No Interest u/s 234B can be levied on the assessee-payee on the ground of non-payment of Advance Tax: ITAT

The Income Tax Appellate Tribunal (ITAT), Delhi Bench held that no interest under section 234B can be levied on the assessee-payee on the ground of non-payment of advance tax.

The appellant, M/s Huawei Technologies Co. Ltd is a company incorporated in People’s Republic of China and is primarily engaged in the business of supplying (on offshore basis) non-terminal products, that is, advanced tele-communication network equipment, namely, core and access network equipment, mobile network equipment and data communications equipment etc. for use in fixed and mobile phone networks and terminal products, that is, mobile phone handsets to various customers (including customers in India). As alleged, the said supplies were made on principal to principal basis and property in equipment was transferred to Indian customers outside India.

The issue raised was in respect of charging of interest under section 234B of the Act.

As per the provisions of section 234B of the Act, an assessee who is liable to pay advance tax under section 208 will be liable to interest under section 234B of the Act, if he fails to pay such tax, or the advance tax paid by him falls short of 90 percent of the assessed tax.

The coram consisting of K.N.Chary and N.K.Billaiya clarified that an assessee must first be liable to pay advance tax under the provisions of section 208 of the Act. As per the provisions of section 208 read with section 209(1)(d) of the Act, advance tax payable has to be computed after reducing from the estimated tax liability the amount of tax-deductible/ collectible at source on income which is included in computing the estimated tax liability.

Under section 195 of the Act, tax is deductible at source from payments made to non-residents. Appellant is a non-resident and thus, tax is deductible at source from the payments made to it under section 195 of the Act. Since tax was deductible at source on all the payments made to the Appellant, no advance tax was payable as per the provisions of the Act.

The tribunal considered the decision of the Delhi High Court in the case of DIT v. GE Packaged Power wherein the High Court held that no interest under section 234B of the Act can be levied on the assessee-payee on the ground of non-payment of advance tax because the obligation was upon the payer to deduct the tax at source before making remittances to them.

“Amendment to the provisions have been brought by the Finance Act, 2012, w.e.f. 1.4.2012 by which a proviso below section 209(1)(d) of the Act has been added but applicable from A.Y 2013-14. Considering the law on this issue, we direct the Assessing Officer not to charge interest u/s 234B of the Act upto A.Y 2012-13. Interest can be levied as per provisions of law from A.Y 2013-14 onwards,” the ITAT said.