2008 (4) TMI 362 - AT - Income Tax

US Tax Payments Deemed Advance Tax under DTAA for 1998-99 & 2005-06

Deputy Commissioner Of Income-Tax. Versus Satyam Computer Services Limited.

The Appellate Tribunal upheld the decision of the Commissioner of Income Tax (Appeals), ruling that tax payments made by the assessee in the USA should be ... Chargeability Issues Involved:Interpretation of Double Taxation Avoidance Agreement (DTAA) regarding tax payment in a foreign country as advance tax or self-assessment tax.Detailed Analysis:Issue 1:The main issue in this case is whether the tax paid by the assessee in the USA under the DTAA should be considered as advance tax or self-assessment tax for the assessment years 1998-99 and 2005-06.Analysis:The Assessing Officer (AO) initially treated the tax payment as advance tax but later issued notices under section 154 treating it as self-assessment tax. The AO believed that the DTAA did not specify the treatment of such payments as advance tax. However, the Commissioner of Income Tax (Appeals) (CIT(A)) held that the amounts paid by the assessee in the USA should be considered as advance tax. The Revenue challenged this decision on appeal.Issue 2:The application of section 234B of the Income Tax Act and the impact of the Explanation introduced by the Finance Act, 2006.Analysis:The Revenue argued that the tax payment in the USA should be treated as self-assessment tax, leading to the application of section 234B for charging interest. However, the Tribunal noted that the tax payment was made within the relevant financial years and if paid in India, it would have been treated as advance tax. The Tribunal also considered the Explanation introduced by the Finance Act, 2006, which clarified the meaning of 'assessed tax.' The Tribunal held that the amounts paid by the assessee in the USA should be treated as advance tax based on the Explanation and the Supreme Court's interpretation of statutory provisions.Conclusion:The Appellate Tribunal upheld the CIT(A)'s decision, ruling that the tax payments made by the assessee in the USA for the relevant years should be considered as advance tax, dismissing the appeals of the Revenue. The Tribunal emphasized that the tax payments were made within the financial years and the Explanation provided a clear understanding of the tax treatment under the DTAA.