TMI Blog2011 (4) TMI 886X X X X Extracts X X X X X X X X Extracts X X X X ..... AO by the appellate authority, the appeals dismissed with the direction to the AO to pass consequential orders on the issue pending before it on the basis of the decision given by this Bench - in favour of assessee as directed. - IT Appeal No. 26 of 2009, IT Appeal No. 27 of 2009, IT Appeal No. 28 of 2009, IT Appeal No. 29 of 2009 - - - Dated:- 7-4-2011 - BIST V. K., PRAFULLA C. PANT, TARUN AGARWALA, JJ. JUDGMENT Tarun Agarwala J.- 1. A Division Bench of this court finding itself unable to agree with the decision of another Division Bench of this court felt that the matter should be referred to a Larger Bench. The hon'ble the Chief Justice, accordingly, constituted a Full Bench to decide the case. Since the entire matter has been referred to this Bench, we are accordingly deciding the appeal itself. 2. In CIT v. Tide Water Marine International Inc. [2009] 309 ITR 85 (Uttarakhand), the question of law involved in the said appeal was whether the Income-tax Appellate Tribunal had erred in law in holding that the interest were not payable by the assessee under section 234B of the Income-tax Act, 1961 (hereinafter referred to as "Act"), even though, the income of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same question of law. We, accordingly, decided, with consent of the parties, to take up these appeals together. 2. The Tribunal has rendered the judgment, appealed against, following the decision of this court rendered in the case of CIT v. Sedco Forex International Drilling Co. Ltd. [2003] 264 ITR 320 (Uttaranchal). In that case, as it appears, this court took notice of section 209(1)(a) of the Act, which authorised the assessee to make an estimate of his current income. This court also took notice of the fact that in view of different decisions rendered by the Tribunal, there was a bona fide dispute whether an assessee was liable to pay tax for the off-period and the said dispute was put to rest by a clarification inserted by the Legislature in 1999. This court, therefore, in those circumstances, interfered with imposition of interest under section 234B of the Act. In the instant case, however, there is no scope of any confusion by reason of any conflicting views expressed by the Tribunal. Therefore, the said judgment of this court may not be directly applicable to the case in hand. 3. The learned counsel for the appellants, however, has brought to our notice another decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Forex [2003] 264 ITR 320 (Uttaranchal). The Income-tax Department, being aggrieved by the appellate order, filed an appeal before the Income-tax Tribunal, who by its order dated November 28, 2008 dismissed the appeal being devoid of any merit. The Department, being aggrieved by the aforesaid orders, filed the present appeal under section 260A of the Act, which was admitted on the following substantial question of law : "Whether the Income-tax Appellate Tribunal has erred in law in holding that interest under section 234B of the Income-tax Act, 1961 was not chargeable as the payments were subject to deduction of tax under section 195 of the Act ?" 7. We have heard Mr. Arvind Vashisht and Mr. Hari Mohan Bhatia, the learned counsel for the Income-tax Department and Mr. Porus Kaka, the learned senior counsel assisted by Mr. Naresh Pant, Ms. Monika Tripathi and Mr. Manish Kanth, advocates for the assessee. 8. Mr. Arvind Vashisht, the learned counsel for the Income-tax Department contended that in the facts and circumstances of the present case, section 234B of the Act was applicable and that the assessee was liable to pay interest for non-payment of the advance tax. The lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated a liability upon the assessee to pay the tax deductible at source, but the said provision does not include the liability for payment of interest chargeable under section 234B on the assessee for failure on the part of his employer to deduct the tax at source. 10. At the outset, we would like to make it clear that the present controversy is confined on the question as to whether interest under section 234B of the Act could be imposed by the Department on the return of the income of the employee under the head "Salaries" on account of non-deposit of advance tax by the employer under section 192(1) of the Act. 11. In order to appreciate the rival submissions of the learned counsel for the parties, it would be essential to deal with certain provisions of the Act on the subject in question. 12. Part A of Chapter XVII of the Act deals with the general provision for the collection and recovery of tax. Section 190(1) of the Act provides that notwithstanding the fact that the 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 at source or by advance payment in accordance with the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cent. per annum on the amount of such tax from the date on which it was deductible to the date on which it was actually paid. Under section 204 of the Act, the expression "the person responsible for paying" in the case of payment of income chargeable under the head "Salaries" means, the employer. 17. Thus, from a combined reading of sections 190, 191, 192, 198, 200, 201, 203 and 204 of the Act, it is clear that as soon as tax is deducted at source by the person responsible to make the payment, the liability of the assessee to pay the tax gets discharged. If the tax is not deducted, it remains payable by the assessee direct as provided under section 191 of the Act. Further, the liability to pay interest under section 201(1A) is on the person who fails to deduct the tax at source is absolute and is upon the person responsible for deducting tax at source till the date it was actually paid. 18. When the tax is not deducted, the assessee is required to pay the tax directly which would be at the stage of self-assessment and not by way of advance tax. The liability to pay the interest will however remain upon the person responsible to deduct the tax at source. The statute has taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial 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 sub-section (1) of section 143 or on regular assessment as reduced by the amount of tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income." 21. A perusal of the aforesaid provision indicates that the liability to pay interest is on the person who fails to pay advance tax under section 208 of the Act and/or under section 210 of the Act. 22. The question now is, whether the assessee who became liable to pay the tax as it was not deducted at source also became liable to pay interest under section 234B of the Act ? 23.The payment of tax and interest have been separately dealt with under the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment which is to be made in a later assessment year as is clear from section 190 of the Act, whereas advance tax is liable to be paid in a financial year only and not thereafter. We are consequently of the view that if the employer fails to deduct the tax at source while paying any income charge-able under the head "Salaries", would be responsible for payment of interest under section 201(1A) of the Act. The assessee would not be liable to pay interest under section 234B of the Act since he was not liable to pay advance tax under section 208 of the Act. 25. In Sedco Forex International Drilling Co. Ltd. [2003] 264 ITR 320 (Uttaranchal), a Division Bench of this court held that interest was not payable by the assessee under section 234B of the Act on account of non-deduction of tax at source by the employer. The reasoning laid down in the said judgment and the principles enunciated therein are squarely applicable to the present facts and circumstances of the case and the said judgment applies on all force. We accordingly agree with the said decision. 26. Similarly, in CIT v. Halliburton Offshore Services Inc. [2004] 271 ITR 395 (Uttaranchal) and another Division Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is open to the Department to proceed against the employer or against the employee for the recovery of interest is patently misconceived and, in any case, would not make the assessee jointly and severally liable to pay interest on the amount of tax which was not deducted at source on the income by the employer. 31. In the light of the aforesaid, we concur with the decision of the Division Bench of this court in Tide Water Marine International [2009] 309 ITR 85 (Uttarakhand) and disagree with the order of the Division Bench dated December 9, 2010. 32. In the light of the aforesaid, we answer the reference that where the assessee's income is chargeable under the head "Salaries", the person responsible for paying any income chargeable under the head "Salaries" shall at the time of paying, deduct income-tax at source and failure on his part entails an obligation to pay interest under section 234B of the Act in order to compensate the loss incurred to the Revenue and that upon failure on the part of the employer to deduct tax at source, the assessee only becomes liable to pay the tax directly under section 191 of the Act and does not become liable to pay interest under section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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