While dismissing the appeal filed by the revenue, the Delhi bench of Income Tax Appellate Tribunal (ITAT) has held that interest under section 234B is not leviable in respect of payments to the non-resident assessee being subject to tax deduction at source under Section 195 of the Income Tax Act 1961.
Assessee in the instant case was a company incorporated in United States of America (USA) engaged in the business of administering and operating a global electronic payment system, which enables its members of commercial banks and other financial institutions to authorize and settle transactions between themselves. And it has business connections in India, but it does not have any Permanent Establishment (PE) in India. During the assessment year the assessee company filed its returns declared its total income of Rs. 9,17,24,589.
The revenue initiating reassessment proceedings and also contended that as per the MAP order passed by the US Competent Authority it is clear that the assessee has a permanent establishment in India as per Article 5 of the Double Taxation Avoidance Agreement (DTAA) and the income attributable to such establishment is taxable in India on a net income basis.
The Delhi bench consists of Judicial Member H.S.Sidhu and Accountant Member L.P.Sahu has observed that the assessee has submitted the relevant documents which are reflected that tax is deductible under section 195 of the act on all payments made to it, there is no advance tax payable under section 208 r.w.s. 209(1)9d) of the Act. In the absence of such liability to pay advance tax then the provisions under section 234B are not applicable in this case. The bench also relied up on the decisions taken by the Honorable Delhi High Court in the Assessee’s own case during the preceding years while declaring that interest under section 234B is not leviable in respect of payments to the non-resident assessee, being subject to tax deduction at source under section 195 of the Income Tax Act.
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