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2023 (9) TMI 1612 - HC - Income TaxNon-resident liability to pay interest u/s 234B and 234C - tax is deductible under Sec.195 of the Act on the payments made and no advance tax is payable by the assessee - HELD THAT - The dispute relating to the interpretation of the words would be deductible or collectible in Section 209(1)(d) of the Act can be resolved by referring to the proviso to section 209(1)(d) which was inserted by the Finance Act 2012. The proviso makes it clear that the assessee cannot reduce the amount of income-tax paid to it by the payer without deduction while computing liability for advance tax. To give the intended effect to the proviso section 209(1)(d) of the Act has to be understood to entitle the assessee for all assessments prior to the financial year 2012-13 to reduce the amount of income- tax which would be deductible or collectible in computation of its advance tax liability notwithstanding the fact that the assessee has received the full amount without deduction. The issue is covered by a decision of Mitsubishi Corporation 2021 (9) TMI 875 - SUPREME COURT find no force in the contention of the Revenue that section 234B should be read in isolation without reference to the other provisions 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 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 MITSUBISHI CORPORATION 2021 (9) TMI 875 - SUPREME COURT as well in the Madras Fertilizers Ltd. case 1983 (9) TMI 74 - MADRAS HIGH COURT that the Revenue is not remediless and there are provisions in the Act enabling the Revenue to proceed against the payer who has defaulted in deducting tax at source. There is no doubt that the position has changed since the financial year 2012-13 in view of the proviso to section 209(1)(d) pursuant to which if the assessee receives any amount including the tax deductible at source on such amount the assessee cannot reduce such tax while computing its advance tax liability. Decided against revenue.
Issues Involved:
1. Whether the Income Tax Appellate Tribunal was correct in law in holding that the non-resident assessee was not liable to pay interest under sections 234B and 234C of the Income Tax Act when the advance tax paid was less than the ultimate tax liability. 2. Whether the Tribunal was correct in holding that the Assessing Officer should have exercised the power of rectification concerning the deletion of interest under sections 234B and 234C when raised by the assessee in a rectification application. Issue-wise Detailed Analysis: Issue 1: Liability to Pay Interest under Sections 234B and 234C The primary issue in this case was whether interest under sections 234B and 234C of the Income Tax Act could be levied on a non-resident assessee when the tax was deductible at source under section 195, and no advance tax was payable by the assessee. The High Court relied on the precedent set by the Hon'ble Supreme Court in the case of Director of Income Tax, New-Delhi vs. Mitsubishi Corporation, which clarified the interpretation of sections 209 and 234B of the Act. The Supreme Court had analyzed the relevant provisions, particularly section 209(1)(d), which pertains to the computation of advance tax. It was noted that prior to the amendment by the Finance Act, 2012, an assessee could reduce the amount of income-tax deductible or collectible at source while computing advance tax liability. The amendment introduced a proviso effective from April 1, 2012, which clarified that if income was received without deduction of tax, the assessee was liable to pay advance tax on such income. However, this amendment was prospective and applicable from the financial year 2012-13 onwards. The Court concluded that for assessment years prior to 2012-13, the assessee was entitled to reduce the amount of tax deductible at source while computing advance tax liability, and therefore, could not be held liable for interest under section 234B for shortfall in advance tax payments. The Court found that the Tribunal was correct in its decision, and the question was answered against the revenue, leading to the dismissal of the appeal on this issue. Issue 2: Rectification by the Assessing Officer The second issue was whether the Assessing Officer should have exercised the power of rectification concerning the deletion of interest under sections 234B and 234C when raised by the assessee. Given that the first issue was resolved against the revenue, the Court deemed the second question to be academic. Since the legal issue regarding the non-liability of interest under sections 234B and 234C was settled, the question of rectification became irrelevant. Consequently, the appeal on this issue was also dismissed. In conclusion, the High Court upheld the Tribunal's decision, ruling that the non-resident assessee was not liable to pay interest under sections 234B and 234C for the assessment year in question, and the appeal was dismissed in its entirety.
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