2010 (1) TMI 114 - SC - Income Tax

Non Deduction of TDS - foreign salary payment as a component of the total salary paid to an expatriate working in India assessee in default debatable issue period of limitation - in Commissioner of Income Tax vs. Eli Lilly & Co. (India) Pvt. Ltd., reported in 2009 -TMI - 32752 - SUPREME COURT it was held that TDS is deductible Whether on such debatable points, the assessee(s) could be declared as assessee(s) in default under Section 192 read with Section 201 of the Income Tax Act, 1961? held that - in Eli Lilly & Co. (India) Pvt. Ltd. vide Paragraph 21, this Court has clarified that the law laid down in the said case was only applicable to the provisions of Section 192 of the Income Tax Act, 1961 - Leaving the question of law open on limitation, these civil appeals filed by the Department are disposed of with no order as to costs decided in favor of assessee

Summary

Issues involved:
Validity of orders under Sections 201(1) and 201(1A) of the Income Tax Act, 1961 - Bar on time limitation.

Analysis:
The Supreme Court considered the issue of whether the Income Tax Appellate Tribunal was correct in holding that orders passed under Sections 201(1) and 201(1A) of the Income Tax Act, 1961 were invalid and barred by time. The Court noted that there was a debate regarding the deductibility of TDS under the Income Tax Act on foreign salary payments to expatriates working in India. This debate was resolved by a previous judgment of the Court in the case of Commissioner of Income Tax vs. Eli Lilly & Co. (India) Pvt. Ltd. The Court emphasized that the question of limitation had become academic in these cases due to the resolution of the controversy. The Court also highlighted that the assessee(s) had paid the differential tax, interest, and had undertaken not to claim a refund for the amounts paid. Additionally, the Court clarified that the law laid down in the Eli Lilly & Co. case was only applicable to the provisions of Section 192 of the Income Tax Act, 1961. Consequently, the Court decided to leave the question of law open on limitation and disposed of the civil appeals filed by the Department with no order as to costs.

This judgment provides clarity on the issue of time limitation concerning orders under Sections 201(1) and 201(1A) of the Income Tax Act, 1961. It underscores the importance of resolving debates on tax deductibility to avoid disputes regarding the validity of orders. The Court's decision to leave the question of law open on limitation signifies the significance of addressing legal controversies promptly and effectively. The Court's emphasis on the payment of differential tax and interest by the assessee(s) highlights the importance of compliance with tax obligations to avoid default status. The clarification regarding the applicability of the law laid down in the Eli Lilly & Co. case to specific provisions of the Income Tax Act, 1961 ensures proper interpretation and application of tax laws in similar cases.