Assessee can’t be held liable for Interest for short-fall of Advance Tax which arises due to Default of Payer in deducting TDS, rules Supreme Court [Read Judgment]

The Apex Court held that the assessee cannot be held liable for interest for short-fall of advance tax which arises due to Default of Payer in Deducting TDS before the Financial Year 2012-13.

The dispute relating to the interpretation of the words “would be deductible or collectible” in Section 209 (1) (d) of the Act can be resolved by referring to the provision to Section 209 (1) (d), which was inserted by the Finance Act, 2012.

The proviso makes it clear that the assessee, M/s. Mitsubishi Corporation cannot reduce the amounts of income tax paid to it by the payer without deduction while computing liability for advance tax. The memorandum explaining the provisions of the Finance Bill, 2012 provides necessary context that the amendment was warranted due to the judgments of courts, interpreting Section 209 (1) (d) of the Act to permit computation of advance tax by the assessee by reducing the amount of income-tax which is deductible or collectible during the financial year. If the construction of the words “would be deductible or collectible” as placed by the Revenue is accepted, the amendment made to Section 209 (1) (d) by insertion of the proviso would be meaningless and an exercise in futility. To give the intended effect to the proviso, Section 209 (1) (d) of the Act has to be understood to entitle the assessee, for all assessments prior to the financial year 2012-13, to reduce the amount of income- tax which would be deductible or collectible, in the computation of its advance tax liability, notwithstanding the fact that the assessee has received the full amount without deduction.

The division bench of Justice L. Nageswara Rao and Justice Anirudha Bose held that prior to the financial year 2012-13, 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.

“There is no doubt that the position has changed since the financial year 2012-13, in view of the proviso to Section 209 (1) (d), pursuant to which if the assessee receives any amount, including the tax-deductible at source on such amount, the assessee cannot reduce such tax while computing its advance tax liability.

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