2022 (8) TMI 387 - MADRAS HIGH COURT

Waiver of interest under Section 234B and 234C - Non deduction of TDS by the payer - whether interest is to be paid u/s 234B when no advance tax is payable by the assessee and when the deductor/ the employer abroad, had not deducted tax at source, but has subsequently paid the tax with interest and whether the assessee/payee can be charged with interest? - HELD THAT:- The view of the Bombay High Court in NGC Network Asia [2009 (1) TMI 174 - BOMBAY HIGH COURT] and the Uttaranchal High Court in Sedco Forex International Drilling Co.Ltd [2003 (10) TMI 40 - UTTARANCHAL HIGH COURT] has been upheld by the Hon’ble Apex Court in Mitsubishi Corporation [2021 (9) TMI 875 - SUPREME COURT] held that find 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 computation of advance tax payable by the assessee cannot be ignored while construing the contents of Section 234B. As we have already held that prior to the financial year 2012-13, the amount of income-tax which is deductible or collectible at source can be reduced by the assessee while calculating advance tax, the Respondent cannot be held to have defaulted in payment of its advance tax liability. 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.

After dismissing the appeal filed by the revenue, the appeals of the Assessees on the same issue were allowed referring to the above judgment. Therefore, this is no longer res integra and the claim of the assessees thus stands vindicated.

Scope of Notification in F.NO400/234/95-IT(B) dated 23-5-1996 issued under Section 119 wherein the Chief Commissioner and the Director General of Income Tax may reduce or waive the interest charged under Section 234A or Section 234B or Section 234C of the Act in the classes of cases or classes of Income specified in paragraph 2 of the order for the period and to the extent the Chief Commissioner of Income tax/Director General of Income Tax deems fit - HELD THAT:- The law as applicable on the date of the application must be applied. In the present case, the appellant had the right to apply for waiver as per the notification dated 23-05-1996 by invoking clause 2 (e) which empowered an assessee to apply for waiver, when the return could not be filed for “unavoidable reasons”, when the application was filed in 2003. Once the applicant was found eligible to apply on the date of application, his application cannot be thrown out as not maintainable because of a subsequent notification. It is one thing to say that the relief is discretionary and another to state that the application is not maintainable. The subsequent notification will not affect the consideration of the applications pending on merit. Such an interpretation would not be against the law laid down by the Apex Court, but would also be arbitrary. Therefore, the contention of the revenue on this ground is rejected. Insofar as the merit is concerned, we have already seen that the legal issue as to chargeability till the financial year 2012-13 has been decided in favour of the assessee in Mitsubishi case (supra). Therefore, we find no ground to interfere with the findings of the Learned Judge by relying upon the Judgment in Chennai Port Trust case, to exclude the period till the decision was taken by AAR.