the trajectory of the charging-mechanism question.
Cluster 3 - Deductibility, waiver and the mandatory successor regime
Bharat Commerce & Industries Ltd. v. CIT (1998) 230 ITR 733 (SC)
Held: Interest paid under sections 215 and 139 is not deductible as business expenditure under section 37(1); interest on delayed payment of income-tax is inextricably connected with the tax liability and takes its character, and income-tax (and interest thereon) is not a permissible business deduction.
Significance: Settles that section 215 interest is a non-deductible accretion to the tax liability.
CIT v. Anjum M. H. Ghaswala (2001) 252 ITR 1 (SC) [Constitution Bench]
Held: Interest under the successor sections 234A/234B/234C is mandatory; even the Settlement Commission has no power to waive or reduce it under section 245D(6).
Significance: Marks the contrast with section 215(4)/Rule 40: the discretionary waiver of advance-tax interest under the old section did not survive into the mandatory successor regime.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is omitted, spent or substantially unlitigated, the candour rule is observed - the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.