2015 (3) TMI 939 - HC - Income Tax

Interest under Section 234B - non-payment of advance tax - non deduction of tds - Held that - As relying on DIRECTOR OF INCOME TAX INTERNATIONAL TAXATION Versus GE PACKAGED POWER INC. AND OTHERS 2015 (1) TMI 1168 - DELHI HIGH COURT no interest is leviable on the respondent assessees under Section 234B, even though they filed returns declaring NIL income at the stage of reassessment. The payers were obliged to determine whether the assessees were liable to tax under Section 195(1), and to what extent, by taking recourse to the mechanism provided in Section 195(2) of the Act. The failure of the payers to do so does not leave the Revenue without remedy; the payer may be regarded an assessee-in-default under Section 201, and the consequences delineated in that provision will visit the payer. - Decided in favour of assessee.

Summary

Issues:
1. Liability to pay interest under Section 234B of the Income Tax Act, 1961 for non-resident companies engaged in distribution of news.
2. Interpretation of relevant legal provisions and precedents regarding tax deduction at source under Section 195.
3. Application of judicial precedents in determining the primary liability of deducting tax and the consequences of failure to do so under Section 201.

Detailed Analysis:
Issue 1:
The primary issue in this judgment pertains to the liability of non-resident companies to pay interest under Section 234B of the Income Tax Act, 1961 for their activity of distributing news. The assessment proceedings upheld the levy of interest under Section 234B, which was challenged. The ITAT relied on a Division Bench judgment in a similar case to uphold the interest liability. However, subsequent judicial decisions and interpretations were considered to determine the applicability of interest under Section 234B.

Issue 2:
The judgment delves into the interpretation of Section 195 of the Income Tax Act, which deals with tax deduction at source. The court analyzed various provisions of Chapter XVII and highlighted the specific expression "sum chargeable under the provisions of the Act" used in Section 195. Reference was made to judicial decisions, including those by the Karnataka High Court and the Supreme Court, to elucidate the application of tax deduction provisions and the obligations of the payer in determining tax liability under Section 195.

Issue 3:
Another crucial aspect addressed in the judgment is the application of judicial precedents in determining the primary liability of deducting tax and the consequences of failing to do so under Section 201 of the Income Tax Act. The court examined previous decisions and distinguished between different judgments to establish the correct interpretation of the law. The judgment emphasized the obligation of the payer to deduct tax at the source and the repercussions of not fulfilling this obligation, leading to the payer being considered an assessee-in-default under Section 201.

Overall, the judgment provides a comprehensive analysis of the issues related to interest liability under Section 234B, the interpretation of tax deduction provisions under Section 195, and the application of judicial precedents in determining the primary liability of deducting tax and the consequences of non-compliance. The decision favored the assessee, highlighting the importance of adhering to clear statutory provisions and judicial precedents in tax matters.