By C. N. Vaze, Shailesh Kamdar, Chartered Accountants
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35 (2008) 21 SOT 549 (Delhi)
Asst. Director of Income-tax, International Taxation
v. Western Geco International Ltd.
ITA Nos. 4847 to 4941 (Delhi) of 2007
A.Y. 2006-07. Dated : 21-2-2008
S. 234B read with S. 208 and S. 209 of the Income-tax Act,
1961 — There is no question of payment of advance tax by an employee whose total
income comprises of salary from which tax at source is to be deducted as per
statutory provisions and, hence, there is no question of applying provisions of
S. 234B to such a person who is not liable to pay advance tax.
Company ‘G’ was agent of many foreign nationals. It paid
salary to different non-resident assessees and filed returns on their behalf.
The assessees/employees only had salary income, which was subjected to deduction
of tax at source. They claimed deduction u/s.10(10CC) on account of tax paid by
the employer on their salary as per agreement. The Assessing Officer refused to
allow the said deduction and added tax paid on income through multiple grossing
instead of single grossing. This led to additional liability and demand
representing the difference between the assessed tax and tax deducted at source
leading to levy of interest u/s.234B for non-payment of advance tax. On appeal,
the CIT(A) held that the Assessing Officer was not right in levying interest
u/s.234B upon the assessees and, accordingly, deleted the same.
The Tribunal, following the decision in the case of
Motorola Inc. v. Dy. CIT, (2005) 95 ITD 269 (Delhi) (SB) held that the
assessees were not liable to pay advance tax, and consequently, were also not
liable to pay any interest u/s.234B. The Tribunal noted as under :
(1) Clause (d) of S. 209(1) clearly provides that while
computing advance tax, the amount of income-tax which is deductible or
collectible at source, will be deducted from the advance tax payable. In other
words, advance tax payable will be reduced by the amount of tax at source
‘deductible or collectible’.
(2) Therefore, when tax is deductible or collectible at
source from salary, which is the only source of income, no advance tax would
be payable by such an employee.
(3) In the instant case, there was no dispute that total
income of the assessee was subjected to deduction of tax at source u/s.192.
The assessee had no amount of advance tax payable if tax at source deductible
from the assessee’s salary was taken into account.
(4) Advance tax is payable in the financial year on the
current income. It cannot be paid after the close of the year. However, a
salaried person, whose salary is subject to deduction of tax at source, cannot
come to know of any short recovery or no recovery of tax at source till the
close of the financial year in which tax is deductible. If the employer has
not correctly deducted tax at source from the salary in one month u/s.192, the
deficiency can be made good U/ss.(3) of S. 192. Therefore, the employer can
always make good the deficiency in deduction of tax at source within the
financial year. If in one month there is short deduction of tax at source, the
employer can make higher deduction in other months in the financial year and
make good the short deduction.
(5) Therefore, a salaried employee would not know that
there had been short, wrong or no deduction of tax at source unless the
financial year is over. By the time he would come to know about short recovery
or no recovery of tax at source in his case, the time for payment of advance
tax would be over. In case of short recovery the employer is liable to pay
interest and penalty and not the employee. That is the scheme of the Act.
(6) Therefore, there is no question of payment of advance
tax by an employee whose total income comprises of salary from which tax at
source is to be deducted as per statutory provisions. Further, there is no
question of applying provisions of S. 234B to such a person who is not liable
to pay advance tax.
