IN HIGH COURT OF DELHI AT NEW DELHI Date of Decision: September 05, 2014 ITA 178/2002 COMMISSIONER OF INCOME TAX DELHI XVII Appellant Through: Mr.Rohit Madan, Standing Counsel versus M/S.BABCOCK POWER (OVERSEAS PROJECTS) LTD. Respondent Through: Nemo CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE V. KAMESWAR RAO V. KAMESWAR RAO, J (ORAL) 1. present appeal by Revenue filed under Section 260A of Income-Tax Act, 1961 was admitted for hearing on following substantial question of law:- Whether Tribunal was correct in law in directing Assessing Officer to recomputed interest payable by assessee under Section 201(1A) of Income Tax Act, 1961 after taking into consideration advance tax and self- assessment tax paid by employees concern? 2. facts as culled out from record are as under:- respondent/assessee M/s.Babcock Power (Overseas Projects) Ltd., non-resident company incorporated in United Kingdom, during ITA No. 178/2000 Page 1 of 5 Assessment Years 1987-88 to 1989-90 had project office in India and was engaged in execution of contract of setting up coal based thermal plant. respondent-assessee to fulfil their contractual obligations, had engaged their foreign technicians who were deputed to work at Indian project office. These employees were on pay roll of UK office of respondent- assessee and salaries were paid in foreign currency in their bank accounts abroad. These contracts of employment were duly approved by Ministry of Mines for purposes of Section 10(6) of Act. 3. Respondent-assessee did not deduct Tax at Source on salary paid on ground that tax was not required to be deducted. Assessing Officer disagreed and also directed interest under Section 201(A) of Act be charged. 4. respondent-assessee challenged order of CIT (Appeals) before Tribunal primarily on three grounds. first one being that provisions of Section 192 were not applicable to respondent-assessee inasmuch as assessee as well as foreign technicians were non-residents; remuneration was paid outside India; contract of employment was also outside India. second ground was that assessee was under bone fide belief that provisions of Section 192 were not applicable to them and in support of this ground respondent- assessee relied upon text by Jurist Mr.Nani A. Palkhivala in (Law and ITA No. 178/2000 Page 2 of 5 Practice of Income-Tax) 8th Edn. Vol.1 and judgment of Supreme Court in case of Electronic Corporation of India vs. Commissioner of Income-Tax, [1990] 183 ITR 43 (SC). third ground was that no interest could be levied since demand of tax itself has been deleted by Tribunal. 5. Tribunal rejected first two grounds raised by respondent-assessee. As regards third ground Tribunal found error in order of authorities below on time period for which interest was payable. Tribunal was of view that concerned foreign technicians had paid tax by way of advance tax as well as self- assessment tax and levy of interest cannot be for period beyond said dates, as tax stood paid/deposited. Tribunal modified order of CIT(Appeals) and directed Assessing Officer to recompute levy of interest for period commencing from first day of April following end of relevant financial year till date of actual payment that is date of self-assessment tax by concerned employees. Further, it held that no interest would be payable on amount of advance tax paid by respective foreign technicians. 6. This issue is no more res integra having been decided by this Court with respect to same respondent-assessee in ITA No.82/2000 wherein on issue of levy of interest this Court has dismissed appeal ITA No. 178/2000 Page 3 of 5 by answering substantial question of law against appellant Revenue in following manner:- 3. respondent/assessee - M/s. Babcock Power (Overseas Projects) Ltd. is non-resident company incorporated in United Kingdom, which during Assessment Years 1987-88 to 1989-90 had project office in India for execution of contract. respondent to fulfil their contractual obligations had engaged foreign technicians who were deputed to work at Indian project office. These employees were on pay roll of UK office of respondent/assessee and salaries were also paid in foreign currency in their bank accounts abroad. These contracts of employment were duly approved by Ministry of Mines for purposes of Section 10(6) of Act. 4. question arose, whether respondent/assessee was liable to deduct tax at source under Section 192 of Act on salaries paid to foreign technicians. Tribunal, by impugned order, has rejected contention of respondent assessee that they were not liable to deduct tax at source. Tribunal further upheld levy of interest and observed that interest was payable under Sections 201(1) and 201(1A). Interest has been referred to as legitimate amount of tax due for delayed payment. However, Tribunal did not accept and agree with levy of interest for period commencing from 1st April following Financial Year till date of order of levy of interest under Section 201(1A) observing that this was erroneous and cannot be sustained. This finding/direction is questioned. 5. admitted position is that foreign employees of respondent/assessee had paid tax in India either by way of advance tax or self assessment tax. Tribunal has further observed that Assessing Officer had himself not levied interest commencing from period of deductibility of tax till end of Financial Year. Accordingly, Tribunal was not inclined to enlarge period for which interest was payable. In subsequent paragraphs, Tribunal has held and directed Assessing Officer to re-compute levy of interest for period commencing from first date of April following end of relevant Financial Year till date of actual payment i.e. date of payment of self assessment tax, if payable by employees, or after taking into consideration advance tax and self assessment tax paid by employees. No further interest, it has been directed, would be payable. view taken by Tribunal is in consonance with decision of Division Bench of this Court dated 21.12.2011 in ITA No.74/2003 titled Commissioner of Income Tax TDS vs. M/s. American Express Bank Ltd., in which it has been held as under: Insofar as second question is concerned i.e., with regard to interest payable under Section 201(1A) of said Act, that is mandatory provision, as already held by Division Bench of this Court in ITA No. 178/2000 Page 4 of 5 case of CIT v. ITC Limited, ITA No.475/2010, dated 11.05.2011. said Division Bench observed as under:- ?xxxx xxxx xxxx xxxx However, levy of interest under section 201(1A) is neither treated as penalty nor has said provision been included in Section 273B to make reasonableness of cause for failure to deduct relevant consideration. Section 201(1A) makes payment of simple interest mandatory. payment of interest under that provision is not penal. There is, therefore, no question of waiver of such interest on basis that default was not intentional or on any other basis. (See Bennet Coleman and Co. Ltd. v. V.P.Damle, Third ITO, [1986] 157 ITR 812 (Bom.) and CIT v. Prem Nath Motors (P). Ltd., [2002] 120 Taxman 584 (Delhi). Therefore, second question is also answered in favour of Revenue and against assessee 6. It has been further observed in American Express Bank Ltd. (supra) that if employees (i.e. payee) had paid taxes as per individual return/assessment, no amount as tax would be payable to that extent and liability for interest would be only for period commencing from date of such tax was deductible to date on which tax was actually paid. [CIT vs. Adidas India Marketing (P) Ltd. (2007) 288 ITR 379 Delhi and CIT XVII vs. Trans Bharat Aviation (P) Ltd. (2010) 320 ITR 671.]. 7. In view of aforesaid position, question is answered against appellant Revenue and in favour of respondent/assessee. order of Tribunal does not call for any interference. 5. For parity of reasons we answer substantial question of law against appellant Revenue and in favour of respondent-assessee. appeal is accordingly dismissed. No costs. (V. KAMESWAR RAO) JUDGE (SANJIV KHANNA) JUDGE SEPTEMBER 05, 2014/HP ITA No. 178/2000 Page 5 of 5 Commissioner of Income-tax, Delhi-XVII v. M/s. Babcock Power (Overseas Project) Ltd