Summary
The Court held that, before financial year 2012–13, advance-tax computation permitted reduction of tax deductible at source even if the payer had not deducted it. Section 234B interest depended first on an advance-tax liability and default computed under Section 209; it could not be read in isolation. The 2012 proviso changed the position prospectively for income received without deduction. Revenue appeals were dismissed, while the connected Alcatel assessees’ appeals against contrary interest rulings were allowed. Other contentions and individual assessment facts were not decided.
Issues
- Whether undeducted but deductible source tax reduced advance-tax liability under the pre-2012 law.
- Whether Section 234B operated independently of Section 209, and what effect the 2012 amendment had.
Provisions considered
- Section 209(1)(d), before and after the Finance Act, 2012 proviso, Income-tax Act, 1961Before financial year 2012–13, deductible or collectible source tax reduced advance-tax computation despite actual non-deduction. The prospective proviso withdrew that reduction in its specified circumstances. (¶¶ 11, 12, 13, 14, 15, 16, 17, 18, 19, 20)
- Section 234B(1), read with Section 209, Income-tax Act, 1961Interest required advance-tax liability and non-payment or short payment as preconditions. The assessed-tax definition did not displace the governing advance-tax computation. (¶¶ 11, 12, 20, 21, 22, 23, 24, 25)
Held
- The pre-amendment words “would be deductible or collectible” allowed reduction of source tax that ought to have been deducted or collected, notwithstanding receipt of the full payment without deduction. The later proviso and its explanatory memorandum confirmed that the contrary construction would render the amendment futile. All matters concerned periods before the change applied. (¶¶ 11, 12, 13, 14, 15, 16, 17, 18, 19)
- Section 234B could not be construed as an isolated code. Advance-tax liability and default had to exist first, determined with reference to Section 209; only then did the assessed-tax measure of interest operate. On the historical law applied, the respondents could not be treated as advance-tax defaulters on this basis. The Act supplied remedies against a defaulting payer. (¶ 20)
- The position changed from financial year 2012–13: under the inserted proviso, a recipient of income paid without source deduction could not reduce that undeducted tax in computing advance-tax liability. The decision did not extend the earlier exemption to those later circumstances. (¶¶ 14, 15, 16, 19, 20)
- The Revenue appeals were dismissed. The connected Alcatel appeals, challenging contrary High Court interest rulings for the earlier periods, were allowed on the same legal interpretation. Other Revenue contentions and the individual facts of each assessment were not adjudicated. (¶¶ 21, 22, 23, 24, 25)
Result
Revenue appeals dismissed and connected assessee appeals allowed under the pre-financial-year-2012–13 computation rule; prospective effect of the 2012 proviso expressly recognised.