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2017 (4) TMI 448 - AT - Income TaxInterest under sec.234-B liability - TDS liability u/s 195 - liability of the assessee to pay advance tax - Held that - Under Sec.195 there is an obligation on the payer, i.e. any person responsible for paying to a non-resident, to deduct income tax at source at the rates in force from such payments excluding those incomes which are chargeable under the head Salaries . Therefore, the entire tax is to be deducted at source which is payable on such payments made by the payee to the non- resident. Sec.201 of the Act lays down the consequences of failure to deduct or pay. These consequences include not only the liability to pay the amount which such a person was required to deduct at source from the payments made to a non-resident but also penalties etc. Once it is found that the liability was that of the payer and the said payer has defaulted in deducting the tax at source, the Department is not remedy-less and therefore can take action against the payer under the provisions of Sec.201 of the Income Tax Act and compute the amount accordingly. No doubt, 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. However, in such a case, the non-resident is liable to pay tax and the question of payment of advance tax would not arise. The provisions of Sec.209(1)(d) have been amended by the Finance Act, 2012 but those amendments are not relevant for the present case which relates to AY 1992-92. We therefore hold that the assessee was not liable to pay any interest under sec.234-B of the Act following the judgments referred to earlier. We find no merits in the relevant grounds of appeal of the revenue wherein the revenue has challenged the order of the CIT(A) holding that charging of interest u/s.234B of the Act in the present case was not in accordance with law. Levy of interest u/s.220(2) - Held that - CIT(A) has not given any finding as to whether interest is chargeable u/s.220(2) of the Act or not. He has only directed the AO to follow the CBDT Circular No.334 dated 3.4.1982 and charge interest u/s.220(2) of the Act in accordance with the said circular. The Assessing Officer and the Assessee will be at liberty to put forth their claim as to whether para 2.1 or 2.2 of the CBDT Circular will apply. The CIT(A) ought to have rendered a finding on this aspect. We are of the view that the order of assessment by the AO u/s.147 of the Act as well as the order u/s.154 of the Act were only set aside in appeal and such setting aside did not render the assessment final and issues were set aside for fresh consideration by the AO. In such circumstances, the charging of interest would be governed by para 2.2 of the Circular and charging of interest u/s.220(2) as done by the AO should be held to be proper. We hold accordingly. Consequently, the relevant grounds of appeal regarding levy of interest u/s.220(2) of the Act raised by the Revenue in its grounds of appeal are allowed.
Issues Involved:
1. Validity of initiation of re-assessment proceedings under section 147 of the Income Tax Act. 2. Levy of interest under section 234B of the Income Tax Act. 3. Levy of interest under section 220(2) of the Income Tax Act. Detailed Analysis: 1. Validity of Initiation of Re-assessment Proceedings under Section 147: The Assessee, a non-resident company, filed a return of income for A.Y. 1992-93 declaring fees received for rendering managerial technical and consultancy services. The Assessing Officer (AO) initially held that the procurement fees paid by Coal India Ltd. (CIL) to the Assessee were in the nature of commission and not technical fees, thus treating them as business income. This decision was upheld by the CIT(A) and the Tribunal. The AO later issued a notice under section 148 for re-assessment, which was challenged by the Assessee through a writ petition. The High Court stayed the proceedings, but the AO eventually passed an order under section 147/143(3) adding ?2,32,28,112/- to the Assessee's income on the grounds that the tax paid by CIL on behalf of the Assessee should be grossed up and included as income. The Tribunal found that the AO had specific reasons to believe that income had escaped assessment and that the notice under section 148 was issued with proper application of mind and necessary approvals. The Tribunal upheld the validity of the re-assessment proceedings, rejecting the Assessee's contentions regarding the mechanical issuance of the notice and the alleged change in opinion by the AO. 2. Levy of Interest under Section 234B: The CIT(A) deleted the levy of interest under section 234B, holding that since the Assessee was a non-resident, the payer (CIL) was required to deduct tax at source under section 195. The Tribunal upheld this decision, referencing the ITAT Delhi decision in Sedco Forex International Drilling Vs. DCIT and the Delhi High Court decision in DIT vs. Ericsson AB, which stated that no interest is payable by a taxpayer if the entire tax was deductible at source, even if not actually deducted. The Tribunal concluded that the Assessee was not liable to pay advance tax, and thus, no interest under section 234B could be levied. 3. Levy of Interest under Section 220(2): The CIT(A) directed the AO to calculate interest under section 220(2) as per CBDT Circular No.334 dated 3.4.1982. The Tribunal noted that the CIT(A) did not provide a specific finding on whether interest under section 220(2) was chargeable. The Tribunal held that since the assessment was set aside for fresh consideration and not rendered final, the charging of interest would be governed by para 2.2 of the Circular. Consequently, the Tribunal upheld the AO's decision to charge interest under section 220(2). Conclusion: The Tribunal dismissed the Assessee's appeals for non-prosecution and upheld the validity of the initiation of re-assessment proceedings under section 147. It confirmed that no interest under section 234B was chargeable due to the non-resident status of the Assessee and the obligation of the payer to deduct tax at source. However, it upheld the charging of interest under section 220(2) as per the CBDT Circular. The Revenue's appeal was partly allowed, and the Assessee's appeals were dismissed.
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