DIRECTOR OF INCOME TAX Vs. MAERSK CO. LTD

JUDGEMENT

(1.) A Division Bench of this Court finding itself unable to agree with the decision of another Division Bench of this Court felt that the matter should be referred to a Larger Bench. Hon'ble the Chief Justice, accordingly, constituted a Full Bench to decide the case. Since the entire matter has been referred to this Bench, we are accordingly deciding the appeal itself.

(2.) In the Commissioner of Income Tax, Meerut and Anr. v. M/s Tide Water Marine International Inc., 2009 309 ITR 85, the question of law involved in the said appeal was whether the Income Tax Appellate Tribunal had erred in law in holding that the interest was not payable by the Assessee under Section 234B of the Income Tax Act (hereinafter referred to as 'Act'), even though, the income of the Assessee was subject to tax deduction at source. The facts of that case was that the Assessee M/s Tide Water Marine International Inc. was a non-resident foreign company and was engaged by another non-resident company M/s Hundai Heavy Industries Co. Ltd. in the business of exploration and production of mineral oils. The employer, M/s Hundai Heavy Industries Co. Ltd. did not deduct the tax at source from the income of the Assessee. The assessing officer, while assessing the tax of the Assessee on the income shown in its return, directed that interest would be charged under Section 234B of the Act, since advance tax was not paid. The Assessee, being aggrieved, filed an appeal which was dismissed and thereafter filed a second appeal before the Income Tax Appellate Tribunal, who allowed the appeal holding that the interest was not payable by the Assessee under Section 234B of the Act as the Assessee himself was not liable to deduct the tax at source in order to pay advance tax under Section 208 of the Act. The Income Tax Department, being aggrieved by the order of the Tribunal, filed an appeal under Section 260A of the Income Tax Act before the High Court. The High Court dismissed the appeal and affirmed the order of the Tribunal holding that the Assessee was not liable to pay interest under Section 234B of the Act for the default committed by the employer, who was liable to deduct the tax at source. The Division Bench, while arriving at the aforesaid conclusion relied upon a decision of another Division Bench of this Court in the Commissioner of Income Tax and Anr. v. Sedco Forex International Drilling Co. Ltd., 2003 264 ITR 320.

(3.) While hearing the present appeal, the Division Bench in its order dated 09th December, 2010 held that the decision of the Division Bench in the case of Sedco Forex (supra) was distinguishable and was not directly applicable to the case in hand and did not agree with the decision of the Division Bench in M/s Tide Water Marine (supra). The Division Bench held that if the Assessee was liable to be taxed in India, then, it was his obligation to pay advance tax and, if he failed to pay the advance tax, he was liable to pay interest under Section 234B of the Act. For reference, the order of the Division Bench dated 09.12.2010 passed in this appeal is quoted hereunder: