Advance tax not required to be paid (for 234B calculation), if the payer defaults in deducting tax – Del ITAT


DDIT v Lucent Technologies International Sales Ltd [IT Appeal No. 4054 (Delhi) of 2011 dtd 24.08.2012] Delhi ITAT

Background:

During the year under consideration, the assessee supplied telecom equipments to various companies. In its return of income for A.Y. 2006-07, the income from services rendered in India was offered to tax. However, income from offshore supplies made to Indian customers was not offered to tax.

A survey u/s 133 A of the Act was carried out on 22.2.2009 at the office premises of Alcatel Lucent India Ltd. located at New Delhi and Gurgaon. Based upon the documents found, statement recorded during and after the survey and subsequent discussions, it was held in the assessment order of Alcatel Lucent France, for assessment year 2006-07 that various Alcatel Lucent Overseas entities including the assessee had a permanent establishment (PE) in India. The AO determined net income chargeable to tax as attributable to PE in India @ 2.5% of the sales made by the assessee in India. Accordingly, assessment was framed at an income of Rs.6,55,033/- and also levied the interests u/s 234A, 234B and 234C.

Before the CIT (A), the assessee questioned the levy of interest u/s 234B by the AO at Rs. 3,46,360/-. The CIT(A) being convinced with the contention of the assessee has deleted the interest levied u/s 234B.

Tax Authority’s arguments:

  • Short advance tax payment was made by the assessee. The scheme of advance tax places primary responsibility of the assessee for payment of tax.
  • A conjoint reading of various provisions u/s 207 onward would make it clear that the Act makes assessee responsible for estimation of its current income and also for payment of advance tax.

Assessee’s contentions:

  • Decision of Hon’ble Jurisdictional High Court of Delhi in the case of Jacabs Civil Incorporated Mitsubishi Corpn. [2011] 330 ITR 578 is squarely applicable in the case of assessee.

HELD:

  • A combined reading of the provisions of Section 209(1)(d) with the provisions of Section 234B of the Act makes it clear that the liability to pay interest u/s 234B would arise only if advance tax is payable after making the necessary adjustment for tax deductible at sources.
  • The amount of (Tax deductable) would obviously mean the tax as was required to be deducted in respect of a particular income and not the tax which has actually being deducted at source.
  • Section 234B and Section 234C only provide a method of computation of interest in case of default by an assessee to pay advance tax as stipulated in Sections 208, 209 and 210 of the Act.
  • The fact in the present case was that the tax on the entire income received by the assessee was required to be deducted at appropriate rates by the respective payers u/s 195(2) of the Act. Had the payer made the deduction of tax at the appropriate rate, the net tax payable by the assessee would have been Nil. Thus there was no liability to pay advance tax by the assessee.
  • Reliance is placed on the Hon’ble High Court of Delhi in the case of Jacabs Civil Incorporated/ Mitsubishi Corpn. (Supra) 

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