The Dy. Director Of ... v. M/S. Merrill Lynch C...

ORDER

Rajendra Singh, Accountant Member. — This appeal by the revenue is directed against the order dated 10.6.2009 of CIT(A) for the assessment year 2005-06. The only dispute raised in this appeal is regarding levy of interest under section 234B of the Income-tax Act.

2. Briefly stated the facts of the case are that the assessee for the relevant year had declared total income of Rs. 32,53,529. The AO in the assessment made addition of Rs. 97,25,000 on account of the Transfer Pricing adjustments and assessed the total income at Rs. 1,29,78,529. AO also charged interest under section 234B on account of shortfall in payment of advance tax. The assessee disputed the decision of the AO and submitted before CIT(A) that tax payable on the returned income was Rs. 4,88,029 and the assessee had paid advance tax of Rs. 2,23,321 and tax deducted at source was Rs. 3,61,768 and there was refund of Rs.97,060/-. The assessee was therefore not liable to pay interest under section 234B. It was also submitted that entire income of the non-resident was tax deductible at source as per section 195 of the Income-tax Act and therefore whether tax was fully deducted or not the assessee was not liable for advance tax. The assessee placed reliance on the decision of the Special Bench of the Tribunal in case of Motorola Inc v. Dy. CIT [2005] ( 95 ITD 269 ) Delhi. CIT(A) was satisfied by the explanation given and deleted the levy of interest aggrieved by which the revenue is in appeal.

3. After hearing both the parties we find that the issue raised in this appeal is covered by the judgment of Hon'ble High Court of Mumbai in case of Director Of Income-Tax (International Taxation) v. Ngc Network Asia Lic [2009] (313 ITR 187) in which it has held that when the entire tax was deductible at source failure on the part of the payer to do so, could not be ground for levy of interest under section 234B. The Learned DR has not disputed the fact that the entire income of the assessee was tax deductible at source and therefore following the said judgment of the jurisdictional High Court (supra) we see no infirmity in the order of CIT(A) deleting the interest charged under section 234B. The order of CIT(A) is therefore upheld.

4. In the result the appeal of the revenue is dismissed.

5. The order was pronounced in open court on 28.01.2011.