2014 (1) TMI 940 - AT - Income Tax

Deletion of Interest u/s 234B of the Act - Failure to pay advance tax u/s 209 of the Act - TDS to be deducted u/s 195 of the Act Held that - The decision in Director of Income Tax Versus M/s. Jacabs Civil Incorporated / Mitsubishi Corporation 2010 (8) TMI 37 - DELHI HIGH COURT followed - The entire tax is to be deducted at source which is payable on such payments made by the payee to the non-resident Once it is found that the liability was that of the payer and the said payer has defaulted in deducting the tax at source the Department is not remedy-less and therefore can take action against the payer under the provisions of Section 201 of the Income-tax Act and compute the amount accordingly - the non-resident is liable to pay tax and the question of payment of advance tax would not arise - This would be clear from the reading of Section 191 of the Act along with Section 209 (1) (d) of the Act - For this reason it would not be permissible for the Revenue to charge any interest under Section 234B of the Act - the Tribunal has rightly held that the assessee was not liable to pay any interest under Section 234B of the Act Decided against Revenue.

Summary

Issues:
1. Reopening of assessments based on survey u/s 133A.
2. Existence of Permanent Establishment in India.
3. Attribution of profits to Permanent Establishment.
4. Levy of interest u/s 234B of the Income-tax Act.

Reopening of Assessments:
The case involved a survey conducted at the premises of GEIOC, leading to the initiation of reassessment proceedings for 22 entities of G.E. Group. The Assessing Officer completed assessments u/s 143(3) read with S.147 of the Act after rejecting objections to the reopening of assessments.

Existence of Permanent Establishment:
The Assessing Officer determined that the 22 GE Overseas entities had a Permanent Establishment in India, including a dependent agency Permanent Establishment in the form of G.E. India Industrial (P.) Ltd. Profit was attributed to the Permanent Establishment and brought to tax.

Attribution of Profits to Permanent Establishment:
The Ld. Commissioner of Income-tax (Appeals) confirmed the action of the Assessing Officer on the issues of reopening of assessments, existence of Permanent Establishment, and attribution of profits to the Permanent Establishment. However, the Ld. Commissioner decided in favor of the assessee regarding the levy of interest u/s 234B following the judgment of the Jurisdictional High Court.

Levy of Interest u/s 234B:
The Revenue challenged the deletion of interest levied by the Assessing Officer u/s 234B by the Ld. Commissioner of Income-tax (Appeals). The issue centered around whether interest u/s 234B was applicable due to failure to pay advance tax. The Tribunal held that the assessees were not liable to pay interest u/s 234B based on the provisions of the Act and relevant case laws, including the decision of the Jurisdictional High Court in the case of Jacabs Civil Incorporated Mitsubishi Corpn.

The Tribunal noted that the obligation to deduct tax at source under S.195 of the Act meant the assessees were not required to pay advance tax, thus interest u/s 234B was not leviable. The decision of the Jurisdictional High Court was followed, and the Tribunal upheld the order of the Ld. Commissioner of Income-tax (Appeals), dismissing the appeals of the Revenue.

In conclusion, the Tribunal dismissed the appeals of the Revenue and upheld the decision regarding the deletion of interest u/s 234B, based on the interpretation of relevant provisions and case laws.