Daily Archives: September 12, 2014


CIT v BABCOCK POWER (OVERSEAS PROJECTS) LTD. ITA 178/2002 dated 05.09.2014 – DELHI HIGH COURT Background: The assessee – M/s.Babcock Power (Overseas Projects) Ltd., a non-resident company incorporated in United Kingdom, during the Assessment Years 1987-88 to 1989-90 had a project office in India and was engaged in execution of a contract of setting up a coal based thermal plant. The assessee to fulfil their contractual obligations, had engaged their foreign technicians who were deputed to work at the Indian project office. These employees were on pay roll of UK office of the respondent assessee and salaries were paid in foreign currency in their bank accounts abroad. These contracts of employment were duly approved by the Ministry of Mines for the purposes of Section 10(6) of the Act. Assessee did not deduct Tax at Source on the salary paid on the ground that tax was not required to be deducted. The Assessing Officer disagreed and also directed interest under Section 201(A) of the Act be charged. A question arose, whether the assessee was liable to deduct tax at source under Section 192 of the Act on the salaries paid to the foreign technicians. Tribunal, by the impugned order, has rejected the contention of the  assessee that they were not liable to deduct tax at source. Tribunal further upheld levy of interest and observed that interest was payable under Sections 201(1) and 201(1A). Interest has been referred to as the legitimate amount of tax due for delayed payment. However, the Tribunal did not accept and agree with levy of interest for the period commencing from 1st April following the Financial Year till the date of the order of levy of interest under Section 201(1A) observing that this was erroneous and cannot be sustained. This finding/direction is questioned. 

Interest u/s 201(1A) to be levied from dt of on which tax was deductible till ...