GOLDMAN SACHS INVESTMENTS ( MAURITIUS ) LTD,MUMBAI vs. DCIT (IT) 2(3)(2), MUMBAI

We have deliberated at length on the aforesaid issue under consideration and find substantial force in the claim of the ld. A.R. As per the „Explanation‟ to Sec. 234C, for the purpose of computing the interest liability therein contemplated, the tax due on the returned income has to be reduced by any tax deductible at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction and is taken into account in computing the total income of the assessee. As observed by us hereinabove, the interest income of Rs.1,73,91,400/- received by the assessee from Indian Oil Corporation Ltd. was liable for deduction of tax at source, which however, was not done by the payer. Accordingly, in our considered view the tax deductible at source on the aforesaid amount of interest income, as stated by the ld. A.R, and rightly so, had to be excluded from the tax due on the returned income for the purpose of computing the interest liability under Sec. 234C of the Act. Our aforesaid view is supported by the judgment of the Hon’ble High Court of Bombay in the case of DIT (International Taxation) Vs. NGC Network LLC (2009) 313 ITR 187 (Bom). In its aforesaid order, it was observed by the Hon‟ble High Court that when a duty is cast on a payer to deduct and pay the tax at source, then on the payers failure to do so interest under Sec. 234B cannot be imposed on the payee assessee. Accordingly, in terms of our aforesaid observations, we are in agreement with the claim of the ld. A.R that the tax deductible at source on the aforesaid interest income received by the assessee from Indian Oil Corporation Ltd. was liable to be excluded at the time of working out the assessee‟s liability towards interest under Sec. 234C. We thus direct the A.O to recompute the interest liability under Sec. 234C in terms of our aforesaid observations. The Ground of appeal No. 6 is allowed as above.

The appeal filed by the assessee is allowed in terms of our aforesaid observations.