Interest u/s 243B of Income Tax Act cannot be levied where the Income of the Assessee is Subject to TDS; ITAT Delhi [Read Order]

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The Income Tax Appellate Tribunal has recently in an appeal filed by the Revenue against the Carpool Limited held that where the income is deductible under section 195 of the Income Tax, interest u/s 243B cannot be imposed.

The brief facts of the case are that the respondent is a liaison officer of the Hong Kong Company. It was found to be earning a certain income in India and therefore it was chargeable to tax. However, the issue was that whether interest under section 234B of the income tax act can be levied on income tax of the assessee where tax under section 195 of the income tax act is deductible from the whole of such income.

The Learned assessing officers held that interest in section 234B of the act is chargeable and therefore this ground was raised by the assessee before the ld. CIT (A). However, the CIT (A) did not pass any order on the applicability of the provisions of section 234B and consequent interest payable by the assessee in his order dated 01/12/2011 for A Y 2001 2002 and 2008 2009. Therefore the assessee filed an application under section 154 of the income tax act for both the years making the prayer that the ground against the charging of interest under section 234B of the act has not been decided. Based on this application under section 154 the Ld. Commissioner of income tax (A) relying on the various High Court decisions including decision of honorable jurisdictional High Court on that issue held that interest under section 234B of the act is not chargeable in the hands of the appellant being nonresident when its entire income is subject to tax deduction at source under section 195 of the income tax act., hence revenue filed an appeal before the Tribunal.

The solitary ground of the appeal taken by the revenue is that on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) erred in deleting the interest levied under section 234 B of the Income Tax Act.

The Tribunal decided the case by following the decision of Honourable Delhi high court in case of DIT V G E Packaged power in which it was held that on the payments received by the assessee the payer was required to deduct tax at sources u/s 195 of the act and as the tax was ‘deductible’ u/s 195 of the act there is no failure on part of the assessee in payment of advance tax. Therefore, an assessee cannot be saddled with the burden of interest u/s 234B of the act. The Tribunal confirmed the order of the Ld. CIT (A) in deleting interest under section 234 B of the income tax act 1961 in case of the assessee.

Read the full text of the order here.

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