DEPUTY COMMISSIONER OF INCOME TAX v. PRIDE FORAMER SAS
[Citation -2008-LL-0530-17]

Citation 2008-LL-0530-17
Appellant Name DEPUTY COMMISSIONER OF INCOME TAX
Respondent Name PRIDE FORAMER SAS
Court ITAT
Relevant Act Income-tax
Date of Order 30/05/2008
Assessment Year 2002-03
Judgment View Judgment
Keyword Tags deduction of tax at source • income chargeable to tax • advance tax liability • payment of interest • charge of interest • regular assessment • specific provision • recovery of tax • advance payment • payment of tax • current income • forest produce • special bench
Bot Summary: In appeal, CIT(A) observed that the entire income of the foreign technicians was liable to deduction of tax at source and therefore, as per the provisions of s. 209(1)(d) the tax payable for the purpose of advance tax was required to be reduced by the tax deductible. Since the entire tax payable was tax deductible, there was no advance tax payable by the assessee. The advance tax was required to be computed as per the provisions of s. 209 in terms of which the tax deductible was required to be excluded while computing the advance tax payable. The argument of the learned CIT Departmental Representative is that in cases where the tax had not been deducted at source, tax is payable by the assessee direct under s. 191 and once the tax is payable direct and the same will be payable as advance tax in view of the judgment of Hon'ble High Court of Uttaranchal in case of Halliburton Offshore Services Inc. in which it has been held that the provisions of s. 191 are not overridden by the provisions of s. 209(1)(d) as per which the tax deductible at source has to be excluded from the amount payable as advance tax. There is a reasoning for excluding the 'tax deductible at source' because in cases where tax has not been deducted at source by the person responsible, the said person is deemed to be an assessee in default under s. 201 in respect of whole or any part of tax which had not been deducted at source and he is also liable for payment of interest and penalty under the said section. Since the 'tax deductible at source' in case not deducted, could be recovered with interest from the person responsible for deducting the same at source, the 'tax deductible' has been excluded from the advance tax liability of the assessee. In view of the foregoing discussion, we hold that the tax deductible at source has to be excluded while computing the advance tax liability as provided in s. 209(1)(d), even if the tax had not actually been deducted.


These appeals by Revenue are directed against different orders dt. 30th July, 2007 of CIT(A) for asst. yr. 2002-03. only dispute raised by Revenue in these appeals that on facts and in circumstances of case, CIT(A) was not justified in deleting interest charged by AO under s. 234B of IT Act. As issue involved in these appeals is common, all these appeals are being disposed off by single consolidated order for sake of convenience. Briefly stated, facts of case are that M/s Pride Foramer SAS Non Resident French Company had engaged employees of Pride Forasol associate company, for providing technical services in connection with offshore drilling in India. These technicians were residents of various foreign countries. AO noted that these technicians had been paid salary in excess of exemption limit under IT Act. AO therefore, passed order under s. 163(1) r/w s. 149(3) treating M/s Pride Foramer SAS as agents of these technicians and issued notice under s. 148 to said concern as representative assessee of foreign technicians. In assessments made, AO assessed salary as well as perquisite received by technicians in name of M/s Pride Foramer SAS as representative assessee and since no tax had been deducted at source and no advance tax had been paid, he charged interest under s. 234B in each case. In appeal, CIT(A) observed that entire income of foreign technicians was liable to deduction of tax at source and therefore, as per provisions of s. 209(1)(d) tax payable for purpose of advance tax was required to be reduced by tax deductible. Since entire tax payable was tax deductible, there was no advance tax payable by assessee. Accordingly he directed AO to delete interest charged under s. 234B. Aggrieved by said decision, present appeals have been filed by Revenue. Before us, learned CIT Departmental Representative Shri Devender Shankar, who appeared on behalf of Revenue, argued that under provisions of s. 191 of Act, in cases where tax had not been deducted at source, Income-tax was payable by assessee direct. These provisions were not overridden by provisions of s. 209 and, therefore, once tax had not been deducted at source, same was payable as advance tax. He referred to judgement of Hon'ble High Court of Uttaranchal in case of CIT vs. Halliburton offshore services inc. (2004) 192 CTR (Uttaranchal) 507 (2004) 271 ITR 395 (Uttaranchal) which is junsdictional High Court in this case, in which, it was pointed out, High Court had held that provisions of s. 191 were not overridden by ss. 192, 208 and 209(1)(d). It was therefore argued that unless tax was actually deducted at source, it could not be excluded from tax payable for purpose of computation of advance tax in view of provisions of s. 191 of IT Act. learned. Authorised Representative for assessee on other hand argued that s. 191 did not override or bar applicability of ss. 192, 208 and 209(l)(d) and it was merely residuary mode of recovery of tax from assessee direct. advance tax was required to be computed as per provisions of s. 209 in terms of which tax deductible was required to be excluded while computing advance tax payable. It was also pointed out that Delhi Bench of Tribunal in case of Asstt. Director of IT, International Taxation vs. Western Geco International Ltd. had specifically examined this aspect in order dt. 21st Feb., 2008 in ITA Nos. 4847, 4941/Del/2007 and held that tax deductible, had to be excluded for purpose of computation of advance tax. Tribunal had followed decision of Special Bench in case of Motorola Inc. vs. Dy. CIT (2005) 96 TTJ (Del)(SB) 1: (2005) 95 ITD 269 (Del)(SB). Referring to judgment of Hon'ble High Court of Uttaranchal in case of Halliburton Offshore Services Inc. (supra), it was pointed out that though High Court had observed that provisions of s. 191 were not overridden by ss. 192, 208 and 209, High Court ultimately did not uphold imposition of interest under s. 234B. In reply, learned CIT Departmental Representative pointed out that in earlier decisions in case of Motorola Inc. (supra) and other cases, provisions of s. 191 had not been considered. In view of judgment of Hon'ble High Court of Uttaranchal in case of Halliburton Offshore Inc. (supra) in which it was clearly held that provisions of s. 191 were not overridden by provisions of ss. 192, 208 and 209, tax not deducted at source was payable as advance tax and in case of default, interest s. 234B was chargeable. relevant portion of and in case of default, interest s. 234B was chargeable. relevant portion of judgment in case of Halliburton Offshore Inc. (supra) referred to by learned Departmental Representative were as under;- "It is important to note that s. 234B imposes interest, which is compensatory in nature and not as penalty (see.Union Home Products Ltd. vs. Union of India (1995) 129 CTR (Kar) 217: (1995) 215 ITR 758 (Kar.) at p. 766). Secondly, although s. 191 of Act is not overridden by ss. 192, 208 and 209(1)(a)(d) of Act, scheme of ss. 208 and 209 of Act indicates that in order to compute advance tax assessee has to, inter alia, estimate his current income and calculate tax on such income by applying rates in force. That under s. 209(1)(d), IT calculated is to be reduced by amount of tax which would be deductible at source or collectible at source, which in this case has not been done by employer company according to law prevailing for which assessee cannot be faulted. As stated above at relevant time there were conflicting decisions of Tribunal. bona fide dispute was pending. assessee had to estimate his current income. words used under s. 209(1)(a), make assessee estimate his current income and since bona fide dispute was pending, imposition of interest under s. 234B was not justified without hearing and without reasons." We have perused records and considered rival contentions carefully. limited issue raised in this appeal is whether tax deductible at source can be excluded from tax payable while computing liability on account of advance tax even in cases where tax had not actually been deducted at source. IT Act, 1961 provides for payment of tax in advance and in certain types of income, person responsible for paying income, chargeable under Act, is required to deduct tax at source. Secs. 192 to 296D relate to deduction of tax at source in relation to different specified cases of payments. Sec. 192, for example, relates to deduction of tax at source by person responsible for making payment of salary income. There are also provisions contained in s. 206C for collection of tax at source by sellers from buyers in case of certain trades like alcoholic liquor, forest produce etc. Further, there are provisions for payment of tax in advance. s. 207 r/w s. 208 provides that IT shall be payable in advance whenever tax payable is Rs. 5,000 and more. Sec. 209 contains provisions for computation of advance tax. Advance tax is payable on estimated current income under cls. (a), (b) and (c) of sub-s. (1) of 209. Sub-cl. (d) of sub-s. (1) of 209 provides that IT calculated under cls. (a), (b) and (c) for purpose of advance tax will be reduced by amount of IT which would be deductible or collectible at source during financial year. provisions of sub- s. (1) of s. 209 which are relevant in this case are reproduced below as ready reference: "209. (1) amount of advance lax payable by assessee in financial year shall, subject to provisions of sub-ss. (2) and (3), be computed as follows, namely: (a) ........... (d) IT calculated under cl. (a) or cl. (b) or cl. (c) shall, in each case, be reduced by amount of IT which would be deductible (or collectible) at source during 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 current income or, as case may be, total income aforesaid; and amount of IT so reduced shall be advance lax payable." Further, s. 191 of Act provides that in cases of income in respect of which there is no provision for deducting tax at source or in cases where IT had not been deducted at source, IT shall be payable by assessee direct. said section is reproduced below as ready reference. "191. Direct payment.-In case of income in respect of which provision is not made under this chapter for deducting IT at tune of payment, and in any case where IT has not been deducted in accordance with provisions of this Chapter, IT shall be payable by assessee direct." argument of learned CIT Departmental Representative is that in cases where tax had not been deducted at source, tax is payable by assessee direct under s. 191 and once tax is payable direct and same will be payable as advance tax in view of judgment of Hon'ble High Court of Uttaranchal in case of Halliburton Offshore Services Inc. (supra) in which it has been held that provisions of s. 191 are not overridden by provisions of s. 209(1)(d) as per which tax deductible at source has to be excluded from amount payable as advance tax. In other words, argument is that unless tax has actually been deducted at source, same cannot be deducted while computing advance tax payable, merely because tax was deductible. We have considered matter carefully but we are not convinced by argument advanced by learned CIT Departmental Representative. We find that s. 191 along with s. 190 falls in Part of Chapter XVII, which relates to collection and recovery of tax. Sec. 190 relates to deduction at source and advance payment and provides that notwithstanding fact that regular assessment in respect of any income is to be made in later assessment year, tax on such income shall be payable by deduction or collection at source or by advance payment as case may be in accordance with provisions of this chapter. Sec. 191, which has been reproduced earlier, provides for another mode of collection of tax by way of direct payment. As there are separate provisions for deduction at source/advance payment and direct payment, direct payment referred to in s. 191 obviously is not in relation to payment of advance tax. Direct payment is different mode of collection in addition to collection at source and advance tax. Therefore, even if provisions of s. 191 are not overridden by provisions of s. 209, amount payable by assessee direct under provisions of s. 191 in cases where tax had not been deducted at source, is not amount payable as advance tax. amount payable as advance tax has to be computed under provisions of s. 209, which is specific provision for this purpose. Under cl. (d) of sub-s. (1) of s. 209, tax deductible at source has to be excluded while computing advance tax payable. Had Legislature wanted that only tax actually deducted at source or collected at source, should be excluded, they would not have used words 'tax deductible at source' or 'collectible at source'. phrase 'deductible at source' has not been used casually or without any purpose. There is reasoning for excluding 'tax deductible at source' because in cases where tax has not been deducted at source by person responsible, said person is deemed to be assessee in default under s. 201 in respect of whole or any part of tax which had not been deducted at source and he is also liable for payment of interest and penalty under said section. Since 'tax deductible at source' in case not deducted, could be recovered with interest from person responsible for deducting same at source, 'tax deductible' has been excluded from advance tax liability of assessee. provisions of s. 191 contain only alternate mode of recovery so that in case tax could not be recovered from person responsible in case of default, it could be collected from assessee who is primarily responsible for paying tax. section does not say that same is payable as advance tax. There is separate s. 190 in relation to collection of tax at source and advance payment. Though Hon'ble High Court of Uttaranchal in case of Halliburton Offshore Services Inc. (supra) have held that provisions of s. 191 are not overridden by provisions of s. 209, Hon'ble High Court has nowhere held that tax payable by assessee as per s. 191 will be payable in advance tax. We are therefore, unable to agree with arguments advanced by learned CIT Departmental Representative. We also find that this aspect has also been considered recently by another bench of Tribunal at Delhi in case of Western Geco International Ltd.. {supra) in which Tribunal after detailed examination and after referring to decision of Special Bench in case of Motorola Inc. (supra) held as under: "We have given careful thought to submission of learned Departmental Representative. Having regard to provisions of s. 191, it has to be accepted that assessee has to pay tax, payable by him direct, if tax had not been deducted from his income. However, s. 191 only talks of IT it does not talk of payment of "advance tax" or "interest" for which there are separate provisions in Act as noted above. Advance tax is payable by assessee as per provisions of s. 207, quoted above. It is also to be paid in accordance with provisions of ss. 208 to 219 of Act on total income chargeable to tax in financial year for immediately following assessment year. It is payable on current income. Sec. 208 further provides that advance tax is payable if such tax payable on current income computed in accordance with provisions of this Chapter is Rs. 5,000 or more. So for computation of advance tax, we are to look Chapter is Rs. 5,000 or more. So for computation of advance tax, we are to look to provisions of s. 209. Cl. (d) of s. 209(1) clearly provides that while computing advance tax, amount of IT, which is deductible or collectible at source, will be deducted from advance tax payable. In other words, advance tax payable will be reduced by amount of tax at source "deductible or collectible". Therefore, when tax is deductible or collectible at source from salary which is only source of income, no advance tax would be payable by such employee.............." Thus, issue had also been considered by decision of Co-ordinate bench in case of Western Geco International Ltd. (supra) in which provisions of s. 191 had been specifically dealt with. Tribunal following decision of Special Bench in case of Motorola Inc (supra) held that tax deductible at source had to be excluded while computing advance tax liability. argument of learned CIT Departmental Representative is that these cases require reconsideration in view of specific observation of Hon'ble High Court o f Uttaranchal in case of Halliburton Offshore Services Inc. (supra) that provisions of s. 191 are not overridden by s. 209. We have dealt with this argument of learned CIT Departmental Representative in earlier part of this order and for reasons given therein we are unable to accept these arguments. There is no. judgment of any High Court or apex Court brought to our notice in which it has been specifically held that amount of tax payable direct by assessee under provisions of s. 191 will be payable in advance. Though Hon'ble High Court of Uttaranchal did observe in case of Halliburton Offshore Services Inc. (supra) that provisions of s. 191 were not overridden by provisions of s. 209(1)(d), High Court nowhere held that provisions of s. 191 would override provisions of s. 209(l)(d) and that amount of tax payable direct as referred to in s. 191 would be payable in advance. In view of foregoing discussion, we hold that tax deductible at source has to be excluded while computing advance tax liability as provided in s. 209(1)(d), even if tax had not actually been deducted. In this case, there is no dispute that entire income of assessee under reference was tax deductible at source. Therefore, no advance tax was payable by these assessees and as result there will be no case for charge of interest under s. 234B. We accordingly, see no infirmity in order of CIT(A) directing AO to delete interest charged under s. 234B. order of CIT(A) is thus upheld. In result, all appeals of Revenue stand dismissed. *** DEPUTY COMMISSIONER OF INCOME TAX v. PRIDE FORAMER SAS
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