2003 (11) TMI 634 - AT - Income Tax

Summary

Issues Involved:
1. Levy of interest under sections 234B and 234C of the Income-tax Act, 1961.
2. Disallowance of UK lb 430 being expenses incurred in connection with the sale of shares and debentures.

Detailed Analysis:

1. Levy of Interest under Sections 234B and 234C:

The main controversy in this appeal is whether the CIT(A) was justified in confirming the levy of interest under sections 234B and 234C of the Income-tax Act, 1961. The assessee, a non-resident company, had returned taxable income aggregating to Rs. 1,69,62,578 for the assessment year 1994-95. A cheque for Rs. 83,25,820 dated 10th March 1994 was deposited for advance tax but was cleared only on 16th April 1994. The assessee contended that since the cheque was deposited on 15th March 1994, it should not be liable for interest under sections 234B and 234C. However, the Authority for Advance Ruling (AAR) held that the payment was made only on 15th April 1994, making the assessee liable for interest under these sections.

The Assessing Officer, relying on the AAR ruling, charged interest amounting to Rs. 1,24,638 and Rs. 2,52,499 under sections 234B and 234C respectively. The assessee argued that as per section 195 of the Act, its income was subject to tax deduction at source (TDS), and hence, it was not liable to pay advance tax. The CIT(A) dismissed this contention, stating that the AAR's decision was binding.

The Tribunal noted that while the AAR's ruling is binding under section 245S, it only addressed the timing of the payment and not the applicability of sections 234B and 234C per se. The Tribunal emphasized that under section 209(1)(d), the advance tax payable should be reduced by the amount of income-tax deductible at source. Since the assessee, being a non-resident, had its entire tax liability deductible at source under section 195, it had no liability to pay advance tax. Therefore, there was no question of levying interest under sections 234B and 234C.

The Tribunal concluded that the CIT(A) was not justified in upholding the levy of interest under sections 234B and 234C, as the assessee was not liable for advance tax due to the TDS provisions. The Tribunal directed the Assessing Officer to compute the advance tax payable by reducing the TDS amount from the tax liability.

2. Disallowance of UK lb 430:

The second issue pertains to the disallowance of UK lb 430, which were expenses incurred in connection with the sale of shares and debentures of Rallis. The expenses were paid to ANZ International Merchant Banking for travel expenses and allowances. The Assessing Officer disallowed the expenditure due to lack of evidence. The CIT(A) upheld the disallowance, noting that no further evidence was provided during the appellate proceedings.

The Tribunal, however, found that the assessee had furnished adequate material, including relevant invoices and the agreement under which the payments were made. The Tribunal held that the factum of expenditure, its genuineness, and its purpose were clearly established by the assessee. Therefore, the disallowance of UK lb 430 was deleted.

Conclusion:

The Tribunal allowed the assessee's appeal, setting aside the levy of interest under sections 234B and 234C and deleting the disallowance of UK lb 430.