TMI Blog2012 (7) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... or the Assessment Years 2004-05 to 2007-08 in the case of Alcatel Lucent USA Inc. and remaining five also filed on 11.8.2011 against a common order dated 01.06.2011 of the learned CIT(A)-XXIX, New Delhi in the case of Alcatel Lucent World Services Inc. for the Assessment Years 2004-05 to 2008-09, raise the following similar grounds:- "1 On the facts and in the circumstances of the case, the learned CIT(A) has erred in relying upon the decision of the Hon'ble Delhi High Court order in the case of Jacab Civil Inc./Mitsubishi Corporation, directing the Assessing Officer to delete the interest u/s 234B of the Income-tax Act. 2 The appellant craves to add, amend, modify or alter any grounds of appeal at/the time or before the hearing of the appeal." Since similar issues are involved, these appeals were heard simultaneously for the sake of convenience and are being disposed of through this common order 2. Adverting now to ground no.1 in these appeals, facts, in brief, as per relevant orders in the case of Alcatel Lucent USA Inc are that the assessee, a tax resident of USA, is one of the Alcatel-Lucent group entity and supplied telecom equipment to customers in India in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nil 55,90,876/- -do- 2007-08 nil 1,02,58,238 (ii) Name of company A. Y. Returned income Assessed income [In Rs.] Alcatel Lucent World Services Inc. USA 2004-05 nil 8,61,22,454/- -do- 2005-06 nil 11,30,46,307 -do- 2006-07 nil 3,29,51,266/- -do- 2007-08 nil 3,84,44,771/- -do- 2008-09 nil 21,11,48,425/- Inter alia, the AO charged interest u/s 234B of the Act. 3. On appeal, though these assessees raised grounds relating to PE and computation of income, these grounds were not pressed before the learned CIT(A). As regards levy of interest u/s 234B of the Act, the only issue disputed before us, the ld. CIT(A) while following the decision of Hon'ble jurisdictional High Court in the case of DIT v. Jacabs Civil Incorporated/Mitsubishi Corpn. [2011] 330 ITR 578/[2010] 194 Taxman 495 (Delhi) concluded as under in the AY 2004-05 in the case of Alcatel Lucent USA Inc.:- "7. I have carefully considered the submissions made by the appellant in this regard. From the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on "deductible or collectible at source" and it is this clause which is incorporated by the Uttranchal High Court in the said judgment ( supra ) in the manner already pointed above. The scheme of the Act in respect of non-residents is clear. Section 195 of the Act puts on obligation on the payer, i.e., any person responsible for paying to a non-resident, to deduct income tax at source at the rates in force from such payments excluding those incomes, which are chargeable under the head 'salaries'. Therefore, the entire tax is to be deducted at source which is payable on such payments made by the payee to the non-resident. Section 201 of the Act lays down the consequences of failure to deduct or pay. These consequences include not only the liability to pay the amount which such a person was required to deduct at source from the payments made to a non-resident but also penalties, etc. 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. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the factum of having PE and admitted that income was chargeable to tax, but since the entire income was liable to deduction of tax at source, interest u/s 234B could not be levied. The ld. vehemently argued that that the assessee should not be allowed to take the plea that since its income was chargeable to tax and as per sec.195 it was responsibility of payer to deduct tax and for the default of the payer, the assessee should not be visited with liability u/s 234B of the Act. The ld. DR pointed out that the clause (d) read with clause (a) of section 209(1) makes it clear that the words deductible or collectible at source are to be read in relation to the income which has been included in the estimate of current income. Since the assessee did not include the impugned income in the-estimate of current income, the assessee could not be given benefit of the amount of tax deductible/collectible at source on such income. There was no application from the assessee u/s 195 or u/s 197 for non deduction or less deduction of tax at source. The assessee would have told the payer that it did not have PE in India which was the basis of non-deduction by the payers. Thus, the assessee now cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings, after accepting the existence of PE in India, the assessee should not be allowed to take the plea that since its income was 'chargeable to tax' and as per section 195 it was responsibility of payer to deduct the tax and for default of payer the company should not be visited with liability u/s 234B of IT ACT. 5.2 The Scheme of Advance Tax places primary responsibility on the assessee for payment of tax : It is respectfully submitted that the scheme of advance tax is to be studied and appreciated. It is also submitted that while interpreting the meaning of the words/phrase deductible or collectable, the whole scheme is to be kept in mind. The word "deductible", it is submitted, cannot be read in isolation. It is submitted that scheme of advance tax u/s 207 onward was to be read together. A conjoint reading of various provisions would make it clear that -the act makes assessee responsible for estimation of its current income and also for payment of advance tax. The Section 207 deals with the liability for payment of advance tax in respect of total income of assessee, which would be chargeable to tax in the assessment year, which is referred to as "current income". The sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of non-deduction by the payers. It was further submitted that since during the course of appellate proceedings, assessee for the first time accepted that it had PE by not pressing the ground No.1 of appeal. It may be noted that the appeal order is passed on 31.5.2011. It is respectfully submitted that the assessee now cannot be allowed to take benefit that it was payer who defaulted in making deduction and thus be not visited with levy of interest u/s 234B of the Act. The assessee could not take two contradictory stands at different times. First at the time of payment by contending that it does not have a PE, therefore, income is not chargeable to tax and provisions of section 195 are not applicable. Secondly at the time of assessment proceedings/ appellate proceedings, he accepts the PE and contends that income was chargeable to tax and deduction of tax at source should have been made by the payer u/s 195. 5.4 Provisions of Section 201 and alternate Remedy: no case of unjust enrichment or charging double compensatory interest : As regards alternate remedy available with the Department u/s 201 of the LT. Act as observed by the Hon'ble High Court, it was submitted that in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ftware International Ltd. [2006] 9 SOT 305 (Delhi); Van Oord Dredging Marine Contracts BV v. Dy. CIT (International Taxation) [2007] 105 ITD 97 (Mum); Samsung Heavy Industries Co. Ltd. v. Asstt. DIT [2011] 133 ITD 413/13 taxmann.com 14 (Delhi); Dy. CIT v. Pride Foramer SAS [2008] 24 SOT 59 (Delhi) and Jt. DIT v. Booz Allen Hamilton Inc. [2007] 107 ITD 313 (Mum) while supporting the findings of the ld. CIT(A). The ld. AR added that the entire income being liable to deduction of tax at source in terms of provisions of sec. 195(1) of the Act, these assessees were not liable to pay any interest u/s 234B of the Act. 6. We have heard both the parties and gone through the facts of the case as also the submissions made in the synopsis filed by the ld. DR and the decisions cited by the ld. AR. The only issue before us is as to whether or not the aforesaid two assessees are liable to pay interest u/s 234B of the Act. Indisputably and as pointed out by the learned CIT(A), the tax on the entire income received by these assessees was required to be deducted at source at appropriate rates by the respective payers u/s 195 of the Act. Section 2(1) of the Act defines "advan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1988 with effect from 1-4-1989, payment in respect of royalty, fees for technical services or other sums chargeable under the Income-tax Act would not get the benefit of deduction if the assessee fails to deduct tax at source in respect of payments outside India which are chargeable under the Act. This provision ensures effective compliance of section 195 of the Act relating to tax deduction at source in respect of payments outside India in respect of royalties, fees or other sums chargeable to tax under the Act. In a given case where the payer is an assessee he will definitely claim deduction under the Act for such remittance and on inquiry if the AO finds that the sums remitted outside India come within the ambit of other sums chargeable to tax under the Act then it would be open to the AO to disallow such claim for deduction. Therefore, in our view, there are adequate safeguards in the Act which prevent revenue leakage. When a duty is cast on the payer to pay the tax at source, on failure, no interest can be imposed on the payee assessee. [ NGC Network Asia LLC's case ( supra ). 6.1 As pointed out by the ld. CIT(A), in this case it is an undisputed fact that the tax on t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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