2008 (5) TMI 448 - AT - Income Tax

Summary

Issues Involved:
1. Whether the CIT(A) was justified in deleting the interest charged by the Assessing Officer u/s 234B of the Income-tax Act.
2. Whether the tax deductible at source can be excluded from the tax payable while computing the liability on account of advance tax even in cases where tax had not actually been deducted at source.

Summary:

Issue 1: Deletion of Interest Charged u/s 234B
The revenue appealed against the CIT(A)'s order for the assessment year 2002-03, which deleted the interest charged by the Assessing Officer u/s 234B. The CIT(A) observed that the entire income of the foreign technicians was liable to deduction of tax at source. Therefore, as per section 209(1)(d), the tax payable for advance tax purposes was to be reduced by the tax deductible. Since the entire tax payable was tax deductible, no advance tax was payable by the assessee, leading to the deletion of interest charged u/s 234B.

Issue 2: Exclusion of Tax Deductible at Source from Advance Tax Liability
The revenue argued that u/s 191, in cases where tax had not been deducted at source, the income-tax was payable by the assessee directly, and this was not overridden by section 209. They cited the judgment of the Hon'ble High Court of Uttaranchal in CIT v. Halliburton Offshore Services Inc., which held that the provisions of section 191 were not overridden by sections 192, 208, and 209(1)(d). The assessee countered that section 191 did not override sections 192, 208, and 209(1)(d), and that advance tax was to be computed as per section 209, which required the exclusion of tax deductible at source.

The Tribunal noted that section 191 provides for direct payment of tax where it has not been deducted at source, but this does not relate to advance tax. Section 209(1)(d) specifically provides for the exclusion of tax deductible at source while computing advance tax. The Tribunal emphasized that the phrase "tax deductible at source" was used purposefully, as the person responsible for deducting tax at source is deemed an assessee in default if they fail to do so, and the tax can be recovered from them with interest and penalty.

The Tribunal referred to the decision of the Delhi Bench in Western Geco International Ltd., which held that tax deductible at source must be excluded while computing advance tax liability. They also noted that the Hon'ble High Court of Uttaranchal in Halliburton Offshore Services Inc. did not hold that the tax payable directly u/s 191 would be payable as advance tax.

Conclusion:
The Tribunal upheld the CIT(A)'s order, concluding that the tax deductible at source must be excluded while computing advance tax liability, even if it was not actually deducted. Consequently, no advance tax was payable by the assessees, and there was no case for charging interest u/s 234B. All the appeals by the revenue were dismissed.