Advocate Akhilesh Kumar Sah
Reuters case: When a duty is cast on the payer to deduct tax at source, on failure of the payer to do so, no interest can be imposed on the payee under Section 234B of the Act
Section 234B of the Income Tax Act, 1961 (hereinafter “the Act”) deals with the interest for defaults in payment of advance tax. Recently, in DCIT vs. Reuters Transaction Services Ltd. & vice-versa [ITA No. 1393/Mum/2016 and ITA No. 2219/Mum/2016 (AY: 2012-13), decided on 3.8.2018], cross appeals were filed by Revenue as well as the assessee which were directed against the order of the Dispute Resolution Panel-2, Mumbai dated 14.12.2015 under Section 144C(1) of the Act for A.Y. 2012-13. Since the facts were common in both the appeals, these appeals were heard together and are disposed off by the common order for the sake of convenience.
One of the ground taken by the Revenue was that in the circumstances of the case and in law, the DRP had erred in giving direction that interest under section 234B was not chargeable in view of decision of Director of Income-tax (International Taxation) vs. NGC Network Asia LLC (2009) 222 CTR 0086 : (2009) 313 ITR 0187 though proviso to section 209(1)(d)of the Act was introduced in the Act w.e.f. 01.04.2012.
The brief facts of the case in respect of the issue were that the assessee, Reuters Transaction Services Ltd., being a company incorporated under the laws of England was a tax resident of United Kingdom. The assessee is in the business of providing Reuters Dealing 3000, which was an electronic deal matching system enabling authorised dealers in foreign exchange such as banks and other financial institutions, etc. to effect deals in spot foreign exchange with other foreign exchange dealers. The main server of the assessee was located in Geneva and the assessee had executed a Dealing Services Marketing Agreement with Reuters India Pvt. Ltd. whereby the Reuters India Pvt. Ltd. has undertaken marketing services of the assessee to subscribers in India. During the financial year relevant to A.Y. 2012-13 the assessee had earned revenue of 14,18,44,012/- from customers in India. The assessee had filed its return of income declaring Nil income.
The Revenue challenged the order of the DRP deleting interest charged by the AO under Section 234B of the Act, on tax computed under Section 115A of the Act.
The learned Members of the ITAT, Mumbai in respect of chargeability of interest under Section 234B of the Act, found that the DRP had given a direction to the AO to not levy interest under Section 234B of the Act, by following the decision of the Hon’ble High Court in the case of NGC Network Asia LLC (supra) wherein it was held that when a duty is cast on the payer to deduct tax at source, on failure of the payer to do so, no interest can be imposed on the payee under Section 234B of the Act. The Revenue had failed to bring on record any contrary decision against the directions of the DRP in the light of the decision of the Hon’ble High Court. Therefore, the learned Members were of the considered view that there was no error in the directions given by the DRP to the AO not to charge interest under Section 234B of the Act and hence, the learned Members upheld the findings of the DRP and the ground taken by the Revenue in this respect was dismissed.