TaxTMI 
TaxTMI 
2021 (9) TMI 875
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....ent-Assessee under Section 143 (2) of the Act on 12.10.2004. The Assessing Officer passed an assessment order on 24.03.2006 for the assessment years 1998-99 to 2004-05. The Assessee is a non-resident company incorporated in Japan, with operations in India. In spite of resistance from the Assessee, it was held by the Department that a portion of the Assessee's income was attributable to its activities in India and was therefore liable to be taxed in India, under Articles 4, 5 and 6 of the Double Taxation Avoidance Agreement between India and Japan, read with the provisions of the Act. The Respondent-Assessee filed appeals against the assessment order dated 24.03.2006 before the Commissioner of Income-Tax (Appeals) (hereinafter referred to as the "CIT") only with respect to levy of interest under Section 234B of the Act. The CIT dismissed the appeals by a common order dated 10.02.2009, aggrieved by which the Respondent filed appeals before the Income Tax Appellate Tribunal (hereinafter referred to as the "ITAT"). The ITAT allowed the appeals by an order dated 23.06.2009 and held that the Respondent was not liable for payment of interest under Section 234B, when tax at source wa....
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....ppeals filed by the Respondent for the assessment years 1998-99 to 2004-05 on the merits of the issue, the CIT came to the conclusion, independent of the ITAT's order dated 08.08.2008, that the Respondent is liable to pay advance tax in terms of Section 191 of the Act, in case of no deduction by the payer where tax is deductible at source. Consequently, the Respondent was held to be liable to pay interest under Section 234B of the Act for default in payment of advance tax. The CIT, therefore, dismissed the Respondent's appeals for assessment years 1998-99 to 2004-05. 6. In the appeals filed by the Respondent against the order dated 10.02.2009 of the CIT, the ITAT held that the issue was covered by its earlier decision dated 08.08.2008 in the case of the Respondent for the assessment year 2005-06, the decision of the special bench of the ITAT in the case of Motorola Incorporation (supra) as well as decisions of the Uttarakhand High Court and the Bombay High Court. Reliance was placed by the ITAT on a judgement of the Uttarakhand High Court in Commissioner of Income-Tax v. Tide Water Marine International Inc [2009] 309 ITR 85, whereby it was held that an individual assessee cannot....
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....ion 234B is compensatory in nature as the interest component is meant to compensate the Government for the loss accrued in terms of the tax which became due and was not paid. He contended that when there are two modes of recovery of tax, i.e., one from the assessee and other from the payer who had an obligation to deduct tax, the choice of the Revenue regarding the mode of recovery cannot be restricted. By referring to the relevant provisions of the Act, Mr. Hossain argued that the payment of advance tax is the liability of the assessee and any default or shortfall in such payment from the assessed tax continues to be a liability of the assessee. 9. While construing Section 209 (1) (d) of the Act, he submitted that the High Court committed a serious error in its interpretation of the phrase "deductible or collectible at source". According to him, the phrase "deductible or collectible at source" would not take into its fold tax which was not deducted within the statutory time limit and was, in fact, paid to the assessee without deduction. To support his argument, he relied on Explanation 1 to Section 234B (1), which states the definition of "assessed tax" to be tax on the total i....
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....lt of such payment had to be established, to attract the levy of interest under Section 234B. In the present case, these pre-conditions for levy of interest under Section 234B had not been satisfied, as Section 209 (1) (d) had been complied with to compute that the Respondent-Assessee had no advance tax liability. 11. The relevant provision of the Act which falls for consideration in this case are in Chapter XVII, which pertains to collection and recovery of tax. In accordance with Section 190 of the Act, tax on income shall be payable by deduction or collection at source or by advance payment, notwithstanding that the regular assessment in respect of any income is to be made in a later assessment year. Any person responsible for paying to a non-resident or to a foreign company shall, at the time of the credit of such income, deduct income-tax thereon at the rate in force, according to Section 195. Section 200 provides that a person deducting any sum in accordance with the provisions of Chapter XVII shall pay, within the prescribed time, the sum so deducted to the credit of the Central Government. The consequences of failure to deduct tax or pay the tax after deduction are dealt....
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....s 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 assessment, on an amount equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax. Explanation 1.-In this section, "assessed tax " means the tax on the total income determined under subsection (1) of section 143 and where a regular assessment is made, the tax on the total income determined under such regular assessment as reduced by the amount of,- (i) any tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such....
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....ey should not be allowed to then rely on Section 201 of the Act to reduce their advance tax liability. In this connection, it was submitted by the Revenue that the expression "would be deductible or collectible " would not include amounts, which had not been deducted at the time of payment and, in fact, were paid to the assessee by the payer. 14. The primary issue before us pertains to the interpretation of Section 209 (1) (d). A proviso was inserted to Section 209 (1) (d) by the Finance Act, 2012, which reads as under: "Provided that for computing liability for advance tax, income-tax calculated under clause (a) or clause (b) or clause (c) shall not, in each case, be reduced by the aforesaid amount of income-tax which would be deductible or collectible at source during the said financial year under any provision of this Act from any income, if the person responsible for deducting tax has paid or credited such income without deduction of tax or it has been received or debited by the person responsible for collecting tax without collection of such tax." 15. Notes to the memorandum explaining the provisions in the Finance Bill, 2012 are as under: "Liability to....
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....ad upheld the well-recognised principle that in dealing with matters of construction, subsequent legislation may be looked at in order to see what is the proper interpretation to be put upon the earlier Act, where the earlier Act is obscure or ambiguous or readily capable of more than one interpretation. While construing sub-section 2(b) of Section 80-HHC of the Act, as it stood prior to its amendment and thereafter, this Court in Gem Granites v. Commissioner of Income Tax, T.N. (2005) 1 SCC 289 held as follows: "13. The introduction of the phrase "other than" in clause (b) of sub-section (2) of Section 80-HHC in 1991, in our opinion, indicates the carving out of a specific class from the generic class of "minerals and ores". This means that were it not for the exception, the specified processed minerals and ores would have been covered by the words "minerals and ores". It also indicates that only the minerals and ores subjected to the process of cutting and polishing would be entitled to the benefit of Section 80-HHC meaning thereby that all other species of processed minerals and ores would continue to be covered by the general exclusion applicable to the generic c....
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....isions of Chapter XVII. The liability for payment of interest as provided in Section 234B is for default in payment of advance tax. While the definition of "assessed tax" under Section 234B pertains to tax deducted or collected at source, the pre-conditions of Section 234B, viz. liability to pay advance tax and non- payment or short payment of such tax, have to be satisfied, after which interest can be levied taking into account the assessed tax. Therefore, Section 209 of the Act which relates to the computation of advance tax payable by the assessee cannot be ignored while construing the contents of Section 234B. As we have already held that prior to the financial year 2012-13, the amount of income-tax which is deductible or collectible at source can be reduced by the assessee while calculating advance tax, the Respondent cannot be held to have defaulted in payment of its advance tax liability. We uphold the view adopted in the impugned judgement of the Delhi High Court in Civil Appeal No. 1262 of 2016 as well as by the Madras High Court in the Madras Fertilizers case (supra), that the Revenue is not remediless and there are provisions in the Act enabling the Revenue to proceed ag....