L.NAGESWARA RAO, J. - (1.) The conundrum before this Court concerns the liability of an assessee to pay interest on short payment of advance tax due to default of the payer in not deducting tax at the time of payment, under the provisions of the Income-tax Act, 1961 (hereinafter referred to as the "Act"). The facts giving rise to Civil Appeal No. 1262 of 2016 are referred to herein, for the sake of convenience.
(2.) Notice was issued to the Respondent-Assessee under Section 143 (2) of the Act on 12.10.2004. The Assessing Officer passed an assessment order on 24.03.2006 for the assessment years 1998-99 to 2004-05. The Assessee is a non-resident company incorporated in Japan, with operations in India. In spite of resistance from the Assessee, it was held by the Department 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 against the assessment order dated 24.03.2006 before the Commissioner of Income-Tax (Appeals) (hereinafter referred to as the "CIT") only with respect to levy of interest under Section 234B of the Act. The CIT dismissed the appeals by a common order dated 10.02.2009, aggrieved by which the Respondent filed appeals before the Income Tax Appellate Tribunal (hereinafter referred to as the "ITAT"). The ITAT allowed the appeals by an order dated 23.06.2009 and held that the Respondent was not liable for payment of interest under Section 234B, when tax at source was deductible from payment made to the Respondent. The judgement of the ITAT was challenged by the Appellant before the High Court. On 30.08.2010, the High Court dismissed the appeals and upheld the judgement of the ITAT. Dissatisfied with the judgements of the ITAT and the High Court, the Appellant has preferred Civil Appeal No. 1262 of 2016 before this Court.
(3.) The Assessing Officer examined the structure of the Respondent-Assessee which was engaged in carrying out trading activities in carbon crude oil, LPG, ferrous products, industrial machinery, mineral, non-ferrous metal and products, textiles, automobiles etc. through its liaison offices in India. The Assessing Officer rejected the contention of the Respondent that it had no income which was taxable in India and passed the assessment order dated 24.03.2006, determining the income attributable to Indian operations and charging interest as per the provisions of the Act. The assessment order was challenged before the CIT, restricted to the imposition of interest under Section 234B of the Act.;