Director Of I.T New Delhi vs M/S Mitsubhishi Corp. on 17 September, 2021


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Supreme Court of India

Director Of I.T New Delhi vs M/S Mitsubhishi Corp. on 17 September, 2021

Author: L. Nageswara Rao

Bench: [ A ], [ L ]

                                                   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

                   JUDGEMENT

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 Respondent-

Assessee 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 CIT1
, 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 Inc2, 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 LLC3, 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

9 | Page
Commissioner of Income Tax6, 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

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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 sub-
section (1) or sub-section (2) or sub-section (5) or sub-
section (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 sub-
section (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 sub-
section (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 sub-
section (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 non-
deduction 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 income-
tax 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 1 st

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. Clarkson8 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. Roy9 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 income-

tax 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 non-

20 | 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

22 | P a g e
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

Corporation11. 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

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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.

24 | P a g e



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