2014 (1) TMI 937 - AT - Income Tax

Deletion of Interest u/s 234B of the Act Liability to pay advance tax - Short payment of Advance Tax Short deduction of TDS by the person making payment Held that - Interest u/s 234B is levied for the failure to pay advance tax as per the provisions of S.208 and 209 of the Act - All the assesses in these cases, are non-resident companies - the Revenues received by these G.E.Overseas Entities are held as liable to tax in India, then, as per S.195 of the Act, the payers of such income were under an obligation to deduct tax at source and consequently, in terms of pre-amended S.209(I)(d) of the Act, the assessee was not required to pay advance tax, as the advance tax payable by the tax payer is to be calculated, by reducing the tax on current income, by the amount of tax which would be deductible or collectable at source under the Act, during the said F.Y Relying upon Director of Income Tax vs. Jacabs Civil Inc. 2010 (8) TMI 37 - DELHI HIGH COURT . If the person (payer) who had to make payments to the non-resident had defaulted in deducting the tax at source from such payments, the non- resident is not absolved from payment of taxes thereupon - the non-resident is liable to pay tax and the question of payment of advance tax would not arise - This would be clear from the reading of Section 191 of the Act along with Section 209 (1) (d) of the Act - it would not be permissible for the Revenue to charge any interest under Section 234B of the Act - The Tribunal has rightly held that the assessee was not liable to pay any interest under Section 234B of the Act - Decided against Revenue.

Summary

Issues:
Reopening of assessments, Existence of Permanent Establishment, Attribution of profits to Permanent Establishment, Levy of interest u/s 234B of the Income Tax Act.

Reopening of Assessments:
The Assessing Officer initiated reassessment proceedings on 22 entities of G.E. Group after conducting a survey. The Assessing Officer completed assessments u/s 143(3) read with S.147 of the Act, despite objections from the assesses. The Ld. Commissioner of Income Tax (Appeals) confirmed the action of the Assessing Officer on the reopening of assessments, among other issues.

Existence of Permanent Establishment:
The Assessing Officer held that the assesses, 22 GE Overseas entities, have a Permanent Establishment in India, along with a dependent agency Permanent Establishment in the form of G.E. India Industrial P. Ltd. The Ld. Commissioner of Income Tax (Appeals) confirmed this finding.

Attribution of Profits to Permanent Establishment:
The Assessing Officer attributed profit to the Permanent Establishment and brought it to tax. The Ld. Commissioner of Income Tax (Appeals) upheld this action by the Assessing Officer.

Levy of Interest u/s 234B:
The main issue in these appeals was the deletion of interest levied by the Assessing Officer u/s 234B of the Act, by the Ld. Commissioner of Income Tax (Appeals). The Revenue challenged this deletion, arguing that interest u/s 234B is mandatory in nature. The Ld. CIT, D.R. submitted that the Revenue has not accepted the judgment of the Jurisdictional High Court and filed an SLP before the Hon'ble Supreme Court. However, the Ld. Counsel for the assessee argued that the issue is settled based on the decision of the Jurisdictional High Court in another case.

Judgment and Analysis:
The Tribunal considered the arguments and held that interest u/s 234B is levied for the failure to pay advance tax as per the provisions of the Act. The Tribunal found that the issue was covered in favor of the assessees by the judgment of the Jurisdictional High Court in the case of Director of Income Tax vs. Jacabs Civil Inc. The Tribunal concluded that the assessees were not liable to pay interest under Section 234B of the Act based on the interpretation of relevant provisions and case laws cited. The Tribunal upheld the decision of the Ld. Commissioner of Income Tax (Appeals) in deleting the interest levied by the Assessing Officer u/s 234B. Consequently, the appeals of the Revenue were dismissed.