Delhi HC rules on interest liability under Section 234B
15th November, 2013
perhaps, the significance of finer distinctions in fact situations and
observing that tax laws have to be interpreted at times with a touch of equity,
the Delhi High court in DIT –I v. Alcatel Lucent held that
interest under Section 234 B of Income Tax Act was payable by the assessee,
since tax was payable and neither payment had been made nor TDS deducted.
liability, shifting burden of compliance
assesses had filed return declaring ‘nil’ income under protest, on the strength
of the India-USA DTAA, being of the view that sale of goods (telecom equipment)
outside India could not be subject to tax in India. The department opined that
the assessee had a PE in India, part of the proceeds were taxable in India,
advance tax was payable and since no payment had been made, interest under
Section 234 B was also to be paid.
assessee at the appellate stage did not dispute its tax liability but contended
that tax should have been deducted by the Indian purchaser of the goods.
Further it was entitled as a non-resident assessee to take credit of ‘tax
deductible’ and once this was done, no tax liability remained and hence no
liability for interest ensued.
decision in Jacab’s case
assessee relied on Delhi high court in Director of Income Tax v.
Jacabs Civil Incorporated and Mitsubishi Corporation : (2010) 330 ITR 578.
In that case it was held that no liability for interest devolved on the
assessee when the person responsible under Section 195 should have deducted TDS
but failed to do so. Also, the non-resident assessee had admitted tax liability
in the return and could take credit of tax deductible.
ruling not agreed with
Mitsubishi, the facts were similar to the present case wherein the
assessee initially resisted but then agreed on taxability. The court had then,
held that the ratio of Jacab’s would apply and granted relief to the
assessee. In the present judgement, the court observed that this was
takes umbrage at vacillating stands
department contended, with force, that assessee cannot choose to deny and
accept liability and that ‘the assessee would have told the Indian payer
that no tax should be deducted from the remittance’.
duty to consider probabilities
there was no direct evidence that in fact, the assessee had asked/forced the
Indian payer not to deduct TDS, the court opined that it can be reasonably
presumed this would be consistent with the assessee’s stand that it was not
liable to tax. It observed that the ITAT should have accorded due
weightage to such probabilities.
interpretation of statute and principle of equity
the assessee accepted liability, all consequences would follow. Though a strict
interpretation was pressed for by the assessee in that, the Indian payer ought
to have ascertained his duty to deduct tax, the court held that it would be
inequitable to allow the assessee to admit liability but shift the burden of