TMI Blog2021 (9) TMI 875X X X X Extracts X X X X X X X X Extracts X X X X ..... ch was inserted by the Finance Act, 2012. The proviso makes it clear that the assessee cannot reduce the amounts of income-tax paid to it by the payer without deduction, while computing liability for advance tax. The memorandum explaining the provisions of the Finance Bill, 2012 provides necessary context that the amendment was warranted due to the judgements of courts, interpreting Section 209 (1) (d) of the Act to permit computation of advance tax by the assessee by reducing the amount of income-tax which is deductible or collectible during the financial year. 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 of the Act which relates to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner of Income-Tax (Appeals) (hereinafter referred to as the CIT ) only with respect to levy of interest under Section 234B of the Act. The CIT dismissed the appeals by a common order dated 10.02.2009, aggrieved by which the Respondent filed appeals before the Income Tax Appellate Tribunal (hereinafter referred to as the ITAT ). The ITAT allowed the appeals by an order dated 23.06.2009 and held that the Respondent was not liable for payment of interest under Section 234B, when tax at source was deductible from payment made to the Respondent. The judgement of the ITAT was challenged by the Appellant before the High Court. On 30.08.2010, the High Court dismissed the appeals and upheld the judgement of the ITAT. Dissatisfied with the judgements of the ITAT and the High Court, the Appellant has preferred Civil Appeal No. 1262 of 2016 before this Court. 3. The Assessing Officer examined the structure of the Respondent-Assessee which was engaged in carrying out trading activities in carbon crude oil, LPG, ferrous products, industrial machinery, mineral, non-ferrous metal and products, textiles, automobiles etc. through its liaison offices in India. The Assessing Officer reje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by its earlier decision dated 08.08.2008 in the case of the Respondent for the assessment year 2005-06, the decision of the special bench of the ITAT in the case of Motorola Incorporation (supra) as well as decisions of the Uttarakhand High Court and the Bombay High Court. Reliance was placed by the ITAT on a judgement of the Uttarakhand High Court in Commissioner of Income-Tax v. Tide Water Marine International Inc [2009] 309 ITR 85, whereby it was held that an individual assessee cannot be held liable to pay interest under Section 234B for default of the company, who had engaged or employed the assessee, to deduct tax at source while making payments to the assessee. In Director of Income-Tax (International Taxation) v. NGC Network Asia LLC [2009] 313 ITR 187, the Bombay High Court held that on failure of the payer to deduct tax at source, no interest can be imposed on the payee-assessee under Section 234B. The ITAT observed that in all the seven years under consideration, tax was liable to be deducted at source from payments made to the Respondent-Assessee and it had not been demonstrated that the Respondent had a liability to pay advance tax, even after deduction of taxes at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, he submitted that the High Court committed a serious error in its interpretation of the phrase deductible or collectible at source . According to him, the phrase deductible or collectible at source would not take into its fold tax which was not deducted within the statutory time limit and was, in fact, paid to the assessee without deduction. To support his argument, he relied on Explanation 1 to Section 234B (1), which states the definition of assessed tax to be tax on the total income reduced by inter alia any tax deducted or collected at source . For the purposes of levy of interest under Section 234B, the non-payment or shortfall in payment of advance tax is measured against assessed tax , which takes into account tax which was actually deducted or collected at source. He further submitted that Section 234B is a standalone provision and the said section being a complete code in itself, the words used in Section 209 (1) (d) of the Act cannot be imported into Section 234B. Even though the Revenue may proceed against the assessee as well as the payer for collection of the unpaid tax, along with interest, the Revenue would refund the excess amounts collected to either o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year. Any person responsible for paying to a non-resident or to a foreign company shall, at the time of the credit of such income, deduct income-tax thereon at the rate in force, according to Section 195. Section 200 provides that a person deducting any sum in accordance with the provisions of Chapter XVII shall pay, within the prescribed time, the sum so deducted to the credit of the Central Government. The consequences of failure to deduct tax or pay the tax after deduction are dealt with in Section 201 of the Act. Section 209(1) of the Act and Section 234B, which fall for consideration in this case, are reproduced below as they stood prior to the Finance Act, 2012: 209. Computation of advance tax. - (1) The amount of advance tax payable by an assessee in the financial year shall, subject to the provisions of sub- sections (2) and (3), be computed as follows, namely:- (a) where the calculation is made by the assessee for the purposes of payment of advance tax under subsection (1) or sub-section (2) or sub-section (5) or subsection (6) of section 210, he shall first estimate his current income and income-tax thereon shall be calculated at the rates in force ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as aforesaid falls short of the assessed tax. Explanation 1.-In this section, assessed tax means the tax on the total income determined under subsection (1) of section 143 and where a regular assessment is made, the tax on the total income determined under such regular assessment as reduced by the amount of,- (i) any 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; (ii) any relief of tax allowed under section 90 on account of tax paid in a country outside India; (iii) any relief of tax allowed under section 90A on account of tax paid in a specified territory outside India referred to in that section; (iv) any deduction, from the Indian income-tax payable, allowed under section 91, on account of tax paid in a country outside India; and (v) any tax credit allowed to be set off in accordance with the provisions of section 115JAA. Explanation 2.-Where, in relation to an assessment year, an assessment is made for the first time under section 147 or section 153A, the assessment so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r collectible at source during the said financial year under any provision of this Act from any income, if the person responsible for deducting tax has paid or credited such income without deduction of tax or it has been received or debited by the person responsible for collecting tax without collection of such tax. 15. Notes to the memorandum explaining the provisions in the Finance Bill, 2012 are as under: Liability to pay advance tax in case of nondeduction of tax Under the existing provisions of section 209 of the Income-tax Act, the amount of advance tax payable is computed by reducing the amount of income-tax which would be deductible or collectible during the financial year from incometax on estimated income. Therefore, in cases where the assessee receives or pays any amount (on which the tax was deductible or collectible) without deduction or collection of tax, it has been held by courts that he is not liable to pay advance tax to the extent the tax is deductible or collectible from such amount. In order to make an assessee liable for payment of advance tax in respect of income which has been received or paid without deduction or collection of tax, it is pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, the specified processed minerals and ores would have been covered by the words minerals and ores . It also indicates that only the minerals and ores subjected to the process of cutting and polishing would be entitled to the benefit of Section 80-HHC meaning thereby that all other species of processed minerals and ores would continue to be covered by the general exclusion applicable to the generic class. The 1991 amendment to Section 80-HHC thus conclusively demonstrates that the words minerals and ores must be construed widely and in an unrestricted manner. As has been held in Municipal Committee v. Manilal [(1967) 2 SCR 100 : AIR 1967 SC 1201] and Pappu Sweets and Biscuits v. Commr. of Trade Tax [(1998) 7 SCC 228] subsequent legislation may be looked into to fix the proper interpretation to be put on the statutory provisions as they stood earlier. The benefit of Section 80-HHC has been extended by the amendment to a specific kind of mineral and was introduced for the first time in 1991. If we were to hold that the word minerals in sub-section (2)(b) never included processed minerals then the 1991 amendment excepting processed minerals from the exclusionary effect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile calculating advance tax, the Respondent cannot be held to have defaulted in payment of its advance tax liability. We uphold the view adopted in the impugned judgement of the Delhi High Court in Civil Appeal No. 1262 of 2016 as well as by the Madras High Court in the Madras Fertilizers case (supra), 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. 21. As we have dealt with the submissions relating to Section 209 and Section 234B of the Act, we do not deem it necessary to deal with other contentions that have been raised on behalf of the Revenue. We have not dealt with the facts of each case before us, in view of our interpretation of the provisions of the Act germane to the question of law herein. 22. Accordingly, the Appeals filed by the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X
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