NISHA C. FONSECA,MUMBAI vs. INCOME TAX OFFICER(INTERNATIONAL TAXATION)-2(3)1, MUMBAI

The present appeal has been preferred by the assessee against the order dated 23.08.2017 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2010-11.

The only ground in this appeal is against upholding the levy of interest under section 234B and 234C of the Act by relying upon the decision of Hon’ble Supreme Court in the case of Ian Peter Morris vs. ACIT dated 29.11.2016 SLP 1196-1197/2013 wherein it is held that interest for default in payment of advance tax under section 234C. The interest for deferment of advance tax would have no 2 M/s. Nisha C. Fonseca application to the present case. Short facts of the case are that the Ld. CIT(A) has levied the interest under section 234B and 234C on the ground that assessee had agreement with Kuwait Airways wherein it is explicitly mentioned that the ex-employee shall be liable to pay her own individual taxes as per the applicable law and no liability shall accrue to the M/s. Kuwait Airways Corporation for the same. The assessee was to get the retrenchment compensation of Rs.18 lakhs from M/s. Kuwait Airways Corporation and otherwise a service rendered on the basis of settlement arrived at between assessee and M/s. Kuwait Airways Corporation and receipt was on 09.08.09. Assessing Officer (hereinafter referred to as the AO) and the Ld. CIT(A) treated that the assessee is not entitled for deduction under section 10 of the Act and assessee was not allowing deduction under section 89.

The Ld. CIT(A) has confirmed the same but he has also levied the interest under section 234B and 234C.

I have heard the Ld. Counsel and found that the issue in controversy is covered by the decision of Hon’ble Supreme Court in the case of Ian Peter Morris vs. ACIT (2016) 389 ITR 501 wherein it is held as under: “Held, allowing the appeal, that against salary a deduction, at the requisite rate at which Income-tax was to be paid by the person entitled to receive the salary, was required to be made by the employer failing which the employer was liable to pay simple interest thereon. In cases where the receipt was by way of salary, deduction under section 192 of the Act was required to be made. No question of payment of advance tax under Part C of Chapter VII of the Act could arise in cases of receipt by way of salary. If that was so, Part F of Chapter VII dealing with interest chargeable in certain cases (section 234B – Interest for defaults in payment of advance tax and 3 M/s. Nisha C. Fonseca section 234C – Interest for deferment of advance tax) would have no application to the present situation in view of the finality that had to be attached to the decision that what was received by the assessee under the non-compete agreement was by way of salary.”

Respectfully following the same, we allow the appeal of the assessee.