2007 (3) TMI 728 - HC - Income Tax

Summary

Issues involved: Appeal against ITAT order regarding tax deduction obligation and interest charged under Section 201(1A) of I.T. Act.

Tax deduction obligation: The case involved a contract between ONGC and a non-resident company for rig charter hire, with tax liability initially undertaken by ONGC. Subsequent contract amendments shifted corporate tax liability to the non-resident company. The Assessing Officer imposed a penalty under Section 201(1A) for failure to deduct tax on payments to the non-resident company. The Commissioner of Income Tax (Appeals) upheld the penalty, but the ITAT allowed the appeal based on precedents from Bombay High Court and Calcutta High Court, stating that the assessee, acting as agent of the non-resident, was not obligated to deduct tax at source.

Interest charged under Section 201(1A): The ITAT deleted the interest amount charged under Section 201(1A) of the I.T. Act. The High Court, after reviewing the orders of the lower courts and the material available, found no substantial question of law to be answered. It agreed with the ITAT's decision that the assessee, acting as agent of the non-resident company, was not liable to deduct tax at source. The High Court upheld the ITAT's findings, stating that the assessee's appointment as agent for the relevant assessment year absolved them of the obligation to deduct tax, and therefore, no reasonable cause existed for charging interest under Section 201(1A) of the Act. The High Court dismissed the appeal, ruling in favor of the assessee and against the Department.

Separate Judgement: No separate judgment was delivered by the judges.