No-Liability On Non-Resident For Payment Of Advance Tax

DIMENSION DATA ASIA PACIFIC PTE. LTD. V. DY. CIT (2019) 73 ITR 213 (MUM.)(TRIB.)

ITAT HELD THAT

There is no liability on NRIs for payment of advance tax. It is duty of person crediting payment into account of NRIs to deduct tax u/s. 195 of the Income Tax Act, 1961.

APPLICABLE PROVISIONS:
SECTION 195 OF THE INCOME TAX ACT, 1961

(1) Any person responsible for paying to a non-resident, not being a company,or to a foreign company, any interest not being interest referred to in [Section194LB or Section 194LC or section 194LD] or any other sum chargeable under the provisions of this Act (not being income chargeable under the head "Salaries") shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force:

PROVIDED THAT in the case of interest payable by the Government or a public sector bank within the meaning of clause (23D) of section 10 or a public financial institution within the meaning of that clause, deduction of tax shall be made only at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode :

PROVIDED FURTHER THAT no such deduction shall be made in respect of any dividends referred to in section 115-O.

• Explanation 1.- For the purposes of this section, where any interest or other sum as aforesaid is credited to any account, whether called "Interest payable account" or "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.
• Explanation 2.- For the removal of doubts, it is hereby clarified that the obligation to comply with sub-section (1) and to make deduction thereunder applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or not the non-resident person has-

(i) a residence or place of business or business connection in India; or
(ii) any other presence in any manner whatsoever in India.

ADVANCE TAX - As per section 208, every person whose estimated tax liability for the year is Rs. 10,000 or more, shall pay his tax in advance, in the form of“advance tax”.

Person not liable to pay advance tax -as discussed above, every person whose estimated tax liability for the year is Rs. 10,000 or more is liable to pay advancetax- However, a resident senior citizen (i.e., an individual of the age of 60 yearsor above during the relevant financial year) not having any income from business or profession is not liable to pay advance tax.

Salaried Individuals – If your total tax liability is Rs 10,000 or more in a financial year you have to pay advance tax. Advance tax applies to all taxpayers, salaried,freelancers, and businesses.

Presumptive Income from Business; The taxpayers who have opted for presumptive taxation scheme under section 44AD have to pay the whole amount
of their advance tax in one instalment on or before 15 March. They also have an
option to pay all of their tax dues by 31 March.

Presumptive income for Professionals– Independent professionals such asdoctors, lawyers, architects etc. come under the presumptive schemeunder section 44ADA. They have to pay the whole of their advance tax liability inone instalment on or before 15 March. They can also pay the entire amount by31 March.

Advance Tax can be paid in instalments. Due Date Advance Tax Payable

• On or before 15th June 15% of advance tax
• On or before 15th September 45% of advance tax less advance tax already paid.
• On or before 15th December 75% of advance tax less advance tax already paid
• On or before 15th March 100% of advance tax less advance tax already paid

INTEREST ON ADVANCE TAX

Under the Income-tax Act, different types of interests are levied for various kinds of delays/defaults. The provisions of section 234A, 234B and 234C dealing with interest levied for.

• SECTION 234A : (i) delay in filing the return of income.
• SECTION 234B: (ii) non-payment or short payment of advance tax; and
• SECTION 234C: (iii) non-payment or short payment of individual instalment orinstalments of advance tax (i.e., deferment of advance tax)

INTEREST ON LATE PAYMENT OF ADVANCE TAX

Interest on late payment of Advance Tax is applicable as follows

1. INTEREST UNDER SECTION 234C – Interest @ 1% per month is payable if the tax is not paid as per the above schedule i.e., for Deferment in Instalments of Advance Tax.

2. INTEREST UNDER SECTION 234B – Interest @ 1% is payable if 90% of the tax is not paid before the end of the financial year i.e., for Default in Payment of Advance Tax.

For computing Interest u/s 234A/B/C and any other Interest, Income Tax shall be rounded off to the nearest hundred and fraction of a hundred shall be ignored.

BRIEF FACTS

1. The assessee was a tax resident of Singapore and provided management advisory services.

2. The assessee entered into an agreement with its Indian subsidiary to provide advisory services in the field of management, sales, marketing, finance and administrative, human resources and information technology.

3. For such services to the Indian company, the assessee in the previous year relevant to the assessment year 2014-15 earned management fee ofRs. 32,23,41,117/-.

4. The AO held that the management fee received by the assessee from the Indian entity was in the nature of fees for technical services under the DoubleTaxation Avoidance Agreement between India and Singapore taxable in India at 10 per cent.

5. Accordingly, he proposed a draft assessment bringing to tax the management fee received by the assessee and also levied interest. 

6. DRP upheld the decision of the AO.

7. On appeal, the Appellate Tribunal held that that the liability to pay advance tax was not on the non-resident as the liability was on the payer to deduct tax at source under S. 195 of the Income-tax Act, 1961 while making such payment.

8. Therefore, interest under S. 234B was not chargeable.

CONCLUSION

Provisions of Section clearly provides that it is duty of person to deduct tax u/s. 195 at the time of crediting the amount in account of non-resident or a foreign company and pay the same with the government. The provisions of advance tax are not applicable to non-residents and hence interest u/s. 234B is not
chargeable.

DISCLAIMER:the case law presented here is only for sharing knowledge and information with the readers. The views are personal , and shall not be considered as professional advice. In case of necessity do consult with tax professionals.