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TMI Blog2008 (2) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... t Western Geco International Ltd., as agent of foreign nationals, paid remuneration to different non-resident assessees and submitted income-tax return on their behalf as their agent/employer. The assesses/employ- ees only had salary income which was subjected to deduction of tax at source. This is evident from the assessment order where income assessed is only salary income disclosed in Form No. 16. In the return, the assessees had also claimed deduction under section 10( 10CC ) of the Income-tax Act on account of tax paid by the employer on their salary, as per agreement. The Assessing Officer, however, refused to allow above deduction and added tax paid on income through multiple grossing instead of single grossing (single addition of income-tax). The Special Bench of the Income-tax Appellate Tribunal in the case of RBF Rig Corpn. LIC (RBFRC) v. Asstt. CIT [2007] 109 ITD 141 (Delhi) held that these assessees were entitled to deduction under section 10( 10CC ) of the Income-tax Act. Thus additional liability created in these cases under the above provision was deleted. 3. The Assessing Officer had also levied interest under section 234B of the Income-tax Act without givin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Special Bench of the Tribunal in the case of Motorola Inc. v. Dy. CIT [2005] 95 ITD 269 (Delhi)(SB). 6. The learned Departmental Representative Shri Devendra Shankar, however, submitted that in the above cases, attention of the learned Judges was not drawn to provisions of sections 191, 208 and 209 of the Income-tax Act. On a plain reading of above sections with their simple language, it would be clear that assessees are themselves responsible for any non-deduction or short deduction of income-tax at source and are, therefore, liable to pay interest under section 234B of the Income-tax Act. Shri Devendra Shankar, the Ld. Departmental Representative also drew our attention to the decision of Income-tax Appellate Tribunal E Bench in the case of Dy. DIT v. DMJM Harris Inc. [IT Appeal Nos. 85 and 86 (Delhi) of 2005 decided on 24-8-2007] where the Bench has observed as under : "3. Before us, the Ld. Counsel for the assessee, at the outset, has submitted that this issue is covered in favour of the assessee by the decision of Special Bench of ITAT, in the case of Motorola Inc. v. CIT 95 ITD 269 (Del.)(SB) wherein it has been held that where all the income rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defaulted in making the deduction of tax at source, he could be held liable for payment of tax under section 201(1) and interest under section 201(1A). But the assessee could not be penalized by levy of interest as he was not required to pay advance tax, as the entire income was tax deductible at source. The ld. CIT (DR) has argued that these cases are distinguishable as the tax in these cases was payable by the employer and, therefore, the income was not liable to TDS. We are unable to accept these arguments. No doubt, the assessees were entitled for tax-free salary and it was the obligation of the employer to pay the tax but this obligation was as per the contract between the assessee and the employer. The said obligation was not under the provisions of the Income-tax Act. As the income received was by way of salary, the same was liable to TDS under the provisions of Income-tax Act and once the entire income was liable to TDS, the assessees were not required to pay advance tax in view of the provisions of section 209(1)( d ) as held by the Special Bench of the Tribunal and Hon ble High Court of Uttaranchal in the cases mentioned earlier. We, therefore, see no infirmity in the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to in sub-section (1) of section 201 in respect of such tax.] 207. Liability for payment of advance tax. [Tax shall be payable in advance during any financial year, in accordance with the provisions of sections 208 to 219 (both inclusive), in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year, such income being hereafter in this Chapter referred to as current income .] 208. Conditions of liability to pay advance tax. [ Advance tax shall be payable during a financial year in every case where the amount of such tax payable by the assessee during that year, as computed in accordance with the provisions of this Chapter, is [five thousand] rupees or more.] 209. Computation of advance tax. [(1)The amount of advance tax payable by an assessee in the financial year shall, subject to the provisions of sub-sections (2) and (3), be computed as follows, namely ( a ) to ( c ) ****** ( d )the income-tax calculated under clause ( a ) or clause ( b ) or clause ( c ) shall, in each case, be reduced by the amount of income-tax which would be deductible [or collectible] at source duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t assessee has to pay tax, payable by him direct, if tax had not been deducted from his income. However, section 191 only talks of income-tax. It does not talk of payment of advance tax or interest for which there are separate provisions in the Act as noted above. Advance tax is payable by an assessee as per provisions of section 207, quoted above. It is also to be paid in accordance with provisions of sections 208 to 219 of the Act on total income chargeable to tax in the financial year for the immediately following assessment year. It is payable on the current income. Section 208 further provides that advance tax is payable if such tax payable on the current income computed in accordance with provisions of this Chapter, is Rs. 5,000 or more. So for computation of advance tax, we are to look to provision of section 209. Clause ( d ) of section 209(1) clearly provides that while computing advance tax, the amount of income-tax which is deductible or collectible at source, will be deducted from the advance tax payable. In other words, advance tax payable will be reduced by the amount of tax at source deductible or collectible . Therefore when tax is deductible or collectible at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can then only file return of his total income and pay tax thereon. The employer in case of short recovery is liable to pay interest and penalty for default of no or short deduction and not the employee. That is the Scheme of the Act. There is no question of payment of advance tax by an employee whose total income comprises of salary from which tax at source is to be deducted as per statutory provisions. There is no question of applying provisions of section 234B to such a person who is not liable to pay advance tax. This has been highlighted by underlining the relevant portion of section 234B(1) reproduced above. 11. After considering above statutory provision, the Special Bench of Tribunal in the case of Motorola Inc. ( supra ), observed as under : "The language of section 209(1)( d ) of the Act supports the assessees contention. All the payments made to the assessees are tax deductible at source (even assuming that they are taxable) as rightly held by the CIT(A) and also contended before us. In that case, having regard to the provisions of section 201(1A) to which our attention was drawn on behalf of the assessees, the assessees cannot be held to have committed defau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inherent power to review. In the present case, the Tribunal was justified in exercising its powers under section 254(2) when it was pointed out to the Tribunal that the judgment of the coordinate Bench was placed before the Tribunal when the original order came to be passed but it had committed a mistake in not considering the material which was already on record. The Tribunal has acknowledged its mistake, it has accordingly rectified its order. In our view, the High Court was not justified in interfering with the said order. We are not going by the doctrine or concept of inherent power. We are simply proceeding on the basis that if prejudice had resulted to the party, which prejudice is attributable to the Tribunal s mistake, error or omission and which error is a manifest error then the Tribunal would be justified in rectifying its mistake, which had been done in the present case." We need not say anything further. The Special Bench decisions of Motorola Inc. case ( supra ) and of jurisdictional High Court were binding and unless facts were distinguishable, which is not the case here; different view could not have been taken. We respectfully follow the decision of the Special ..... X X X X Extracts X X X X X X X X Extracts X X X X
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