Director, Income Tax (International Taxation v. M/S B.j. Service Co. (M.e.) Ltd

IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Income Tax Appeal No. 59 of 2010 (Delay Condonation Application No. 7877 of 2010) Director, Income Tax (International Taxation) ……….. Appellant Versus M/s B.J. Service Co. (M.E.) Ltd. ……….. Respondent Present: Mr. Hari Mohan Bhatia, Advocate for the appellant. Mr. P.R. Mullick, Advocate for the respondent. Coram: Hon’ble Barin Ghosh, C.J.Hon’ble V.K. Bist, J. BARIN GHOSH, C.J. (Oral) Considering the averments made in the application for condonation of delay in filing the appeal and being satisfied that sufficient grounds have been made out for delay, we allow the said application. 2. Section 195(1) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), as was prevalent at the relevant time, made the person responsible for paying a non-resident or a foreign company any interest to deduct income tax thereon at the rates in force. The Government of India paid interest to the respondent assessee and at the time of paying interest, deducted income tax payable thereon. At the time of assessment, tax, thus deducted and deposited with the Government, was treated as the tax payable on the amount of such interest. Subsequently, the case was re-opened by taking recourse to Section 147 of the Act. It was felt that while tax was deducted at the rate of 15 per cent of the amount of interest paid, taxable liability on the interest was 48 per cent. Whether, the taxable liability was 15 per cent or 48 per cent is a matter with which we are not concerned, as the same is pending adjudication before the Tribunal. The question is, whether the assessee is liable to pay interest under Sections 234B and 234C of the Act? The liability to pay further tax will accrue provided it is held in the proceeding pending that the assessee is liable to pay 48 per cent tax on the amount of interest. Otherwise the assessee will have no liability to pay any interest either under Sections 234B or 234C of the Act as, in the instant case, the payment was made by the Government who, as aforesaid, was directed to deduct income tax at the rate in force. We, therefore, do not conclude the matter and keep open the matter until such time it is decided what is the liability of the assessee? The learned counsel for the respondent assessee wanted vigorously to place before us a judgment of the Full Bench of this Court. Whether that judgment is or is not applicable, will depend upon the facts and circumstances of the case, as yet the tax liability of the assessee concerned has not been decided. In those circumstances, question of payment of any interest for delay in discharge of tax liability does not arise. We close the matter thus. In the event it is decided that the tax liability of the assessee remains confined to 15 per cent of the interest, which was deducted by the Government, then, in the facts and circumstances of the case, it will be construed that the assessee has no liability for payment of interest either under Sections 234B, or Section 234C of the Act. In the event, however, it is held that the assessee is liable to pay tax at the rate of 48 per cent, it shall be open to the appellant to apply for review of this order. (V.K. Bist, J.) (Barin Ghosh, C.J.) 29.04.2014 29.04.2014 P. Singh