TaxTMI 
TaxTMI 
2009 (10) TMI 423
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.... June 27, 2008, of the Income-tax Appellate Tribunal ("ITAT" for short), Pune Bench, Pune, in the income-tax appeals arising from assessments meant for the assessment year 2001-02 and raising three questions of law. 2. Counsel appearing for the appellant and respondent agree that the first two questions sought to be raised in all these group of appeals are covered against the Revenue by virtue of the judgments of the hon'ble Supreme Court. The first question stands answered in the case of Hindustan Coca Cola Beverage P. Ltd. v. CIT reported in [2007] 293 ITR 226 (SC), whereas the second question stands answered by the decision of the apex court in the case of CIT v. Pranoy Roy reported in [2009] 309 ITR 231 (SC). On this backdrop the first two questions can hardly be said to be substantial questions of law warranting consideration afresh at the hands of this court. 3. Having said so, we are now required to consider the third question, which revolves around the interpretation of sections 234B and 234C of the Act resulting from the failure on the part of the assessee to pay advance tax which, in our view, needs consideration. Hence, the appeal stands admitted to adjudicate upon....
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....f the Act. 8. The assessee, not satisfied with the action of the Assessing Officer levying interest under sections 234A, 234B and 234C on the income determined under section 143(3) read with section 147 of the Act preferred an appeal before the Commissioner of Income-tax (Appeals)-III, Pune, which was dismissed by an order dated February 28, 2008, affirming the order of the Assessing Officer. 9. Aggrieved by the aforesaid order of the Commissioner of Income-tax (Appeals)-III, Pune, dated February 28, 2008, an appeal was carried by the respondent to the Income-tax Appellate Tribunal, Pune Bench (B), Pune. The Income-tax Appellate Tribunal, vide its order dated June 27, 2008, allowed the appeal holding that the issue of interest under sections 234B and 234C of the Act is covered by the Special Bench decision in the case of Sumit Bhattacharya v. Asst. CIT [2008] 300 ITR (AT) 347 (Mum), wherein the Special Bench relying upon another decision of the Special Bench in the case of Motorola Inc. v. Deputy CIT [2005] 95 ITD 269 had ruled that interest under sections 234B and 234C of the Act could not have been levied, since the assessee' s employer had paid interest for the delayed pay....
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.... 234C of the Act warranting inference at the hands of this court. 12. Per contra, Mr. Irani, learned counsel appearing with Mr. Jasani, for the respondents urged that the interest under sections 234B and 234C of the Act can be levied only if an assessee is liable to pay advance tax but defaults in payment thereof. According to him, in the present case, the assessee was not liable to pay advance tax at all as such there was no question of his being liable to pay interest either under section 234B or under section 234C of the Act. 13. According to Mr. Irani, two steps are required to be taken in determining an assessee's liability to pay advance tax; in the first step the assessee's current income is required to be estimated and income-tax thereon at the prescribed rate is required to be calculated as per section 209(1)(a); and in the second step, income-tax deductible at source is required to be reduced from the figure arrived at in the first step above, and it is only if any balance is remaining then only the assessee would be liable to pay advance tax under section 209(1)(d). 14. Mr. Irani further submits that the entire tax on the estimated salary income of an employee i....
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....x International Drilling Co. Ltd. [2003] 264 ITR 320 followed by this court in Director of Income-tax (International Taxation) v. NGC Network Asia LLC [2009] 313 ITR 187 (Bom). 18. Lastly, Mr. Irani submits that in any event, the employer-company having already paid interest under section 201(1A) of the Act on account of non-deduction, by it, of tax deducted at source, the employee-respondent cannot be subjected to interest liability under section 234B/234C of the Act. In his submission, it is now well settled that interest payable under the Act is compensatory in nature and hence there cannot be a double recovery of interest by the Revenue. Reliance is placed on the judgment of the Supreme Court in the case of Hindustan Coca Cola Beverage P. Ltd. v. CIT [2007] 293 ITR 226 to contend that deduction of tax at source by a payer and direct payment of tax by the payee were alternative and not cumulative methods of tax recovery, so that once there is direct payment of tax by the payee, the liability of the payer for interest under section 201(1A) of the Act for default in deducting tax at source would cease. 19. On the above premise, the submission advanced by Mr. Irani is that, o....
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.... under the head `Salaries' due or received by him from the other employer or employers, the tax deducted at source therefrom and such other particulars, in such form and verified in such manner as may be prescribed, and thereupon the person responsible for making the payment referred to above shall take into account the details so furnished for the purposes of making the deduction under sub-section (1). 201.(1) Where any person, including the principal officer of a company,- (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: Provided that no penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax. (1A) without prejudice to the provisio....
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....t of a month comprised in the period commencing on the date immediately following the due date, and, (a) where the return is furnished after the due date, ending on the date of furnishing of the return; or (b) where no return has been furnished, ending on the date of completion of the assessment under section 144, on the amount of the tax on the total income as determined under sub-section (1) of section 143, and where a regular assessment is made, on the amount of the tax on the total income determined under regular assessment, as reduced by the amount of, (i) advance tax, if any, paid; (ii) any tax deducted or collected at source; (iii) any relief of tax allowed under section 90 on account of tax paid in a country outside India; (iv) any relief of tax allowed under section 90A on account of tax paid in a specified territory outside referred to in that section; (v) any deduction, from the Indian income-tax payable, allowed under section 91, on account of tax paid in a country outside India; and (vi) any tax credit allowed to be set off in accordance with the provisions of section 115JAA. Explanation 1.-In this section, `due date' means the date specif....
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....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. (5) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years. 234B. (1) Subject to the other provisions of this section, where, in any financial year, an assessee who is liable to pay advance tax under section 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of section 210 is less than ninety per cent. of the assessed tax, the assessee shall be liable to pay simple interest at the rate of one per cent. for every month or part of a month comprised in the period from the 1st day of April next following such financial year to the date of determination of total income under sub-section (1) of section 143 and where a regular assessment is made, to the date of such regular a....
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...., the assessee shall be liable to pay simple interest at the rate of one per cent. for every month or part of a month comprised in the period commencing on the day following the date of determination of total income under sub-section (1) of section 143 and where a regular assessment is made as is referred to in sub-section (1) following the date of such regular assessment and ending on the date of the reassessment or recomputation under section 147 or section 153A, on the amount by which the tax on the total income determined on the basis of the reassessment or recomputation exceeds the tax on the total income determined under sub-section (1) of section 143 or on the basis of the regular assessment aforesaid. Explanation . . . (4) Where, as a result of an order under 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) or sub-section (3) 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....
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....e returned income or the amount of such advance tax paid on or before the 15th day of December is less than sixty per cent. of the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of one per cent. per month for a period of three months on the amount of the shortfall from thirty per cent. or, as the case may be, sixty per cent. of the tax due on the returned income; (ii) the advance tax paid by the assessee on his current income on or before the 15th day of March is less than the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of one per cent. on the amount of the shortfall from the tax due on the returned income: Provided that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of underestimate or failure to estimate (a) the amount of capital gains; or (b) income of the nature referred to in sub-clause (ix) of clause (24) of section 2, and the assessee has paid the whole of the amount of tax payable in respect of income referred to in clause (a) or clause (b), as ....
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....isions of section 115JAA. (2) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years. Consideration: 20. Having heard both parties and having examined the provisions of the Act relevant for the purpose of deciding the issues involved in the present appeal, one has to turn to Chapter XVII of the Act which provides for collection and recovery of tax. Chapter XVII is divided into various Parts A to F. Part A provides for deduction at source and advance payment with which presently we are concerned for deciding the appeal. Section 190(1), inter alia, provides that notwithstanding regular assessment in respect of any income is to be made in a later assessment year, the tax on such income shall be payable by deduction (or collection) at source (or by advance payment or by payment under sub-section (1A) of section 192), as the case may be, in accordance with the provisions of Chapter XVII. Section 191 provides that in the case of income in respect of which provision is not made under Chapter XVII for deducting income-tax at the time of payment, and in any case where inc....
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...., that is to say, income from salaries, income from house property, profits and gains of business, capital gains and income from other sources. The scheme of the tax deducted at source provisions applies not only to the amount paid, which bears the character of `income' such as salaries, dividends, interest on securities, etc., but the said provisions also apply to gross sums, the whole of which may not be income or profits in the hands of the recipient, such as payment to contractors and sub-contractors. The purpose of the tax deducted at source provisions in Chapter XVII-B is to see that the sum which is chargeable under section 4 for levy and collection of income-tax, the payer should deduct tax thereon at the rates in force, if the amount is to be paid to a non-resident. The said tax deducted at source provisions are meant for tentative deduction of income-tax subject to regular assessment. (see Transmission Corporation of A. P. v. CIT reported in [1999] 239 ITR 587, at page 594)." The apex court further observed (page 246): "Applying the above test, we are of the view that if the payments of home salary abroad by the foreign company to the expatriate has any connection o....
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....ent of advance tax. All these three sections create liability on the assessee to pay interest for the default committed by him in the circumstances mentioned in the said sections. 24. The apex court also had an occasion to consider the very same question with regard to the nature of liability of interest in the case of Dr. Prannoy Roy v. CIT reported in [2002] 254 ITR 755 (Delhi), wherein the apex court was pleased to hold that interest charged under section 234A of the Act is not by way of penalty. It is levied to compensate the Revenue in order to avoid from being deprived of payment of tax on the due date. Interest is held to be payable where the tax had not been deposited prior to the due date of filing of the income-tax return. In other words, it was held that where the tax already paid by the assessee was not less than the tax payable on the returned income which was accepted, the question of levy of interest under section 234A does not arise. 25. Section 234B which provides for interest for defaults in payment of advance tax was also a subject-matter of scrutiny at the hands of the Uttaranchal High Court in the case of CIT v. Sedco Forex International Drilling Co. Ltd.....