2014 (1) TMI 1267 - AT - Income Tax

Interest u/s 234B of the Act - Payment of advance tax 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 assessee here are non-resident companies - The assessee s case is that, if the Assessing Officer s stand that 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(1)(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. the decision in Director of Income Tax Versus M/s. Jacabs Civil Incorporated / Mitsubishi Corporation 2010 (8) TMI 37 - DELHI HIGH COURT followed - it would not be permissible for the Revenue to charge any interest under Section 234B of the Act also , 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 under section 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 under section 133A. The Assessing Officer completed assessments under section 143(3) read with section 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.

Existence of Permanent Establishment:
The Assessing Officer held that the 22 GE Overseas entities have a Permanent Establishment in India and a dependent agency Permanent Establishment in the form of G.E. India Industrial (P.) Ltd. The Assessing Officer attributed profit to the Permanent Establishment and brought it to tax. The Ld. Commissioner of Income-tax (Appeals) confirmed this action of the Assessing Officer.

Attribution of profits to Permanent Establishment:
The Assessing Officer attributed profits to the Permanent Establishment and brought them to tax. The Ld. Commissioner of Income-tax (Appeals) upheld this action of the Assessing Officer.

Levy of interest under section 234B of the Income-tax Act:
The main issue in this judgment revolves around the deletion of interest levied under section 234B of the Act by the Ld. Commissioner of Income-tax (Appeals). The Revenue challenged this deletion, arguing that interest under section 234B is mandatory and not subject to the Assessing Officer's discretion. The Ld. CIT, D.R. submitted that the Revenue has filed an SLP before the Hon'ble Supreme Court against the decision of the Jurisdictional High Court. The assessee contended that the issue is settled based on the decision of the Jurisdictional High Court in the case of Jacob Civil Incorporated. The Tribunal held that interest under section 234B is levied for the failure to pay advance tax and that the assessees, being non-resident companies, were not required to pay advance tax due to the obligation of the payers to deduct tax at source. The Tribunal relied on various decisions to support its conclusion and held in favor of the assessees based on the judgment of the Jurisdictional High Court, stating that the assessee was not liable to pay interest under section 234B. The Tribunal dismissed the appeals of the Revenue.

This judgment provides a detailed analysis of the issues related to the reopening of assessments, the existence of Permanent Establishment, the attribution of profits to Permanent Establishment, and the levy of interest under section 234B of the Income-tax Act. It highlights the arguments presented by both parties, the decisions of the lower authorities, and the Tribunal's reasoning based on relevant legal provisions and precedents.