November 2022

Advance tax — Interest — Income earned from abroad — Settlement of case — Levy of interest by Settlement Commission on shortfall of advance tax due on income earned abroad by assessee on which tax not deducted — Assessee not liable to pay interest

K. B. Bhujle, Advocate

John Baptist Lasrado vs. ITSC [2022] 447 ITR 231 (Mad.)
A.Ys.: 1996-97 to 2005-06
Date of order: 27th November, 2017 Sections: 234A, 234B, 245D(4) of ITA,1961

48. Advance tax — Interest — Income earned from abroad — Settlement of case — Levy of interest by Settlement Commission on shortfall of advance tax due on income earned abroad by assessee on which tax not deducted — Assessee not liable to pay interest


The assessee was an employee of a multinational company. For the salary received in India, tax was deducted at source by the employer. With regard to the salary received by him outside India the employer did not deduct tax at source. The sale proceeds of shares held by the assessee outside India were credited in his bank account abroad. For A.Ys. 1996-97 to 2005-06, the assessee had filed his returns of income not disclosing only the income earned abroad. The assessee filed an application u/s 245C before the Settlement Commission wherein he offered all the income earned abroad in A.Ys. 1996-97 to 2005-06. The Settlement Commission passed an order u/s 245D(4) and granted the assessee immunity from penalty and prosecution but charged interest u/s 234B on the excess of the tax assessed over the advance tax paid for all the assessment years. The Settlement Commission rejected the assessee’s miscellaneous petition against the levy of interest holding that where the person responsible for paying salary in foreign currency was a non-resident and hence not responsible u/s 192, the assessee was liable to pay advance tax u/s 208 r.w.s. 209 since the assessee was in receipt of income from deposits abroad which were not liable for deduction of tax and hence, the assessee could not have excluded tax on these while computing the advance tax liability. The Settlement Commission held that the interest u/s 234B and u/s 201(1A) were for two types of defaults and that it could not be held that there was any double levy for the same default.

On a writ petition filed by the assessee the Madras High Court held as under:

“i) For the purposes of section 234B of the Income-tax Act, 1961 the question would be as to whether the assessee, who is the payee, had any role in deducting or collecting the tax, if the answer to this question is in the negative and it was not the duty of the assessee, the question of payment of interest would not arise as the assessee cannot be treated to be an “assessee-in-default”.

ii) The employer abroad had paid the interest u/s 201(1A) and tax having already been remitted it could not be recovered from the assessee once again. The assessee was not liable for payment of interest under section 234B in respect of the salary income earned by him outside India. In respect of any other income the Assessing Officer could proceed to levy interest in accordance with law. The order charging interest was set aside.”

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