DIRECTOR OF INCOME TAX, NEW DELHI versus M/S MITSUBISHI CORPORATION

Citation: [2021] 7 S.C.R. 750 · Decided: 17-09-2021 · Supreme Court of India · Bench: L. NAGESWARA RAO · Disposal: Disposed off

Judgment (excerpt)

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SUPREME COURT REPORTS
[2021] 7 S.C.R.
DIRECTOR OF INCOME TAX, NEW DELHI
v.
M/s MITSUBISHI CORPORATION
(Civil Appeal No. 1262 of 2016)
SEPTEMBER 17, 2021
[L. NAGESWARA RAO AND ANIRUDDHA BOSE, JJ.]
Income Tax Act, 1961 – ss.190, 201, 209 and 234B – Proviso
to s.209(1)(d), inserted by the Finance Act, 2012 – Interpretation
of s.209 (1)(d) – The Respondent- Assessee is a  non-resident
company  incorporated  in  Japan,  with operations in India – Notice
was  issued to the  Respondent-Assessee  u/s. 143 (2) of  the Act on
12.10.2006 – An assessment order was passed for the years 1998-
99 to 2004-05 holding that a portion of the Assessee’s income was
attributable to its activities in India and was therefore liable to be
taxed in India, under Articles 4, 5 and 6 of the Double  Taxation
Avoidance  Agreement  between India and Japan, read with the
provisions of the Act –  The  Respondent- Assessee filed appeals
before the Commissioner  of  Income-Tax  (Appeals) (CIT) only with
respect to levy of interest u/s. 234B  of  the  Act  –  CIT dismissed the
appeals – Respondent filed appeal before Income Tax Appellate
Tribunal (ITAT)  – While  allowing the  appeal,  the ITAT  held that
the respondent was not liable for payment of interest u/s. 234B,
when tax at source was deductible from payment made to the
Respondent – This decision was challenged before the High Court,
which was dismissed and the order of ITAT was upheld – Batch of
appeals were filed in Supreme Court pursuant to the judgment of
High Court – Respondent-Assessee submitted that s.234B of the Act
cannot be read in isolation but in the light of s.209 of the finance
Act, 2012 – The Revenue contended that s.234B should be read in
isolation – Held: The liability for payment of interest as provided in
s.234B is for default in payment of advance tax – While the definition
of “assessed tax”u/s.234B pertains to tax deducted or collected at
source, the preconditions of s.234B, viz. liability to pay advance
tax and non-payment or short payment of such tax, have to be
satisfied, after which interest can be levied taking into account the
assessed tax – Therefore, s.209 of the Act which relates to the
[2021] 7 S.C.R. 750
750
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computation of advance tax payable by the assessee cannot be
ignored while construing the contents of s.234B – The proviso to
s.209(1)(d) is in the nature of an exception to s.209(1)(d), as an
assessee, who has received any income without deduction or
collection of tax, is made liable to pay advance tax in respect of
such income – The proviso makes it clear that assesse cannot reduce
the amounts of income tax paid to it by the payer without deduction,
while computing liability for advance tax  – However, the intended
effect of amendment made to s.209(1)(d) by insertion of the proviso
has to be understood to entitle the assessee, for all assessments
prior to the financial year 2012-2013 to reduce the amount of
income- tax which would be deductible or collectible, in computation
of its advance tax liability – Therefore, prior to the financial year
2012-2013, the amount of income tax which is deductible or
collectible at source can  be reduced by the assessee while
calculating advance tax,  the Respondent cannot be held to have
defaulted in payment of its advance tax liability – The view adopted
by the High Court is upheld.
Disposing of the appeals, this Court
HELD: 1. The relevant  provision of the Act which falls for
consideration in this case are in Chapter XVII, which pertains to
collection and recovery of tax. In accordance with Section 190 of
the Act, tax on income shall be payable by deduction or collection
at source or by advance payment, notwithstanding that the regular
assessment in respect of any income is to be made in a later
assessment year. Any person responsible for paying to a non-
resident or to a foreign company shall, at the time of the credit of
such income, deduct income- tax thereon at the rate inforce,
according to Section 195. Section 200 provides that a person
deducting any sum in accordance with the provisions of Chapter
XVII shall pay, within the prescribed time, the sum so deducted
to the credit of the Central Government. The consequences of
failure to deduct tax or pay the tax after deduction are dealt with
in Section 201 of the Act. [Para 11][759-G-H; 760-A-C]
2. An analysis of clauses (a) and (d) of Section 209 (1) would
make it clear that the assessee shall estimate his current income
and inco

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