Mitsubishi Corporation v Commissioner of Income Tax, Delhi

Holding

The obligation to pay advance tax under section 209 of the Income-tax Act 1961, as it stood before the 2012 amendment, is computed after reducing tax deductible at source on the payee's income; a non-resident assessee whose income is liable to TDS is not also liable to interest under section 234B for shortfall in advance tax.

Facts

Mitsubishi Corporation, a Japanese company, received income from Indian sources that was subject to TDS under section 195. The Revenue levied interest under section 234B for non-payment of advance tax. Mitsubishi contended that because its income was subject to TDS, no advance tax was due.

Reasoning

The Supreme Court held that under pre-2012 section 209, the assessee was entitled to reduce its advance tax liability by the amount of tax deductible at source, regardless of whether the payer had actually deducted it. Since substantially all of Mitsubishi's income was subject to TDS, no shortfall arose and section 234B interest was not chargeable. The Court approved the Delhi High Court's reasoning in earlier non-resident cases.