DIRECTOR OF INCOME TAX AND ANOTHER V. M/S WESTERN GECO INTERNATIONAL LTD.

ITA/169/2007

AI Insights

The case revolves around an appeal by the Director of Income Tax International Taxation Delhi-II and the Dy. Commissioner of Income Tax, Circle-I Dehradun against M/s Western Geco International Ltd. The core issue was whether the Income Tax Appellate Tribunal (ITAT) erred in holding that interest under Section 234B of the Income Tax Act is not payable on the tax due from the assessee after Tax Deduction at Source (TDS) has been applied. The ITAT had previously ruled in favor of the assessee, which led to the present appeal by the revenue. The High Court of Uttarakhand, referencing earlier judgments, affirmed the ITAT's decision, stating that the responsibility of tax deduction at source lies with the employer, and thus, the employee (assessee) should not be penalized with interest under Section 234B for the employer's failure to deduct or pay the tax.

• Counselvise Citation: [2009] 140 COUNSELVISE.COM (IT) 744509 (HC-UTTARAKHAND)
• Appeal Type: Others
• Pronouncement Date: 11-09-2009
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax Vs. Halliburton Offshore Services Inc., The Commissioner of Income Tax, Dehradun and another Vs. M/s Oil Ltd., C/O M/s Nangia & Co., CA's, 75/1, Rajpur Road, Dehradun
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: CHETAN JOSHI
• Assessee Lawyers: ARVIND VASHIST
• Keywords: Assessment Order; Interest under section 234B; Tax deduction at source; Exemption under Section 10(10CC)
• Section: 148; 234B; 10(10CC); 209(1)(d); 260-A

Judgement Text

"IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Income Tax Appeal No. 169 of 2007 1. Director of Income Tax International Taxation Delhi-II, New Delhi. 2. Dy. Commissioner Income Tax, Circle-I Dehradun. … Appellants Vs M/s Western Geco International Ltd. 4th Floor The Capital Court, LSC Phase III Olof Palme Marg, Munirka, New Delhi as an Agent of Mr. Brylla Suzzane. … Respondent Sri Arvind Vashist, learned Standing Counsel for the Income Tax/appellants. Sri Chetan Joshi, learned counsel for the respondent. Date September 11, 2009 Hon’ble B.C. Kandpal, ACJ. Hon’ble B.S. Verma, J. This appeal, preferred under Section 260-A of the Income Tax Act, 1961 (for short the Act) is directed against the order dated 26-4-2007 passed by the Income Tax Appellate Tribunal (Delhi Bench ‘C’) (for short ITAT), in Income Tax Appeal No. 3056/Del/2006 for A.Y. 2003-2004. ITA Nos. 3039 to 3073/Del/2006 were decided by the ITAT by a common order holding that once the entire income was liable for Tax Deduction at Source (TDS), the assessees were not required to pay advance tax in view of the provisions of section 209(1)(d) of the Act and that there was no infirmity in the order of the Commissioner of Income Tax (Appeals) (for short CITA) deleting the interest charged under Section 234B of the Act. 2. We have heard learned counsel for the parties and perused the record. 2 3. The only question of law to be answered in this appeal is as under:- Whether Income Tax Appellate Tribunal has wrongly held that the interest under Section 234B of the Act is not payable on the tax payable by the respondent/assessee, particularly after the tax is deducted at source? 4. Relevant facts giving to this appeal are that the assesses are the employees of Western Geco International Ltd., who filed a return of income tax on behalf of the employees for the assessment year 2003-04. In the return, exemption under Section 10(10CC) of the Act was claimed. The Assessing Officer (for short A.O.) noticed that no exemption under the said provision of the Act was available to the assessee and a notice under Section under Section 148 of the Act was issued requiring the assessee to file a return as specified in the notice. The notice was replied that the original return submitted to the A.O. be treated as final return. The A.O. after giving opportunity of hearing to the parties, did not find favour with the assessee and the A.O. did not allow the exemption on the perquisite claimed by them and after applying principle of multiple stage grossing up’, the income was assessed as mentioned the Assessment Order. Aggrieved by the order of the A.O. assessees filed separate appeals before the CITA. The CITA vide its order dated 21-7-2006 partly allowed the appeals Nos. 499 to 532 and 547/DDN/2005-06 by a common order and it was held that the A.O. was not right in charging interest under Section 234B of the Act. Accordingly the AO was directed to delete the interest charged. Aggrieved, the Revenue preferred the appeals before the ITAT. The ITAT also did not find favour with the Revenue and dismissed all the appeals 3 including the ITA No. 3056/Del/2006 by the order dated 26-4- 2007, which is impugned in the present appeal. 5. In the course of arguments, Mr. Chetan Joshi, learned counsel appearing for the respondent Western Geco International Ltd., submitted that the present appeal is covered by the Division Bench judgment of this Court dated 20-7-2004 in the case of Commissioner of Income Tax Vs. Halliburton Offshore Services Inc. [2004] 271 ITR 0395]. Learned counsel for the respondent also submitted that the present appeal is squarely covered by the subsequent Division Bench judgment dated 8-8-2008 passed by this Court in Income Tax Appeal No. 56 of 2007, The Commissioner of Income Tax, Dehradun and another Vs. M/s Oil Ltd., C/O M/s Nangia & Co., CA’s, 75/1, Rajpur Road, Dehradun. Learned counsel for the respondent has urged that this appeal may be dismissed on merits in terms of the judgment dated 8-8-2008 passed by this Court, wherein it was observed that “where it is the duty of the non resident foreign company, who engaged the individual assessee, who is non resident foreign company, to deduct the tax at source, the individual assessee cannot be made liable to pay the interest under Section 234B for default on the part of the company, who engaged or employed such individual.” 6. Learned counsel for the appellants-revenue Sri Arvind Vashist has fairly conceded to the above fact. 7. We have perused the aforesaid judgments. The Division Bench of this Court has answered the question of law against the revenue in both the cited cases. We also find that almost identical question of law was framed in Income Tax Appeal No. 56 of 2007, The Commissioner of Income Tax, 4 Dehradun and another Vs. M/s Oil Ltd., C/O M/s Nangia & Co., CA’s, 75/1, Rajpur Road, Dehradun. We accordingly hold that the I.T.A.T. has rightly held that the interest under Section 234B of the Act is not payable on the tax payable by the assessee, particularly after the tax is deducted at source. The question of law stands answered. We are also of the view that the controversy involved in the present appeal stood resolved by the order dated 8-8-2008 passed by the Division Bench of this Court in Income Tax Appeal No. 56 of 2007, The Commissioner of Income Tax, Dehradun and another Vs. M/s Oil Ltd., C/O M/s Nangia & Co., CA’s, 75/1, Rajpur Road, Dehradun. Hence the present appeal preferred by the revenue is also liable to be dismissed on merits in terms of the said order. 8. The appeal preferred by revenue/appellants is dismissed on merits in terms of the judgment dated 8-8-2008 passed by the Division Bench of this Court in Income Tax Appeal No. 56 of 2007, The Commissioner of Income Tax, Dehradun and another Vs. M/s Oil Ltd., C/O M/s Nangia & Co., CA’s, 75/1, Rajpur Road, Dehradun. Costs easy. (B.S.Verma, J.) (B.C.Kandpal, ACJ.) RCP "