Interest for non/short payment of advance tax and on excess refund : S. 234B and S. 234D of Income-tax Act, 1961 : A.Y. 2001-02 : Interest not chargeable u/s.234B where short payment of advance tax is attributable to non/short deduction of tax at source :

[DIT v. M/s. Jacabs Civil
Incorporated (Del.), ITA No. 491 of 2008 dated 30-8-2010]

The assessee is a foreign
company. For the A.Y. 2001-02, the assessee had filed return of income declaring
income of Rs.96 lakhs. The assessee had claimed that it is not liable for
interest u/s.234B of the Income-tax Act, 1961 in view of the fact that it was
not liable to pay advance tax since whole of the tax liability was deductible
u/s.195 by the payee. The assessee had also claimed that S. 234D is not
applicable since it is operative only from the A.Y. 2004-05. The Assessing
Officer rejected the assessee’s claim and levied interest u/s.234B and u/s.234D
of the Act. The Tribunal accepted the assessee’s claim.

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

“(i) U/s.209(1)(d), the
tax ‘deductible or collectible at source’ has to be reduced from the advance
tax payable. S. 195 puts an obligation on the payer to deduct tax at source.
Therefore, the entire tax is to be deducted at source which is payable on such
payments made by the payee to the non-resident. The non-resident recipient is
not liable to pay advance tax. Though in Anjum Ghaswala 252 ITR 1(SC), it was
held that S. 234B is mandatory, the present is a case where S. 234B does not
apply at all. Accordingly, it is not permissible for the Revenue to charge
interest u/s.234B.

(ii) S. 234D inserted by
the Finance Act, 2003 w.e.f. 1-6-2003 is in the nature of a substantive
provision and applies only for the A.Y. 2004-05 and onwards. It is not
retrospective.”