2016 (11) TMI 1763 - AT - Income Tax

Non-resident liability to pay interest u/s 234B and 234C - delay and deferment of advance tax liability - ssessee was a non resident assessee and given the fact that all the monies brought to tax in the hands of the assessee were received from Indian assessees who were obliged to deduct applicable tax at source from the related payments - HELD THAT - The judicial views on the proposition that Section 234 B and 234 C cannot be invoked in the cases of non resident assesses where taxes are deductible from all the receipts brought to tax in the hands of the assessee particularly where no malafides are alleged on the conduct of the assessee are consistently in favour of the assessee. The plain words of the statue support this interpretation and Hon ble Courts above have unanimously held so. Such being the circumstances there is no scope of two views on this issue. The proviso to Section 209(1) brought on the statue with effect from 1st April 2012 does alter the legal position but then right now we are dealing with the pre-amendment period. In our considered view the interest u/s 234B and 234 C cannot be levied at all in the cases in which the assessee is a non resident assessee and in which all the monies brought to tax in the hands of the assessee were received from Indian assesses who were obliged to deduct applicable tax at source from the related payments. Learned representatives fairly agree that in the event of this issue in principle being decided in favour of the assessee the assessee succeeds in these appeals. We therefore uphold the grievance of the assessee and direct the Assessing Officer to delete the impugned levies of interest under section 234B and 234C. Assessee appeal allowed.

Summary

Issues Involved:

1. Liability of a non-resident assessee for interest under sections 234B and 234C of the Income Tax Act, 1961, when tax was deductible at source by the payer.
2. Applicability of rectification under section 154 for the deletion of interest levied under sections 234B and 234C.

Detailed Analysis:

1. Liability of Non-Resident Assessee for Interest under Sections 234B and 234C:

The primary legal issue addressed in this judgment is whether a non-resident assessee is liable for interest under sections 234B and 234C of the Income Tax Act, 1961, when the tax was deductible at source by the payer. The Tribunal noted that this issue is no longer res integra, referencing a prior decision in Fisons Plc Vs DCIT, which established that when the entire tax liability of a non-resident assessee is deductible at source under section 195, the assessee has no liability to pay advance tax. Consequently, there is no basis for levying interest under sections 234B and 234C.

The Tribunal further supported this position by citing decisions from various High Courts, including the Bombay High Court in DIT vs NGC Network Asia LLC and the Delhi High Court in DIT Vs Jacabs Civil Inc. These courts held that the liability to deduct tax at source is on the payer, and if the payer defaults, the non-resident assessee cannot be held liable for interest under sections 234B and 234C, as the assessee is not in default.

2. Applicability of Rectification under Section 154:

The Tribunal also addressed whether the deletion of interest under sections 234B and 234C could be sought through a rectification petition under section 154. The Department argued that since there could be two views on the issue, it is not a mistake apparent on the record and cannot be rectified under section 154. However, the Tribunal disagreed, noting that the consistent judicial view supports the non-liability of non-resident assessees for interest under these sections when tax is deductible at source. The Tribunal emphasized that there is no scope for two views on this issue, as the statutory language and judicial precedents are clear.

The Tribunal rejected the Department's reliance on the Delhi High Court's decision in DIT Vs Alcatel Lucent Inc USA, clarifying that the decision was based on specific facts and does not apply universally. The Tribunal noted that in the present case, there was no allegation of malafides or inconsistent conduct by the assessee, distinguishing it from the Alcatel Lucent case.

In conclusion, the Tribunal held that interest under sections 234B and 234C cannot be levied on non-resident assessees when the tax is deductible at source by the payer. The Tribunal allowed the appeals, directing the deletion of the impugned interest levies. As the decision was based on this legal issue, the Tribunal did not address the factual aspects or other peripheral issues raised in the appeals.