Dy. Director Of Income Tax, (International Taxation)-1(1) v. Arc Line (Mauritius)

ORDER

J. Sudhakar Reddy, Accountant Member - Both these appeals are filed by the Revenue against the orders of the CIT(Appeals)-XXXI, Mumbai dated 31-07-2006 for the assessment years 1999-2000 and 2000-2001. A common ground raised by the Revenue reads as follows:

"On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in holding that the assessee is not liable to interest u/s 234B of the Income Tax Act, 1961 as it could not visualize that its income was taxable in India as DIT relief certificate was issued."

2. We have heard Mr. S.B. Morey, the learned DR and Mr. Jiger Saiya, learned counsel for the assessee.

3. On a careful consideration of the facts and circumstances of the case and on a perusal of the papers on record and the orders of the authorities below, we hold as follows:

4. The assessee is a non-resident of Mauritius and is engaged in the business of shipping. The agent of the assessee was granted 100% DIT relief by the AO in respect of foreign income as per Article 8 of the India-Mauritius DTAA and accordingly the return of income was filed declaring Nil income. The issue before us is whether the assessee was liable to pay interest u/s 234B, for shortfall or non payment of advance tax.

5. The assessee's case is that it was under an impression that no advance tax is required to be paid and the tax liability is Nil for the specific reason that DIT relief certificate was issued by the AO to the appellant. Reliance was placed on the following decisions:

(i) CIT v . Sedco Forex International Drilling Co. Ltd. [2003] 264 ITR 320/134 Taxman 109 (Uttaranchal)

(ii) CIT v . Ranoli Investments (P.) Ltd. [1999] 235 ITR 433 (Guj)

(iii) BHPE Kinhill Joint Venture v. Asstt. DIT (IT) [2008] 23 SOT 209 (Delhi)

(iv) IBM India Ltd. v. CIT [2007] 105 ITD 1 (Bang.)

(v) Haryana Warehousing Corpn. v. Dy. CIT [2000] 75 ITD 155 (Delhi)(TM)

(vi) Asstt. CIT v. Norasia Lines (Malta) Ltd. [2007] 107 ITD 301 (Cochin) (SB)

(vii) Dy. DIT (IT) v. Pipeline Engg. GmbH [2007] 28 SOT 121 (Mum)

(viii) Dy. DIT v. Thoresen Chartering Singapore (P) Ltd. [2009] 118 ITD 416 (Mum.)

6. The first appellate authority at para 4.3 page 8 observed as follows:

"I have examined the AR's arguments. It is clear that the DIT Relief certificate was issued by the AO to the appellant which created an impression in the mind of taxpayer that no advance tax is required to be paid as the tax liability is zero. Subsequently in the course of assessment of later Assessment Years, it has been held that the appellant is not entitled to benefit of Article 8 of the DTAA and accordingly its income is taxable in India. Such change of circumstances could not have been anticipated by the assessee in the relevant previous year. Accordingly the appellant cannot be saddled with the liability to pay advance tax. My predecessor in A.Y. 2001-02 in his order dated 31.12.2004 in Appeal No. CIT(A)XXXI/DDIT(IT)1/IT-83/03-04 has held that no interest is payable u/s 234B in these circumstances. I have perused his order and I am in agreement with him that in view of the 100% DIT Relief certificate having been issued the appellant could not anticipate his liability to pay advance tax and accordingly his liability to pay interest u/s 234B does not arise. Appeal on this ground is accordingly allowed. Interest levied u/s 234B of Rs.14,77,653/- is deleted."

7. We fully agree with these findings as they are in the line with the judgment of Hon'ble Uttaranchal High Court in the case of Sedco Forex International Drilling Co. Ltd. (supra).

8. In the result, we uphold the orders of the first appellate authority and dismiss both the appeals of the Revenue.