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July 2009

Advance Tax : Interest u/s. 234B : Failure by payer to deduct tax at source : Interest cannot be imposed on assessee.

By K. B. Bhujle, Advocate
Reading Time 2 mins

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  1. Advance Tax : Interest u/s. 234B : Failure by payer to
    deduct tax at source : Interest cannot be imposed on assessee.

[DI(International Taxation) vs. NGC Network Asia LLC,
313 ITR 187 (Bom.)]

In this case there was short payment of advance tax on
account of the non-deduction of tax by the payer which it was required by law
to deduct u/s. 195 of the Income-tax Act, 1961. The Assessing Officer levied
interest u/s. 234B on account of short payment of advance tax due to such
non-deduction. It is the case of the Revenue that on failure of the payer to
deduct tax at source, it is the liability of the assessee to pay the advance
tax even on the amount which had not been deducted u/s. 195 of the Act. The
Tribunal held that the assessee was not liable to advance tax and cancelled
the levy of interest.

On appeal by the Revenue, the Bombay High Court upheld the
decision of the Tribunal and held as under :

“When duty was cast on the payer to deduct tax at source,
on failure of the payer to do so, no interest could be imposed on the assessee”.

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