Interest Not Leviable From Assessee For Short Payment Of Tax Due To Payer's Default In Deducting TDS Before FY 2012-2013: ITAT
Mariya Paliwala
7 May 2024 2:30 AM GMT
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that since the assessee was a non-resident, the entire tax was to be deducted at source on payment made by the payer to it, and there was no question of advance tax payment by the assessee; accordingly, no interest under Section 234B could be levied upon the assessee.The bench of G.S. Pannu (Vice President) and Astha...
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that since the assessee was a non-resident, the entire tax was to be deducted at source on payment made by the payer to it, and there was no question of advance tax payment by the assessee; accordingly, no interest under Section 234B could be levied upon the assessee.
The bench of G.S. Pannu (Vice President) and Astha Chandra (Judicial Member) has relied on the decision of the Supreme Court in the case of Director of Income Tax, New Delhi v. M/s Mitsubishi Corporation, in which it was held that if a non-resident assessee received any amount on which tax was deductible at source, the assessee could not reduce such tax while computing its advance tax liability, which was applicable prospectively after FY 2012–13.
The appellant/assessee is a foreign company and is a tax resident of Canada. It is engaged in the business of supplying reservoir simulation software to oil companies such as ONGC, Oil India, Vedanta, etc., along with related software maintenance support services and training services for acquainting themselves with the operation of such software. On examining the list of non-filers, the AO found that the assessee has not filed its return for AY 2012–13 despite receipts from M/s. Cairn Energy India Pty. Ltd., M/s. Prize Petroleum Company Ltd., M/s. Shell India Market Pvt. Ltd., and M/s. Reliance Industries Ltd., on which TDS has been deducted.
The AO issued notice under Section 148 of the Income Tax Act. It was served, but compliance was not made. He then issued notice(s) to the above concerns under Section 133(6), seeking details about the amount paid or accrued to the assessee, the nature of the products or services rendered by the assessee to them, and the contract or agreement under which such payments have been made.
Based on the inputs so obtained, the AO concluded that the assessee is providing products and services that are being used to support exploratory activities in oil and gas exploration and production. Applying the provisions of Section 44BB, he computed the income of the assessee at Rs. 36,43,546/-, equivalent to 10% of the aggregate amount of Rs. 3,64,35,459/- received or receivable by the assessee. A draft assessment order was passed on December 30. Since the assessee did not file any objection before the DRP, the AO passed the final assessment order on February 21, 2020, under Section 144C/144/147 of the Income Tax Act, determining that the income of Rs. 36,43,550 is taxable at a rate of 40% as per the provisions of the Act.
The assessee brought the matter in appeal before the CIT (A), challenging the ex-parte assessment under Section 147 and the addition made under Section 44BB.
The CIT (A) declined to admit the additional evidence, rejecting the explanation of the assessee that it, being a foreign company, was not familiar with the return filing procedure, tax assessment procedure, and related law in India as it does not have any office or base in India. The CIT (A) held reassessment proceedings under sections 147 and 148 of the Income Tax Act as valid.
The assessee contended that the proviso inserted in Section 209(1)(d) of the Act by the Finance Act, 2012, w.e.f. 01.04.2012, would apply only in a scenario where the person responsible for deducting tax has paid or credited such income without deduction of tax. The income (impugned receipts) has been received by the assessee after deduction of tax at source, and therefore the proviso to Section 209(1)(d) is not applicable. As per Section 209(1)(d) r.w. Proviso, where, in the case of a non-resident company, tax deductible at source has been paid, it would not be permissible for the department to charge any interest under Section 234B for alleged failure to pay advance tax by such assessee.
The tribunal held that the proviso to Section 209(1) issued by the Finance Act, 2012, was applicable prospectively after FY 2012–13; there was no liability for the assessee to pay interest under Section 234B of the Act for the impugned AYs since the entire income was tax deductible at source in the hands of the payer.
Counsel For Appellant: Manuj Sabharwal
Counsel For Respondent: Vizay B. Vasanta
Case Title: Computer Modelling Group Ltd. Versus ACIT
Case No.: ITA No. 2090/Del/2023
