Case: The Commissioner of Income Tax-Iv Vs. Mr. Emilio Ruiz Berdejo .Respondent C/O Tetra Pak India Limited &amp; Others

2] Counsel appearing for the appellant and respondent agree that first two questions sought to be raised in all these group of appeals are covered against the Revenue by virtue of the judgments of the Honble Supreme Court. The first question stands answered in the case of Hindustan Coca Cola Beverage P. Ltd. Vs. Commissioner ofreported in 2007 (293) ITR 226 (SC)  . Whereas second question stands answered by the decision of the Apex Court in the case of Commissioner ofand Anr. Vs. Pranoy Roy and Anr., reported in 2009 (309) ITR 231 (SC). On this backdrop the first two questions can hardly be said to be the substantial questions of law warranting consideration afresh at the hands of thisHaving said so, we are now required to consider third question, which revolves around interpretation of Sections 234B and 234C of the Act resulting from the failure on the part of the assessee to pay Advance Tax which in our view needs consideration. Hence appeal stands admitted to adjudicate upon the third question reading asWhether on the facts and in the circumstances of the case and in law, the Honble ITAT erred in not appreciating that the assessee had failed to pay advance tax and hence section 234B and 234C were rightlyThe learned Counsel for the respondent has waived service in all the appeals. The group of appeals involving identical question is heard finally by consent of parties. All these appeals involve common question of law based on identical facts, as such the factual matrix is drawn from ITA (L) No.3823 of 2008 (CIT Vs. Mr.Emilio Ruiz Berdejo) for considering rivalHaving heard rival parties, before considering the aforesaid question, it is necessary to draw factual matrix giving rise to the aboveMATRIX:6] The respondent is an assessee under the provisions of the Act. The relevant assessment year isThe respondent assessee an individual, is an employee of M/s.Tetra Pak International SA. He was deputed to India for working in M/s.Tetra Pak (India) Ltd. for the previous year ended on 31.3.2001 relevant to the assessment yearThe assessee filed his original return of income for the assessment yearon 26.7.2001 declaring total income in the sum of Rs.The assessee had received from outside India an amount of Rs.90,50,970/from M/s.Tetra Pak International SA, which he did not disclose in his original return of income filed by him. In the opinion of the Assessing Officer, the income chargeable to tax, had escaped assessment within the meaning of Section 147 of the Act, a notice under Section 148 of the Act was issued on 10.11.2006. It was served on the assessee on 17.11.2006. In response thereto, the assessee filed a revised return of income on 26.06.2007 showing his income at Rs.An assessment was completed under Section 143(3) r/w Section 147 of the Act vide order dated 14.09.2007 determining the total income of the assessee in the sum income of Rs.1,25,20,120/by making an addition of Rs.90,50,970/on account of addition of the amount which the assessee had received from outside India, i.e. from M/s.Tetra Pak International SA with further order directing levy of interest under Sections 234A, 234B and 234C of the Act.8] The assessee, not satisfied with the action of the Assessing Officer levying interest under Sections 234A, 234B and 234C on the income determined under Section 143(3) r/w Section 147 of the Act preferred an appeal before CITPune, which was dismissed by an order dated 28.2.2008 affirming the order of the AssessingAggrieved by the aforesaid order of CITPune, dated 28.2.2008 an appeal was carried by the respondent to the ITAT, Pune Bench (B), Pune. The ITAT vide its order dated 27.06.2008 allowed the appeal holding that the issue of interest under Sections 234B and 234C of the Act is covered by the Special Bench decision in the case of Sumit Bhattacharya Vs. ACIT (300 ITR AT 347), wherein the Special Bench relying upon another decision of the Special Bench in the case of Motrola Inc. Vs. DCIT (95 ITD SB 269) had ruled that interest under Sections 234B and 234C of the Act could not have been levied, since as the assessees employer had paid interest for the delayed payment under Sections 234B and 234C of the Act. It was further held that in view of Apex Court Judgment in the case of Dr. Prannoy Roy and another Vs. Commissioner ofand Anr. reported in 2002 (254) ITR 755   the interest under Section 234A was not leviable in a case where there was delay in filing of return provided entire tax liability paid. On these findings the Tribunal, vide its order dated 27th June, 2006 was pleased to hold the levy of interest under Sections 234A and 234B and 234C of the Act was notBeing dissatisfied with the aforesaid order of the Tribunal, the Revenue is before this Court under Section 260A of the Act, raising third substantial question of law extracted herein above warranting consideration on the rival submissions sketched herein below.

Reasoning:
20] Having heard both parties and having examined provisions of the Act relevant for the purpose of deciding the issues involved in the present appeal, one has to turn to the Chapter XVII of the Act which provides for collection and recovery of tax. Chapter XVII is divided into various parts A to F.provides for deduction at source and advance payment with which presently we are concerned for deciding the appeal. Section 190(1) interalia provides that, notwithstanding regular assessment in respect of any income is to be made in a later assessment year, the tax on such income shall be payable by deduction (or collection) at source [or by advance payment or by payment under subsection (1A) of Section 192], as the case may be, in accordance with the provisions of Chapter XVII. Section 191 provides for in the case of income in respect of which provision is not made under Chapter XVII for deductingat the time of payment of payment, and in any case where income tax has not been deducted in accordance with the provisions of this Chapter,shall be payable directly by the asessee. Part B of Section XVII consists of group of sections which provide for deduction of tax at source. Section 192 provides for deduction of tax on income chargeable under the head Salary by any person responsible for paying any income chargeable under the head Salaries. Section 4(2) interalia provides in respect of income chargeable under subsection (1),shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of the Income Tax, 1961. Section 192 is a machinery provision. It deals with collection and recovery of tax, this provision is referable to Section 4(2). The scheme of TDS, not only applies to the amount paid, such as salaries etc. but the said provisions also apply to gross sums, the whole of which may not be income or profits in the hands of the recipient, such as payment to contractors and subcontractors. The purpose of the TDS provisions in Chapter XVIIB is to see that the sum which is chargeable under section 4 for levy and collection ofthe payer should deduct tax thereon at the rates in force. The said TDS provisions are meant for tentative deduction ofsubject to regularThe aforesaid provisions and the scheme of the ActTDS deduction were the subject matter of consideration by the Apex Court in the case of Commissioner ofVs. Eli Lilly and Co. (India) P. Ltd., reported in 2009 (312) ITR 225 (SC)  . The Apex Court, while considering the question Whether the TDS provisions in Chapter XVIIB, which are in the nature of machinery provisions enabling collection and recovery of tax are at all applicable to payments made abroad by the foreign company/head office which had seconded the expatriate(s) for rendering services in India to the(employer) was pleased to hold that Section 192 of the Act is very much applicable even to a nonresident company and observed asif a sum that is to be paid to thechargeable to tax, tax is required to be deducted. The sum which is to be paid may be income out of different heads of income mentioned in section 14, that is to say, income from salaries, income from house property, profits and gains of business, capital gains and income from other sources. The scheme of the TDS provisions applies not only to the amount paid, which bears the character of income such as salaries, dividends, interest on securities, etc., but the said provisions also apply to gross sums, the whole of which may not be income or profits in the hands of the recipient, such as payment to contractors and subcontractors. The purpose of the TDS provisions in Chapter XVIIB is to see that the sum which is chargeable under section 4 for levy and collection ofthe payer should deduct tax thereon at the rates in force, if the amount is to be paid to aThe said TDS provisions are meant for tentative deduction ofsubject to regularassessment. (see Transmission Corporation of A.P. Ltd. V. CIT reported in [1999] 239 ITR 587     at page 594).The Apex Court further observed:Applying the above test, we are of the view that if the payments of home salary abroad by the foreign company to the expatriate has any connection or nexus with his rendition of service in India, then such payment would constitute income which is deemed to accrue or arise to the recipient in India as salary earned in India in terms of section 9(1) (ii) (which is one of the heads of income). Section 9(1) (ii) lays down that income which falls under the head Salaries, if it is earned in India, shall be deemed to accrue or arise in India. In fact, section 9 explains the expression is deemed to accrue or arise to him in India used in section 5(2) (b). Section 9 is not only a machinery section, it has the effect of rendering a person liable to tax on incomes which do not accrue or arise or are not received in India but which are deemed to be taxable by virtue of section 9 which applies to residents and nonresidents. Section 9 is, therefore, a typical example of a combination of a machinery provision which also provides forIt is thus, clear that if a sum is to be paid to the nonresident is chargeable to tax, tax is required to beHaving seen the aforesaid scheme of the Act and law laid down by the Apex Court, the further question which needs consideration is : the consequences of failure to deduct advance tax in whole or part or after deducting, one fails to pay the tax under the Act, then such person is made liable to pay simple interest at certain percentage for every month or part of a month on such amount from the date on which such tax was deductible to the date on which such tax is actually paid in accordance with the provisions of subsection (3) of section 200. The said section 200 creates an obligation on the person deducting tax to pay the same within prescribed time to the credit of Central Government or as the Board may direct. Section 201 provides for consequences of failure to deduct or to pay tax, whereas subsection (A) of Section 201 provides for liability to pay interest. Now, liability to pay interest as stated under Section 201 is on the person who fails to deduct advance tax. As against this, if one turns to the Chapter XVII of the Act, it provides for chargeability of interest in certain cases. Section 234A provides for payment of interest for defaults in furnishing return of income, whereas Section 234B provides for payment of interest for defaults in payment of advance tax and Section 234C provides for payment of interest for deferment of advance tax. All these three sections create liability on the assessee to pay interest for the default committed by him in the circumstances mentioned in the saidThe Apex Court also had an occasion to consider the very same question with regard to the nature of liability of interest in the case of Dr.Prannoy Roy and Anr. Vs. CIT and Anr. 2002(254) ITR 755, wherein the Apex Court was pleased to hold that interest charged under Section 234A of the Act is not by way of penalty. It is levied to compensate revenue in order to avoid from being deprived of payment of tax on the due date. Interest held to be payable where the tax had not been deposited prior to the due date of filing of thereturn. In other words, it was held that where the tax already paid by the assessee was not less than the tax payable on the returned income which was accepted, the question of levy of interest under Section 234A does not arise.25] Section 234B which provides for interest for defaults in payment of advance tax was also a subject matter of scrutiny at the hands of Uttaranchal High Court in the case of CIT Vs. Sedco Forex International Drilling Co.Ltd. 264 ITR 320, wherein the Court was pleased to hold that Section 234 which imposes interest is compensatory in nature and not as a penalty. The very same view holds good for Section 234C of theThe Division Bench of this Court had an occasion to consider the very same issue in the case of Director of(International Taxation) Vs. NGC Network Asia LLC, reported in 2009 (313) ITR 187 (Bom)  , where in this Court ruled asare in respectful agreement with the view taken in the case of CIT v. Sedco Forex International Drilling Co. Ltd. [2003] 264 ITR 320, by the Uttaranchal High Court. We are clearly of the opinion that when a duty is cast on the payer to pay the tax at source, on failure, no interest can be imposed on theThe aforesaid view of the Division Bench is in consonance with the view taken by the Apex court in the case of Commissioner ofVs. Eli Lilly and Co.(India) P. Ltd. and Dr. Prannoy Roy and another Vs. Commissioner ofand Anr. citedAt this juncture, it is also relevant to mention that the Apex Court also had an occasion to consider the effect of payment of TDS by deductee u/s.201(1) (c) of the Act and consequences thereof in the case of Hindustan Coca Cola Beverage P. Ltd. Vs. Commissioner of(supra), wherein the Apex Court was pleased to hold that once the deductor has satisfied, the officer in charge of TDS, that taxes due have been paid by thethen assessee has to pay only interest for late payment under Section 201(1)(a) and then no tax can further be recorded. The Apex Court has also considered the effect of circular dated 29th January, 1997 issued by the CBDT, which declaresdemand visualized under Section 201(1) of the Income Tax Act should be enforced after the tax deductor has satisfied the officer in charge of TDS, that taxes due have been paid by theHowever, this will not alter the liability to charge interest under Section 201(1A) of the Act till the date of payment of taxes by theor the liability for penalty under Section 271C of the Income Tax Act.