2009 (9) TMI 22 - HC - Income Tax

TDS liable to be deducted Advance Tax Interest u/s 234B - the I.T.A.T. has rightly held that the interest under Section 234B of the Act is not payable on the tax payable by the assessee, particularly after the tax is deducted at source

Summary

Issues:
Whether interest under Section 234B of the Income Tax Act is payable on the tax after deduction at source.

Analysis:
The appeal before the High Court was against the order of the Income Tax Appellate Tribunal (ITAT) regarding the liability of interest under Section 234B of the Income Tax Act, 1961. The ITAT had held that once the entire income was subject to Tax Deduction at Source (TDS), the assessees were not obligated to pay advance tax as per section 209(1)(d) of the Act. Additionally, the ITAT found no error in the Commissioner of Income Tax (Appeals) deleting the interest charged under Section 234B of the Act.

The High Court considered the facts of the case where the assesses, who were employees of a company, claimed exemption under Section 10(10CC) of the Act in their income tax return for the assessment year 2003-04. The Assessing Officer (AO) disagreed with the exemption claim, leading to an appeal before the Commissioner of Income Tax (Appeals) (CITA). The CITA partially allowed the appeals and directed the AO to delete the interest charged under Section 234B. The Revenue then appealed to the ITAT, which upheld the decision of the CITA, prompting the current appeal.

During the arguments, the respondent's counsel cited previous Division Bench judgments of the High Court that supported their position. The High Court reviewed these judgments and concurred with the interpretation that if a non-resident foreign company is responsible for deducting tax at source, the individual assessee cannot be held liable for interest under Section 234B due to the company's default. The Court noted that the question of law had been answered against the revenue in similar cases, and thus, the ITAT's decision was upheld.

Ultimately, the High Court dismissed the appeal by the revenue/appellants, affirming the ITAT's ruling and referencing the Division Bench judgment that settled the issue. The Court concluded that the interest under Section 234B was not payable on the tax after deduction at source, as per the law and previous judicial interpretations.