Case Law Details
Brief : S. 234D inserted by the FA 2003 w.e.f. 1.6.2003 is in the nature of a substantive provision and applies only for the AY 2004-05 and onwards and is not retrospective. A provision by which an authority is empowered to levy and collect interest, even if construed as forming part of the machinery provisions, is substantive law for the simple reason that in the absence of contract or usage interest can be levied under law and it cannot be recovered by way of damages for wrongful detention of the amount. ITO vs. Ekta Promoters 305 ITR 1 (SB) (Del) approved)
Citation : Director of Income Tax Vs M/s. Jacabs Civil Incorporated, ITA No. 491/2008
Court : HIGH COURT OF DELHI
Recently, the Delhi High Court in the case of DIT v. Jacabs Civil Incorporated [2010] ITA No. 491/2008 (Del) held that interest under section 234B (Section 234B of the Act levies interest for default in payment of advance tax) of the Income Tax Act, 1961 (the Act) cannot be charged to non-residents (payee) if payer has defaulted in deducting tax at source.
Further, the High Court held that the liability to deduct or collect tax at source is that of the payer. It was not duty of the payee and therefore the question of payment of any interest would not arise since it cannot be said that the taxpayer was in default for the purposes of Section 234B of the Act.
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