Under the existing provisions of section 209 of the Income Tax Act for computing liability of advance tax, income – tax deductible/ collectible at source shall not be adjusted, 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.

In simple words where a person has received any income without deduction or collection of tax at source, he shall be liable to pay advance tax in respect of such income.

Recently, the Delhi high Court has held that, ” NRI also need to pay advance tax and interests, if income not admitted to the resident Indian . ”

Section 234B

Interest u/s 234B is leviable when the assessee has admitted default in payment of advance tax. This means that interest is payable by the assessee when he doesn’t pay advance tax or when advance tax paid is less than 90% of the tax assessed.

SECTION 195

Any person responsible for paying to a non resident any interest or any other sum chargeable under the provision of the act shall, at the time of credit/payment of such income deduct tax thereon at the rates in force.

FACTS OF THE CASE

1)   The assessee , a US based company used to supply telecom equipments to customers in India. The assessee claimed that it did not have a permanent establishment in India so it is not liable for any tax.

2)   Replying to this the Assessing Officer rejected the claim of the assessee and charged 2.5% of the sale proceeds as profits attributable to the PE in India .The tax was charged on such profit also taking into account the interest u/s 234B.

3)   The assessee accepted the demand raised by the AO but argued that as it was a foreign company so its income was liable to TDS and ultimately it was not liable for advance tax and interest u/s 234B.

CONCLUSION OF THE CASE

There is always difference between an assessee admitting his income chargeable to tax in India and accordingly TDS is deducted u/s 195. Advance Tax and interest u/s 234B does not come into picture only.

But where the assessee doesn’t admits its income then he cannot take the plea that his income was liable for TDS and no liability falls on him for advance tax. He cannot take a plea that the Indian party should have deducted TDS .It is totally not justified to shift the liability on the Indian counterpart. So as the assessee was liable for tax (as it did not admit its income in the beginning and accordingly no TDS was deducted) it is liable for advance tax and also the interest u/s 234B.

Click here to download the full order – Source: Itatonline.org

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