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Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: SHRI PRAKASH CHAND YADAV & SHRI MADHUSUDAN SAWDIA
आदेश/ORDER PER SHRI MADHUSUDAN SAWDIA, A.M.: This appeal is filed by the revenue, feeling aggrieved by the order passed by the learned Commissioner of Income Tax (Appeals)-10, Hyderabad (“Ld. CIT(A)”), dated 27.05.2024 for the A.Y. 2023-24. 2. The revenue has raised the following grounds of appeal : “ (i) The order of the CIT(Appeals) is erroneous on facts and in law. (ii) The CIT(Appeals) erred in law in holding that the assessee be exempted from levy of interests u/s.234B & 234C in respect of the dividend income on which TDS has been made by the payee company without appreciating the fact that the
1. TDS on dividend income was made @5% only instead of 10% as per the Double Taxation Avoidance Agreement with Netherlands and thus there was short deduction of TDS resulting into tax liability as at the end of the financial year which was discharged by way of self assessment tax only. (iii) The CIT(Appeals) erred in law in holding that the assessee be exempted from levy of interests u/s.234B & 234C in respect of the dividend income on which TDS has been made by the payee company without appreciating the fact that the TDS on dividend income was made @5% only instead of 10% as per the Double Taxation Avoidance Agreement with Netherlands by availing Most Favoured Nation clause benefit and subsequently paid tax by way of self assessment tax after the ruling of Hon'ble Supreme Court Supreme Court of India in the case of Assessing Officer (International Taxation), New Delhi Vs. M/s. Nestle SA and thus there was short deduction of TDS which attracts the provisions of Sec.234B & 234C. (iv) The CIT(Appeals) erred in law in holding that the assessee be exempted from levy of interests u/s.234B & 234C in respect of the dividend income on which TDS has been made by the payee company without appreciating the fact that the interest u/s.234B is governed by the provisions of Sec.234B which speaks about charging of interest u/s.234B when the advance tax paid by the assessee is less than 90% of the assessed tax. (v) The CIT(Appeals) erred in law in holding that the assessee be exempted from levy of interests u/s.234B & 234C in respect of the dividend income on which TDS has been made by the payee company without appreciating the fact that the interest u/s.234C is governed by the provisions of Sec.234C which speaks about charging of interest u/s.234C when the assessee has not paid the whole amount of tax payable in respect of the subject dividend income by the end of the financial year i.e 31.03.2023.
(vi) Any other ground of appeal that may be raised with the prior approval of the Hon'ble ITAT during the appellate proceedings. The relevant appellate order was received in the office of the Commissioner of Income tax (IT & TP), Hyderabad on 06/06/2024 which date should be mentioned in the form of appeal as the date of communication of the order of the Commissioner of Income-tax (Appeals)-10, Hyderabad.”
3. Brief facts of the case are that the assessee, a tax resident of Netherlands, filed its return of income for the A.Y. 2023-24 declaring income of Rs.83,79,55,174/-. The return of income was processed and an intimation u/s. 143(1) of the Income Tax Act, 1961 (“the Act”)dated 05.12.2023 was issued by the Centralized Processing Centre (“CPC”), determining a demand of Rs. 20,06,420/-. The demand was raised due to charging of interest u/s. 234B and 234C of the Act due to non payment of advance tax.
4. Aggrieved with the order of CPC, the assessee filed an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee submitted that out of the total returned income of Rs.83,79,55,174/-, Rs.44,14,57,400/- was on account of dividend received. He also submitted that the dividend income of Rs.44,14,57,400/- was liable for tax @ 10% as per the provisions of the Act, however, the payer Indian company deducted tax at source only @ 5%. Therefore due to such difference of 5%, the assessee was liable to pay self- assessment tax at the time of filing the return of income. At the time of issuing the intimation u/s 143(1), the CPC contending that the assessee was liable to pay the difference amount of tax as advance income tax, which the assessee failed to pay, the CPC levied interest u/s.234B & 234C of the Act. The assessee contended before the Ld. CIT(A) that in the case of non- resident if the entire income is liable to withholding of tax and if due to failure of the payer to deduct the tax at specified rate and the difference tax is paid by the non-resident at the time of filing of return, the liability to pay advance tax does not arise and therefore the assessee is not liable to pay any interest u/s.234B & 234C of the Act. Accepting the contention of the assessee, the Ld. CIT(A) directed the Learned Assessing Officer (“Ld. AO") to verify whether the income of Rs.44,14,57,400/- are in the nature of dividend income or not and if the same is in the nature of dividend income, delete the interest levied u/s.234B & 234C of the Act. Aggrieved by the decision of Ld. CIT(A), the revenue is in appeal before us.
The Learned Department Representative (“Ld. DR”) submitted that the assessee failed to deposit advance tax as per the provisions of section 209 of the Act and therefore the assessee is liable to pay interest u/s.234B & 234C of the Act.
Per contra, the Learned Authorised Representative (“Ld. AR”) reiterated the submissions made before the Ld. CIT(A) and prayed that the appeal filed by the revenue be dismissed.
We have heard the rival contention and also gone through the record in the light of the submissions made on either side. Similar issue had been dealt by Hon’ble Supreme Court in the case of CIT (International Taxation) Vs. ZTE Corporation, 157 taxman.com 201 (SC) dated 6.12.2023 in which the Hon'ble Supreme Court dismissed the SLP of the revenue. The head note of the decision is extracted hereunder :
“Section 234B of the Income-tax Act, 1961 - Interest, chargeable as (Non-resident) - Assessment year 2013-14 - Assessee-company based in China was engaged in supply of telecom equipments and had a permanent establishment in India - Assessing Officer computed taxable income by attributing some percentage of sale consideration as profits to PE and interest under section 234B for failure to pay advance tax was levied - High Court by impugned order held that since assessee was a non-resident company, entire tax was to be deducted at source on payments made by payer to it and there was no question of payment of advance tax by assessee, and therefore, it would not be permissible for revenue to charge any interest under section 234B from assessee - Supreme Court by impugned order dismissed SLP against said order - Whether review petition was to be dismissed - Held, yes [Para 3] (In favour of assessee).”
Respectfully following the precedence in the case of CIT (International Taxation) Vs. ZTE Corporation (supra), we are of the view that in the case of non-resident if the entire income is liable to withholding of tax and if due to failure of the payer to deduct the tax at specified rate and the difference tax is paid by the non-resident at the time of filing of return, the liability to pay advance tax does not arise and therefore the assessee is not liable to pay any interest u/s.234B & 234C of the Act. Therefore, we uphold the view taken by the Ld. CIT(A) and remand the issue to the file of the Ld. AO with a direction to verify whether the income of Rs.44,14,57,400/- are in the nature of dividend income or not and if the same is in the nature of dividend income, delete the interest u/s.234B & 234C of the Act is leviable. Accordingly, we dismiss the appeal of revenue.