2017 (11) TMI 1297 - AT - Income Tax

Tribunal rules no interest under section 234B for non-resident Assessee

Dcit, Circle Gurgaon, International Taxation Versus M/s Mastercard International Inc. C/O Authorized Representative, SRBC & Associated LLP

Dcit, Circle Gurgaon, International Taxation Versus M/s Mastercard International Inc. C/O Authorized Representative, SRBC & Associated LLP - Tmi Issues:1. Whether interest u/s. 234B is leviable on payments to a non-resident assessee subject to tax deduction at source u/s. 195 of the IT Act, 1961.Analysis:The Revenue filed an appeal against the Order of the Ld. CIT(A)-43, New Delhi concerning the assessment year 2006-07. The main issue raised by the Revenue was the deletion of interest chargeable u/s. 234B by the Ld. CIT(A) on the grounds that interest is not leviable on payments to a non-resident assessee subject to tax deduction at source u/s. 195. The Revenue contended that interest u/s. 234B is mandatory, citing relevant case laws. The Assessee, a US-based company engaged in electronic payment systems, had a history of filing NIL returns based on not having a Permanent Establishment in India. However, MAP proceedings determined the existence of a PE, leading to the Assessee filing returns on a Global Net Operating Margin (GNOM) basis. The Revenue assessed the income at a higher margin for AY 2006-07, leading to the levy of interest u/s. 234B. The Ld. CIT(A) held in favor of the Assessee, citing precedents and directing the deletion of the interest.The Tribunal analyzed the issue and found that the Delhi High Court had previously ruled in favor of the Assessee on similar grounds in earlier assessment years. Referring to the Ld. CIT(A)'s decisions in the Assessee's own case for AY 2005-06 and 2008-09, the Tribunal noted that interest u/s. 234B was not leviable on payments to non-resident assessees subject to tax deduction at source u/s. 195. Citing various case laws and precedents, the Tribunal upheld the Ld. CIT(A)'s decision to delete the interest levied u/s. 234B. The Tribunal concluded that the interest was not applicable in this case, as all payments to the non-resident Assessee were subject to tax deduction at source u/s. 195. Therefore, the Tribunal dismissed the Revenue's appeal, affirming the Ld. CIT(A)'s order.In conclusion, the Tribunal dismissed the Revenue's appeal against the Ld. CIT(A)'s order, holding that interest u/s. 234B was not leviable on payments to the non-resident Assessee subject to tax deduction at source u/s. 195. The decision was based on previous rulings and case laws supporting the Assessee's position, leading to the deletion of the interest by the Ld. CIT(A).