Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
Civil Appeal No.1262 of 2016
Director of Income Tax, New Delhi
.... Appellant(s)
Versus
M/s. Mitsubishi Corporation
…. Respondent(s)
With
Civil Appeal No. 1256 of 2016
Civil Appeal No. 1268 of 2016
Civil Appeal No. 1271 of 2016
Civil Appeal No. 1272 of 2016
Civil Appeal No. 5734 of 2021
Civil Appeal No. 5735 of 2021
Civil Appeal No. 4766 of 2021
Civil Appeal No.5737 of 2021
Civil Appeal No. 3884 of 2014
Civil Appeal No. 1301 of 2016
J U D G E M E N T
L. NAGESWARA RAO, J.
1. The conundrum before this Court concerns the
liability of an assessee to pay interest on short payment of
advance tax due to default of the payer in not deducting
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tax at the time of payment, under the provisions of the
Income-tax Act, 1961 (hereinafter referred to as the
“Act”). The facts giving rise to Civil Appeal No. 1262 of
2016 are referred to herein, for the sake of convenience.
2. Notice was issued to the Respondent-Assessee under
Section 143 (2) of the Act on 12.10.2004. The Assessing
Officer passed an assessment order on 24.03.2006 for the
assessment years 1998-99 to 2004-05. The Assessee is a
non-resident company incorporated in Japan, with
operations in India. In spite of resistance from the
Assessee, it was held by the Department that a portion of
the Assessee’s income was attributable to its activities in
India and was therefore liable to be taxed in India, under
Articles 4, 5 and 6 of the Double Taxation Avoidance
Agreement between India and Japan, read with the
provisions of the Act. The Respondent-Assessee filed
appeals against the assessment order dated 24.03.2006
before the Commissioner of Income-Tax (Appeals)
(hereinafter referred to as the “CIT”) only with respect to
levy of interest under Section 234B of the Act. The CIT
dismissed the appeals by a common order dated
10.02.2009, aggrieved by which the Respondent filed
appeals before the Income Tax Appellate Tribunal
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(hereinafter referred to as the “ITAT”). The ITAT allowed
the appeals by an order dated 23.06.2009 and held that
the Respondent was not liable for payment of interest
under Section 234B, when tax at source was deductible
from payment made to the Respondent. The judgement of
the ITAT was challenged by the Appellant before the High
Court. On 30.08.2010, the High Court dismissed the
appeals and upheld the judgement of the ITAT. Dissatisfied
with the judgements of the ITAT and the High Court, the
Appellant has preferred Civil Appeal No. 1262 of 2016
before this Court.
3. The Assessing Officer examined the structure of the
Respondent-Assessee which was engaged in carrying out
trading activities in carbon crude oil, LPG, ferrous products,
industrial machinery, mineral, non-ferrous metal and
products, textiles, automobiles etc. through its liaison
offices in India. The Assessing Officer rejected the
contention of the Respondent that it had no income which
was taxable in India and passed the assessment order
dated 24.03.2006, determining the income attributable to
Indian operations and charging interest as per the
provisions of the Act. The assessment order was
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challenged before the CIT, restricted to the imposition of
interest under Section 234B of the Act.
4. The appeals were dismissed by the CIT as not being
maintainable. The appeals filed by the RespondentAssessee against the order of the CIT were disposed of by
the ITAT on 16.11.2007 by remanding the appeals for the
assessment years 1998-99 to 2004-05 to the CIT to be
decided on merits. On remand of the appeals for the
aforesaid assessment years, the CIT framed two questions
for consideration, which are as below:
(a) whether the Appellant is liable to pay interest
under Section 234B of the Act, in case tax which
was deductible at source has not been deducted;
and
(b) whether in the facts and circumstances of the case
there was any tax deductible at source from the
receipts of the appellant so as to apply the ratio of
the ITAT decision in appellant’s own case for
assessment year 2005-06.
5. The CIT took note of the order passed by the ITAT on
08.08.2008 in respect of the assessment year 2005-06 in
case of the Respondent. In the said order, the ITAT had
followed an earlier order passed in Motorola
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Incorporation v. Deputy CIT
1
, in which the assessee was
found to be not liable for payment of advance tax and for
consequent interest under Section 234B, as the entire
income received by the assessee was such from which tax
was deductible at source. However, while deciding the
appeals filed by the Respondent for the assessment years
1998-99 to 2004-05 on the merits of the issue, the CIT
came to the conclusion, independent of the ITAT’s order
dated 08.08.2008, that the Respondent is liable to pay
advance tax in terms of Section 191 of the Act, in case of
no deduction by the payer where tax is deductible at
source. Consequently, the Respondent was held to be
liable to pay interest under Section 234B of the Act for
default in payment of advance tax. The CIT, therefore,
dismissed the Respondent’s appeals for assessment years
1998-99 to 2004-05.
6. In the appeals filed by the Respondent against the
order dated 10.02.2009 of the CIT, the ITAT held that the
issue was covered by its earlier decision dated 08.08.2008
in the case of the Respondent for the assessment year
2005-06, the decision of the special bench of the ITAT in
the case of Motorola Incorporation (supra) as well as
1 [2005] 95 ITD 269
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decisions of the Uttarakhand High Court and the Bombay
High Court. Reliance was placed by the ITAT on a
judgement of the Uttarakhand High Court in
Commissioner of Income-Tax v. Tide Water Marine
International Inc
2
, whereby it was held that an individual
assessee cannot be held liable to pay interest under
Section 234B for default of the company, who had engaged
or employed the assessee, to deduct tax at source while
making payments to the assessee. In Director of
Income-Tax (International Taxation) v. NGC Network
Asia LLC
3
, the Bombay High Court held that on failure of
the payer to deduct tax at source, no interest can be
imposed on the payee-assessee under Section 234B. The
ITAT observed that in all the seven years under
consideration, tax was liable to be deducted at source from
payments made to the Respondent-Assessee and it had
not been demonstrated that the Respondent had a liability
to pay advance tax, even after deduction of taxes at
source. Therefore, the ITAT concluded that the Respondent
was not liable for payment of interest, as the conditions of
Section 234B were not attracted. The Respondent’s
appeals were allowed.
2 [2009] 309 ITR 85
3 [2009] 313 ITR 187
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7. The question of law framed by the High Court is
whether the levy of interest under Section 234B of the Act
for short deduction of tax at source is mandatory and is
leviable automatically. The High Court referred to a
judgement of the Uttarakhand High Court in the case of
Commissioner of Income Tax and Anr. v. Sedco Forex
International Drilling Co. Ltd.
4
, judgement of the
Bombay High Court in the NGC Network Asia LLC case
(supra) and a judgement of the Madras High Court in
Commissioner of Income Tax, Tamil Nadu – I, Madras
v. Madras Fertilizers Ltd.
5
, to uphold the submission of
the Respondent-Assessee that the tax deductible at source
should be excluded from consideration while the estimate
of income for the payment of advance tax is submitted. On
a scrutiny of the relevant provisions of the Act, the High
Court observed that interest under Section 234B of the Act
cannot be imposed on an assessee for failure on the part of
the payer in deducting tax at source, when Section 201
provides for consequences of failure to deduct tax at
source or failure to pay the tax after making deduction.
8. Mr. Zoheb Hossain, learned counsel appearing for the
Revenue, argued that the obligation of the assessee to pay
4 [2003] 264 ITR 320
5 [1984] 149 ITR 703
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advance tax is independent of the obligation of the payer
to deduct tax at source and such obligation of the assessee
continues under Sections 190 and 191 of the Act, even in
case of non-deduction at source by the payer. He
submitted that Section 234B is compensatory in nature as
the interest component is meant to compensate the
Government for the loss accrued in terms of the tax which
became due and was not paid. He contended that when
there are two modes of recovery of tax, i.e., one from the
assessee and other from the payer who had an obligation
to deduct tax, the choice of the Revenue regarding the
mode of recovery cannot be restricted. By referring to the
relevant provisions of the Act, Mr. Hossain argued that the
payment of advance tax is the liability of the assessee and
any default or shortfall in such payment from the assessed
tax continues to be a liability of the assessee.
9. While construing Section 209 (1) (d) of the Act, he
submitted that the High Court committed a serious error in
its interpretation of the phrase “deductible or collectible at
source”. According to him, the phrase “deductible or
collectible at source” would not take into its fold tax which
was not deducted within the statutory time limit and was,
in fact, paid to the assessee without deduction. To support
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his argument, he relied on Explanation 1 to Section 234B
(1), which states the definition of “assessed tax” to be tax
on the total income reduced by inter alia “any tax
deducted or collected at source”. For the purposes of levy
of interest under Section 234B, the non-payment or
shortfall in payment of advance tax is measured against
“assessed tax”, which takes into account tax which was
actually deducted or collected at source. He further
submitted that Section 234B is a standalone provision and
the said section being a complete code in itself, the words
used in Section 209 (1) (d) of the Act cannot be imported
into Section 234B. Even though the Revenue may proceed
against the assessee as well as the payer for collection of
the unpaid tax, along with interest, the Revenue would
refund the excess amounts collected to either of the
parties, most likely to the payee, once it is successful in
recovering the amounts due.
10. Mr. M.S. Syali, learned Senior Counsel appearing for
the Respondent-Assessee, submitted that Section 234B of
the Act cannot be read in isolation but should be construed
in light of Section 209 of the Act. Relying upon a
judgement of this Court in Ian Peter Morris v. Assistant
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Commissioner of Income Tax
6
, he submitted that the
provisions pertaining to payment of advance tax and levy
of interest for default in payment of advance tax would not
come into play once it was determined that tax had to be
deducted at source. He sought support from the
judgements of the Uttarakhand High Court in the Sedco
Forex case (supra), the Bombay High Court in the NGC
Network Asia LLC case (supra) and the Madras High
Court in the Madras Fertilizers case (supra) to justify the
findings recorded in the impugned judgement. He argued
that deduction of tax at source and payment of tax are two
different components of tax-recovery under the Act.
According to him, the assessee cannot be penalized for
default on the part of the payer. The Act provides that the
payer can be declared as an assessee in default for his
failure to deduct tax at source and proceedings can be
initiated against the payer for recovery, apart from
invoking the penal provisions provided under the Act.
While it was agreed by Mr. Syali that the Act imposes an
obligation on the Assessee to pay advance tax, it was
emphasised that for the levy of interest under Section
234B, pre-conditions as specified in the provision had to be
6 (2020) 15 SCC 123
10 | P a g e
met. He contended that an imminent liability to pay
advance tax and a subsequent default of such payment
had to be established, to attract the levy of interest under
Section 234B. In the present case, these pre-conditions for
levy of interest under Section 234B had not been satisfied,
as Section 209 (1) (d) had been complied with to compute
that the Respondent-Assessee had no advance tax liability.
11. The relevant provision of the Act which falls for
consideration in this case are in Chapter XVII, which
pertains to collection and recovery of tax. In accordance
with Section 190 of the Act, tax on income shall be payable
by deduction or collection at source or by advance
payment, notwithstanding that the regular assessment in
respect of any income is to be made in a later assessment
year. Any person responsible for paying to a non-resident
or to a foreign company shall, at the time of the credit of
such income, deduct income-tax thereon at the rate in
force, according to Section 195. Section 200 provides that
a person deducting any sum in accordance with the
provisions of Chapter XVII shall pay, within the prescribed
time, the sum so deducted to the credit of the Central
Government. The consequences of failure to deduct tax or
pay the tax after deduction are dealt with in Section 201 of
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the Act. Section 209(1) of the Act and Section 234B, which
fall for consideration in this case, are reproduced below as
they stood prior to the Finance Act, 2012:
“209. Computation of advance tax. —
(1) The amount of advance tax payable by an
assessee in the financial year shall, subject to the
provisions of sub- sections (2) and (3), be computed
as follows, namely:-
(a) where the calculation is made by the assessee for
the purposes of payment of advance tax under subsection (1) or sub-section (2) or sub-section (5) or subsection (6) of section 210, he shall first estimate his
current income and income-tax thereon shall be
calculated at the rates in force in the financial year;
(b) where the calculation is made by the Assessing
Officer for the purpose of making an order under subsection (3) of section 210, the total income of the
latest previous year in respect of which the assessee
has been assessed by way of regular assessment or
the total income returned by the assessee in any
return of income furnished by him for any subsequent
previous year, whichever is higher, shall be taken and
income-tax thereon shall be calculated at the rates in
force in the financial year;
(c) where the calculation is made by the Assessing
Officer for the purpose of making an amended order
under sub-section (4) of section 210, the total income
declared in the return furnished by the assessee for
the later previous year, or, as the case may be, the
total income in respect of which the regular
assessment, referred to in that sub-section has been
made, shall be taken and income-tax thereon shall be
calculated at the rates in force in the financial year;
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(d) the income- tax calculated under clause (a) or
clause (b) or clause (c) shall, in each case, be reduced
by the amount of income- tax which would be
deductible or collectible at source during the said
financial year under any provision of this Act from any
income (as computed before allowing any deductions
admissible under this Act) which has been taken into
account in computing the current income or, as the
case may be, the total income aforesaid; and the
amount of income-tax as so reduced shall be the
advance tax payable.
…”
“234B. Interest for defaults in payment of
advance tax.—
(1) Subject to the other provisions of this section,
where, in any financial year, an assessee who is liable
to pay advance tax under section 208 has failed to
pay such tax or, where the advance tax paid by such
assessee under the provisions of section 210 is less
than ninety per cent. of the assessed tax, the
assessee shall be liable to pay simple interest at the
rate of one per cent. for every month or part of a
month comprised in the period from the 1st day of
April next following such financial year to the date of
determination of total income under sub-section (1) of
section 143 and where a regular assessment is made,
to the date of such regular assessment, on an amount
equal to the assessed tax or, as the case may be, on
the amount by which the advance tax paid as
aforesaid falls short of the assessed tax.
Explanation 1.—In this section, “assessed tax” means
the tax on the total income determined under subsection (1) of section 143 and where a regular
assessment is made, the tax on the total income
determined under such regular assessment as
reduced by the amount of,—
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(i) any tax deducted or collected at source in
accordance with the provisions of Chapter XVII on any
income which is subject to such deduction or
collection and which is taken into account in
computing such total income;
(ii) any relief of tax allowed under section 90 on
account of tax paid in a country outside India;
(iii) any relief of tax allowed under section 90A on
account of tax paid in a specified territory outside
India referred to in that section;
(iv) any deduction, from the Indian income-tax
payable, allowed under section 91, on account of tax
paid in a country outside India; and
(v) any tax credit allowed to be set off in accordance
with the provisions of section 115JAA.
Explanation 2.—Where, in relation to an assessment
year, an assessment is made for the first time under
section 147 or section 153A, the assessment so made
shall be regarded as a regular assessment for the
purposes of this section.
Explanation 3.—In Explanation 1 and in sub-section
(3), “tax on the total income determined under subsection (1) of section 143” shall not include the
additional income-tax, if any, payable under section
143.”
12. An analysis of clauses (a) and (d) of Section 209 (1)
would make it clear that the assessee shall estimate his
current income and income-tax for payment of advance
tax on the basis of rates in force in the financial year. The
calculation of the advance tax is to be reduced by the
amount of income-tax which would be deductible or
collectible at source during the said financial year. In case
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of failure to pay advance tax under Section 208 or where
the advance tax paid by the assessee as per the provision
of Section 210 is less than ninety per cent of the assessed
tax, the assessee shall be liable to pay interest on the
amount of shortfall from the assessed tax, according to
Section 234B of the Act.
13. The main point argued on behalf of the Revenue
relates to the interpretation of Section 209 (1) (d) of the
Act, with stress on the words “deductible or collectible at
source”. The contention of the Revenue is based on the
fact that an assessee, who has received any payment
without the payer deducting tax on such payment, cannot
be permitted to escape liability in payment of advance tax
and consequent interest for such non-payment under
Sections 191 and 234B of the Act. It was contended that
as all the Assesses in the matters before us were fully
aware of the receipt of amounts without deduction of taxes
at source, they should not be allowed to then rely on
Section 201 of the Act to reduce their advance tax liability.
In this connection, it was submitted by the Revenue that
the expression “would be deductible or collectible” would
not include amounts, which had not been deducted at the
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time of payment and, in fact, were paid to the assessee by
the payer.
14. The primary issue before us pertains to the
interpretation of Section 209 (1) (d). A proviso was
inserted to Section 209 (1) (d) by the Finance Act, 2012,
which reads as under:
“Provided that for computing liability for advance
tax, income-tax calculated under clause (a) or
clause (b) or clause (c) shall not, in each case, be
reduced by the aforesaid amount of income-tax
which would be deductible or collectible at source
during the said financial year under any provision
of this Act from any income, if the person
responsible for deducting tax has paid or credited
such income without deduction of tax or it has
been received or debited by the person
responsible for collecting tax without collection of
such tax.”
15. Notes to the memorandum explaining the provisions
in the Finance Bill, 2012 are as under:
“Liability to pay advance tax in case of nondeduction of tax
Under the existing provisions of section 209 of the
Income-tax Act, the amount of advance tax
payable is computed by reducing the amount of
income-tax which would be deductible or
collectible during the financial year from incometax on estimated income. Therefore, in cases
where the assessee receives or pays any amount
(on which the tax was deductible or collectible)
without deduction or collection of tax, it has been
held by courts that he is not liable to pay advance
tax to the extent the tax is deductible or
collectible from such amount.
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In order to make an assessee liable for payment of
advance tax in respect of income which has been
received or paid without deduction or collection of
tax, it is proposed to amend the aforesaid section
to provide that where a person has received any
income without deduction or collection of tax, he
shall be liable to pay advance tax in respect of
such income.
This amendment will take effect from the 1st April,
2012 and would, accordingly, apply in relation to
advance tax payable for the financial year 2012-
13 and subsequent financial years.”
16. The proviso is in the nature of an exception to Section
209 (1) (d), as an assessee, who has received any income
without deduction or collection of tax, is made liable to pay
advance tax in respect of such income. It is relevant to
note that the amendment was brought into effect from 1st
April, 2012 and was made applicable to cases of advance
tax payable in the financial year 2012-13 and thereafter.
All the appeals before us pertain to the period prior to
assessment year 2013-14.
17. In Cape Brandy Syndicate v. I.R.C.
7
, Lord
Sterndale M.R. had said:
“I think it is clearly established in Attorney
General v. Clarkson
8
that subsequent legislation
may be looked at in order to see the proper
construction to be put upon an earlier Act where
7 [1921] 2 K.B. 403
8 [1900] 1 Q.B. 156, 163, 164
17 | P a g e
that earlier Act is ambiguous. I quite agree that
subsequent legislation if it proceeded on an
erroneous construction of previous legislation
cannot alter that previous legislation; but if there
be any ambiguity in the earlier legislation, then
the subsequent legislation may fix the proper
interpretation which is to be put upon the earlier
Act”.
18. This Court in State of Bihar v. S.K. Roy
9 had
upheld the well-recognised principle that in dealing with
matters of construction, subsequent legislation may be
looked at in order to see what is the proper interpretation
to be put upon the earlier Act, where the earlier Act is
obscure or ambiguous or readily capable of more than one
interpretation. While construing sub-section 2(b) of
Section 80-HHC of the Act, as it stood prior to its
amendment and thereafter, this Court in Gem Granites v.
Commissioner of Income Tax, T.N.
10 held as follows:
“13. The introduction of the phrase “other than” in
clause (b) of sub-section (2) of Section 80-HHC in
1991, in our opinion, indicates the carving out of a
specific class from the generic class of “minerals
and ores”. This means that were it not for the
exception, the specified processed minerals and
ores would have been covered by the words
“minerals and ores”. It also indicates that only the
minerals and ores subjected to the process of
cutting and polishing would be entitled to the
benefit of Section 80-HHC meaning thereby that all
9 (1966) Supp. SCR 259
10 (2005) 1 SCC 289
18 | P a g e
other species of processed minerals and ores would
continue to be covered by the general exclusion
applicable to the generic class. The 1991
amendment to Section 80-HHC thus conclusively
demonstrates that the words “minerals and ores”
must be construed widely and in an unrestricted
manner. As has been held in Municipal
Committee v. Manilal [(1967) 2 SCR 100 : AIR 1967
SC 1201] and Pappu Sweets and Biscuits v. Commr.
of Trade Tax [(1998) 7 SCC 228] subsequent
legislation may be looked into to fix the proper
interpretation to be put on the statutory provisions
as they stood earlier. The benefit of Section 80-HHC
has been extended by the amendment to a specific
kind of mineral and was introduced for the first time
in 1991. If we were to hold that the word “minerals”
in sub-section (2)(b) never included processed
minerals then the 1991 amendment excepting
processed minerals from the exclusionary effect of
the sub-section would be rendered meaningless
and an exercise in futility.”
19. The dispute relating to the interpretation of the words
“would be deductible or collectible” in Section 209 (1) (d)
of the Act can be resolved by referring to the proviso to
Section 209 (1) (d), which was inserted by the Finance Act,
2012. The proviso makes it clear that the assessee cannot
reduce the amounts of income-tax paid to it by the payer
without deduction, while computing liability for advance
tax. The memorandum explaining the provisions of the
Finance Bill, 2012 provides necessary context that the
amendment was warranted due to the judgements of
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courts, interpreting Section 209 (1) (d) of the Act to permit
computation of advance tax by the assessee by reducing
the amount of income-tax which is deductible or collectible
during the financial year. If the construction of the words
“would be deductible or collectible” as placed by the
Revenue is accepted, the amendment made to Section 209
(1) (d) by insertion of the proviso would be meaningless
and an exercise in futility. To give the intended effect to the
proviso, Section 209 (1) (d) of the Act has to be understood
to entitle the assessee, for all assessments prior to the
financial year 2012-13, to reduce the amount of incometax which would be deductible or collectible, in
computation of its advance tax liability, notwithstanding
the fact that the assessee has received the full amount
without deduction.
20. We do not find force in the contention of the Revenue
that Section 234B should be read in isolation without
reference to the other provisions of Chapter XVII. The
liability for payment of interest as provided in Section 234B
is for default in payment of advance tax. While the
definition of “assessed tax” under Section 234B pertains to
tax deducted or collected at source, the pre-conditions of
Section 234B, viz. liability to pay advance tax and non20 | P a g e
payment or short payment of such tax, have to be
satisfied, after which interest can be levied taking into
account the assessed tax. Therefore, Section 209 of the
Act which relates to the computation of advance tax
payable by the assessee cannot be ignored while
construing the contents of Section 234B. As we have
already held that prior to the financial year 2012-13, the
amount of income-tax which is deductible or collectible at
source can be reduced by the assessee while calculating
advance tax, the Respondent cannot be held to have
defaulted in payment of its advance tax liability. We
uphold the view adopted in the impugned judgement of
the Delhi High Court in Civil Appeal No. 1262 of 2016 as
well as by the Madras High Court in the Madras
Fertilizers case (supra), that the Revenue is not
remediless and there are provisions in the Act enabling the
Revenue to proceed against the payer who has defaulted
in deducting tax at source. There is no doubt that the
position has changed since the financial year 2012-13, in
view of the proviso to Section 209 (1) (d), pursuant to
which if the assessee receives any amount, including the
tax deductible at source on such amount, the assessee
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cannot reduce such tax while computing its advance tax
liability.
21. As we have dealt with the submissions relating to
Section 209 and Section 234B of the Act, we do not deem
it necessary to deal with other contentions that have been
raised on behalf of the Revenue. We have not dealt with
the facts of each case before us, in view of our
interpretation of the provisions of the Act germane to the
question of law herein.
22. Accordingly, the Appeals filed by the Revenue are
dismissed.
Civil Appeal Nos. 1338-1341 of 2016, Civil Appeal
No. 1323 of 2016, Civil Appeal No. 1324 of 2016, Civil
Appeal No. 1325 of 2016, Civil Appeal Nos.1326-
1331 of 2016, Civil Appeal No. 1322 of 2016, Civil
Appeal No. 1342 of 2016, Civil Appeal Nos.1295-1299
of 2016, Civil Appeal Nos. 1303-1307 of 2016, Civil
Appeal Nos. 1311-1312 of 2016, Civil Appeal No.
1314 of 2016 and Civil Appeal No.1310 of 2016
23. Assessment orders were passed for the assessment
years 2004-05 to 2007-08 in respect of Alcatel Lucent USA,
Inc. and for the assessment years 2004-05 to 2008-09 in
respect of Alcatel Lucent World Services Inc. The assessees
were inter alia directed to pay interest under Sections
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234A, 234B and 234C of the Act. Dissatisfied with the
assessment orders, the assessees filed appeals which were
dismissed by the CIT. The ITAT held that the assessees
were not liable to pay interest under Section 234B of the
Act, by placing reliance on a judgement of the Delhi High
Court in Director of Income-tax v. Mitsubishi
Corporation
11
. Appeals filed by the Revenue under
Section 260A of the Act challenging the order of the ITAT
passed on 21.10.2011 was allowed by a Division Bench of
the Delhi High Court by a judgement dated 07.11.2013, on
the ground that the assessees after initially denying the
tax liability cannot later be permitted to shift the
responsibility to the Indian payers for not deducting tax at
source. It was further observed by the High Court that it
was difficult to imagine that the payers would have failed
to deduct tax at source except on being prompted by the
assessees. The High Court, accordingly, held that the
assessees were liable to pay interest in terms of Section
234B of the Act.
24. The subject-matter of the aforementioned Appeals is
the judgement of the Division Bench of the High Court
dated 07.11.2013 as well as a subsequent decision of the
11 [2010] 330 ITR 578
23 | P a g e
Delhi High Court dated 08.09.2014, which ruled on the
issue of interest under Section 234B in favour of the
Revenue, relying on the Division Bench judgement dated
07.11.2013. The point that arises for consideration in these
Appeals is covered by our judgement in Civil Appeal
No.1262 of 2016.
25. Accordingly, these Civil Appeals are allowed.
................................J.
[ L. NAGESWARA RAO ]
..............................J.
[ ANIRUDDHA BOSE ]
New Delhi,
September 17, 2021.
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