My non-resident client's Indian customers did deduct tax at source, but the Assessing Officer has still charged s.234B interest for an assessment year after 2012-13, saying the Finance Act, 2012 proviso removes the s.209(1)(d) credit. Is that right?
No. The Delhi Tribunal held that the proviso inserted in s.209(1)(d) by the Finance Act, 2012 with effect from 1 April 2012 'would apply only in a scenario where person responsible for deducting tax has paid or credited such income without deduction of tax', and that where the income was received by the assessee after deduction of tax at source the proviso is not applicable. Reading s.209(1)(d) with its proviso, it held that where in the case of a non-resident company the tax deductible at source has been paid, it is not permissible for the Revenue to charge interest under s.234B for an alleged failure to pay advance tax, and it allowed the ground for both assessment year 2012-13 and assessment year 2019-20.
Decided by the ITAT (Shri G.S. Pannu, Vice President and Ms. Astha Chandra, Judicial Member (ITAT Delhi Bench 'D')) on 2024-05-03, reported as ITA Nos. 2090/Del/2023, 2305/Del/2022, 2091/Del/2023 and 3102/Del/2023; assessment years 2012-13, 2019-20, 2020-21 and 2021-22. It bears on section 234B, section 209, section 209(1)(d), section 44BB, section 147, section 148, section 144C, section 234A, section 244A, section 133(6) of the Income Tax Act 1961, in TDS Defaults, Assessment & Scrutiny and How Tax Law Is Read matters.
The proviso is routinely read as though it abolished the s.209(1)(d) credit for non-residents from 1 April 2012 onwards. It did not. It is conditional on its own words, and the condition is a fact about the payer's conduct — that he paid or credited the income without deducting, or received or debited it without collecting. Where the payer did deduct, the condition is not met and the main clause operates unchanged, so the payee's advance tax stands reduced by the tax deductible on that income and there is nothing for s.234B to work on. That is the value of this order: it is one of the few decisions to apply the proviso to an assessment year that is squarely on its far side. Assessment year 2019-20, which was one of the years before the Tribunal, corresponds to the financial year 2018-19 and is well after 1 April 2012, so the point could not be disposed of, as it can for assessment year 2012-13, by saying the proviso had not yet arrived. The limits of the order are worth stating plainly, because the Revenue will press them. It is a Tribunal order, so it binds nobody outside the case; the finding that tax had in fact been deducted rests on the submission of the assessee's representative as recorded at paragraph 19.2 and was not tested against the record as reported; and the Tribunal's own stated reason at paragraph 19.3 — that the Supreme Court in Mitsubishi Corporation held the proviso "applicable prospectively after FY 2012-13" — cannot by itself support the result for assessment year 2019-20, which is squarely after that year. The whole weight of the order for a post-2012 year therefore falls on paragraph 19.2, the reading of the proviso as conditional on the payer having paid or credited without deducting. Expect that to be met with the Supreme Court's own sentence at paragraph 20 of Mitsubishi Corporation, that "the position has changed since the financial year 2012-13, in view of the proviso to Section 209 (1) (d)", and be ready to answer it on the words of the proviso, which speak only of income paid or credited without deduction.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee is a foreign company resident in Canada, engaged in supplying reservoir simulation software to oil companies such as ONGC, Oil India and Vedanta, together with software maintenance support and training services. Examining a list of non-filers, the Assessing Officer found that the assessee had not filed a return for assessment year 2012-13 despite receipts from Cairn Energy India Pty. Ltd., Prize Petroleum Company Ltd., Shell India Market Pvt. Ltd. and Reliance Industries Ltd. on which TDS had been deducted, and issued a notice under s.148 on 29 March 2019. There was no compliance; the officer issued notices under s.133(6) to the payers, concluded that the products and services supported oil and gas exploration and production, applied s.44BB, and computed income at Rs 36,43,546, being ten per cent of receipts of Rs 3,64,35,459. A draft order was passed on 30 December 2019 and, no objection having been filed before the Dispute Resolution Panel, the final order was passed on 21 February 2020 under s.144C/144/147. The Commissioner (Appeals) upheld the reassessment, declined to admit additional evidence under rule 46A and concurred with the Dispute Resolution Panel's directions for assessment years 2019-20 and 2020-21 applying s.44BB. Before the Tribunal, the assessee challenged among other things the levy of interest under s.234B on the ground that the section is inapplicable to a non-resident — ground No. 8 in assessment year 2012-13 and ground No. 6 in assessment year 2019-20. Its representative submitted that the income in question had been received after deduction of tax at source.
All four appeals were allowed for statistical purposes (paragraph 22), and the ground against the levy of interest under s.234B was allowed for assessment year 2012-13 and assessment year 2019-20 (paragraph 19.4). The proviso inserted in s.209(1)(d) by the Finance Act, 2012 with effect from 1 April 2012 applies only where the person responsible for deducting tax has paid or credited the income without deduction of tax; where the income has been received after deduction of tax at source, the proviso is not applicable, and under s.209(1)(d) read with its proviso, where in the case of a non-resident company the tax deductible at source has been paid, it is not permissible for the Revenue to charge interest under s.234B for an alleged failure to pay advance tax (paragraph 19.2).
The Tribunal set out the proviso to s.209(1)(d) verbatim and recorded that it was inserted by the Finance Act, 2012 with effect from 1 April 2012 (paragraph 19.1). It then read the proviso as conditional on the payer having paid or credited the income without deducting, noted the assessee's submission that the receipts had suffered deduction, and concluded that the proviso was not attracted, so that s.209(1)(d) with its proviso left no room for a s.234B charge on a non-resident whose tax deductible at source had been paid (paragraph 19.2). It then relied on the Supreme Court's decision in Mitsubishi Corporation for the proposition that the proviso applies prospectively after the financial year 2012-13, and on the coordinate bench decision in Amadeus IT Group SA v. ACIT, ITA No. 1742/Del/2023 dated 16 October 2023, and held that no interest under s.234B could be levied, allowing ground No. 8 in AY 2012-13 and ground No. 6 in AY 2019-20 (paragraphs 19.3 and 19.4).
It can be seen from the above that proviso inserted in section 209(1)(d) of the Act by the Finance Act, 2012 w.e.f. 01.04.2012 would apply only in a scenario where person responsible for deducting tax has paid or credited such income without deduction of tax.
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Handle my notice → Ask a CA on WhatsAppNo. The Delhi Tribunal held that the proviso inserted in s.209(1)(d) by the Finance Act, 2012 with effect from 1 April 2012 'would apply only in a scenario where person responsible for deducting tax has paid or credited such income without deduction of tax', and that where the income was received by the assessee after deduction of tax at source the proviso is not applicable. Reading s.209(1)(d) with its proviso, it held that where in the case of a non-resident company the tax deductible at source has been paid, it is not permissible for the Revenue to charge interest under s.234B for an alleged failure to pay advance tax, and it allowed the ground for both assessment year 2012-13 and assessment year 2019-20. This was decided by the ITAT (Shri G.S. Pannu, Vice President and Ms. Astha Chandra, Judicial Member (ITAT Delhi Bench 'D')) and bears on section 234B, section 209, section 209(1)(d), section 44BB, section 147, section 148, section 144C, section 234A, section 244A, section 133(6) of the Income Tax Act 1961. It is reported as ITA Nos. 2090/Del/2023, 2305/Del/2022, 2091/Del/2023 and 3102/Del/2023; assessment years 2012-13, 2019-20, 2020-21 and 2021-22. The proviso is routinely read as though it abolished the s.209(1)(d) credit for non-residents from 1 April 2012 onwards. It did not. It is conditional on its own words, and the condition is a fact about the payer's conduct — that he paid or credited the income without deducting, or received or debited it without collecting. Where the payer did deduct, the condition is not met and the main clause operates unchanged, so the payee's advance tax stands reduced by the tax deductible on that income and there is nothing for s.234B to work on. That is the value of this order: it is one of the few decisions to apply the proviso to an assessment year that is squarely on its far side. Assessment year 2019-20, which was one of the years before the Tribunal, corresponds to the financial year 2018-19 and is well after 1 April 2012, so the point could not be disposed of, as it can for assessment year 2012-13, by saying the proviso had not yet arrived. The limits of the order are worth stating plainly, because the Revenue will press them. It is a Tribunal order, so it binds nobody outside the case; the finding that tax had in fact been deducted rests on the submission of the assessee's representative as recorded at paragraph 19.2 and was not tested against the record as reported; and the Tribunal's own stated reason at paragraph 19.3 — that the Supreme Court in Mitsubishi Corporation held the proviso "applicable prospectively after FY 2012-13" — cannot by itself support the result for assessment year 2019-20, which is squarely after that year. The whole weight of the order for a post-2012 year therefore falls on paragraph 19.2, the reading of the proviso as conditional on the payer having paid or credited without deducting. Expect that to be met with the Supreme Court's own sentence at paragraph 20 of Mitsubishi Corporation, that "the position has changed since the financial year 2012-13, in view of the proviso to Section 209 (1) (d)", and be ready to answer it on the words of the proviso, which speak only of income paid or credited without deduction. If it applies to you, the first step is this: Prove the deduction as a fact before arguing the law. Produce Form 16A, the payer's TDS statement, the Form 26AS or AIS entry, or the payer's ledger, for each receipt in issue.
The assessee is a foreign company resident in Canada, engaged in supplying reservoir simulation software to oil companies such as ONGC, Oil India and Vedanta, together with software maintenance support and training services. Examining a list of non-filers, the Assessing Officer found that the assessee had not filed a return for assessment year 2012-13 despite receipts from Cairn Energy India Pty. Ltd., Prize Petroleum Company Ltd., Shell India Market Pvt. Ltd. and Reliance Industries Ltd. on which TDS had been deducted, and issued a notice under s.148 on 29 March 2019. There was no compliance; the officer issued notices under s.133(6) to the payers, concluded that the products and services supported oil and gas exploration and production, applied s.44BB, and computed income at Rs 36,43,546, being ten per cent of receipts of Rs 3,64,35,459. A draft order was passed on 30 December 2019 and, no objection having been filed before the Dispute Resolution Panel, the final order was passed on 21 February 2020 under s.144C/144/147. The Commissioner (Appeals) upheld the reassessment, declined to admit additional evidence under rule 46A and concurred with the Dispute Resolution Panel's directions for assessment years 2019-20 and 2020-21 applying s.44BB. Before the Tribunal, the assessee challenged among other things the levy of interest under s.234B on the ground that the section is inapplicable to a non-resident — ground No. 8 in assessment year 2012-13 and ground No. 6 in assessment year 2019-20. Its representative submitted that the income in question had been received after deduction of tax at source. The matter was decided on 2024-05-03 by the ITAT (Shri G.S. Pannu, Vice President and Ms. Astha Chandra, Judicial Member (ITAT Delhi Bench 'D')). On those facts the ITAT held as follows. All four appeals were allowed for statistical purposes (paragraph 22), and the ground against the levy of interest under s.234B was allowed for assessment year 2012-13 and assessment year 2019-20 (paragraph 19.4). The proviso inserted in s.209(1)(d) by the Finance Act, 2012 with effect from 1 April 2012 applies only where the person responsible for deducting tax has paid or credited the income without deduction of tax; where the income has been received after deduction of tax at source, the proviso is not applicable, and under s.209(1)(d) read with its proviso, where in the case of a non-resident company the tax deductible at source has been paid, it is not permissible for the Revenue to charge interest under s.234B for an alleged failure to pay advance tax (paragraph 19.2).
The Tribunal set out the proviso to s.209(1)(d) verbatim and recorded that it was inserted by the Finance Act, 2012 with effect from 1 April 2012 (paragraph 19.1). It then read the proviso as conditional on the payer having paid or credited the income without deducting, noted the assessee's submission that the receipts had suffered deduction, and concluded that the proviso was not attracted, so that s.209(1)(d) with its proviso left no room for a s.234B charge on a non-resident whose tax deductible at source had been paid (paragraph 19.2). It then relied on the Supreme Court's decision in Mitsubishi Corporation for the proposition that the proviso applies prospectively after the financial year 2012-13, and on the coordinate bench decision in Amadeus IT Group SA v. ACIT, ITA No. 1742/Del/2023 dated 16 October 2023, and held that no interest under s.234B could be levied, allowing ground No. 8 in AY 2012-13 and ground No. 6 in AY 2019-20 (paragraphs 19.3 and 19.4). In the words reproduced by the source cited on this page: "It can be seen from the above that proviso inserted in section 209(1)(d) of the Act by the Finance Act, 2012 w.e.f. 01.04.2012 would apply only in a scenario where person responsible for deducting tax has paid or credited such income without deduction of tax." The decision followed or applied DIT v. Mitsubishi Corporation, 130 taxmann.com 276 (SC) — followed; Amadeus IT Group SA v. ACIT, ITA No. 1742/Del/2023 dated 16.10.2023 (ITAT Delhi), and the Delhi High Court's disposal of the Revenue's appeal against it — followed.
It was decided by the ITAT on 2024-05-03 and is reported as ITA Nos. 2090/Del/2023, 2305/Del/2022, 2091/Del/2023 and 3102/Del/2023; assessment years 2012-13, 2019-20, 2020-21 and 2021-22. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 234B, section 209, section 209(1)(d), section 44BB, section 147, section 148, section 144C, section 234A, section 244A, section 133(6), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. All four appeals were allowed for statistical purposes (paragraph 22), and the ground against the levy of interest under s.234B was allowed for assessment year 2012-13 and assessment year 2019-20 (paragraph 19.4). The proviso inserted in s.209(1)(d) by the Finance Act, 2012 with effect from 1 April 2012 applies only where the person responsible for deducting tax has paid or credited the income without deduction of tax; where the income has been received after deduction of tax at source, the proviso is not applicable, and under s.209(1)(d) read with its proviso, where in the case of a non-resident company the tax deductible at source has been paid, it is not permissible for the Revenue to charge interest under s.234B for an alleged failure to pay advance tax (paragraph 19.2). It arises in TDS Defaults, Assessment & Scrutiny and How Tax Law Is Read matters, on section 234B, section 209, section 209(1)(d), section 44BB, section 147, section 148, section 144C, section 234A, section 244A, section 133(6) of the Income Tax Act 1961, and was decided by Shri G.S. Pannu, Vice President and Ms. Astha Chandra, Judicial Member (ITAT Delhi Bench 'D'). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Put the proviso's condition in the forefront of the submission: it withdraws the s.209(1)(d) reduction only where the person responsible for deducting has paid or credited the income without deduction of tax, or the collector has received or debited without collection. Keep the credit claim and the advance tax claim separate. Credit for the tax deducted is claimed under s.199, and the Tribunal here dealt with that as a separate ground; the advance tax point under s.209(1)(d) does not depend on the credit being allowed. Where the payer deducted but did not deposit, add s.205, which bars a direct demand on the payee to the extent tax has been deducted; do not let the two points be run together. For an assessment year up to 2012-13, take the simpler point first — the proviso operates from 1 April 2012 and does not reach an earlier financial year at all — and keep this order for the years that follow. Cite this as a Tribunal order at paragraph 19.2, and expect two answers: that the passage is obiter for assessment year 2012-13, and that the Tribunal's own reasoning at paragraph 19.3 does not fit assessment year 2019-20. The year that carries the point is assessment year 2019-20, and the argument that carries it is the conditional wording of the proviso itself.
Searched for later treatment; none was found. That is not the same as a source affirming it. The s.209(1)(d) and s.234B holding has not been taken up by any Bench. The order as a whole has been followed in the assessee's own later appeals: in Computer Modelling Group Ltd v ACIT (ITAT Delhi, 27 February 2026) the Bench recorded at paragraph 9 that 'The Tribunal vide composite order for AY 2012-13, AY 2019-20 to 2021-22 dated 03.05.2024 (supra) deleted the addition' and followed it, and a further order of 6 June 2025 in the same case is to the same effect. But both followed it on the permanent establishment and s.44BB taxability question, not on this order's holding that the proviso to s.209(1)(d) inserted by the Finance Act 2012 bites only where the payer paid or credited the income without deducting tax at all. Nothing else applying, doubting or distinguishing that holding has been found, and no High Court or Supreme Court decision and no appeal against this order is on record here. Treat the status accordingly. This is a single Tribunal order on a point the Revenue contests, and the contest is live: the Supreme Court's own sentence at paragraph 20 of Mitsubishi Corporation, that 'the position has changed since the financial year 2012-13, in view of the proviso to Section 209 (1) (d)', is what the Department will put against it, and the answer has to be made on the words of the proviso, which speak only of income paid or credited without deduction. What would settle the point is a High Court ruling on whether the proviso is conditional on the payer's default or general in its operation. Until then, the ground is worth taking wherever the payers actually deducted, but it should be pleaded on the statutory words and supported by the deduction certificates for the year, not left to rest on this order alone. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
THE PARAGRAPH NUMBERING OF THIS ORDER IS EASY TO GET WRONG, and several circulating electronic copies renumber it. The correct numbering of the relevant stretch is: paragraph 19, the ground against the levy of interest under s.234B — 'In ground No. 8 in AY 2012-13 and ground No. 6 in AY 2019-20, the assessee has challenged the levy of interest under section 234B of the Act on the ground of its inapplicability in case of a non-resident'; 19.1, the proviso to s.209(1)(d) set out verbatim; 19.2, the holding quoted in this entry; 19.3, the reliance on Mitsubishi Corporation; 19.4, the ground allowed. Then paragraph 20 deals with the premature penalty grounds, paragraph 21 with the remaining grounds as academic or not pressed, and paragraph 22 is the LAST paragraph and carries the disposal: 'In the result, all the four appeals of the assessee for AY 2012-13, 2019-20, 2020-21 and 2021-22 are allowed for statistical purposes.', followed by 'Order pronounced in the open court on 3rd May, 2024' and the signature block. There is no paragraph 23. Do not take a paragraph number for this order from a single copy without checking it against the surrounding text. The ITA numbers and the assessment years are given as printed in the header — ITA Nos. 2090/Del/2023, 2305/Del/2022, 2091/Del/2023 and 3102/Del/2023 for assessment years 2012-13, 2019-20, 2020-21 and 2021-22 — but the header does not pair them one to one and this entry does not attempt to. On substance, note what the order rests on. The finding that tax had in fact been deducted comes from the submission of the assessee's representative as recorded at paragraph 19.2 and was not tested against the record as reported, so the order is authority on the construction of the proviso and not on any question of proof. The reason given at paragraph 19.3 — that the Supreme Court in Mitsubishi Corporation held the proviso applicable prospectively after the financial year 2012-13 — cannot by itself carry the result for assessment year 2019-20, which is well after that year. The whole weight of the order for a post-2012 year falls on paragraph 19.2. Note also that the appeals were allowed for statistical purposes on the wider s.44BB and permanent establishment grounds, so the s.234B conclusion sits inside an order that did not finally dispose of the assessments. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
All four appeals were allowed for statistical purposes (paragraph 22), and the ground against the levy of interest under s.234B was allowed for assessment year 2012-13 and assessment year 2019-20 (paragraph 19.4). The proviso inserted in s.209(1)(d) by the Finance Act, 2012 with effect from 1 April 2012 applies only where the person responsible for deducting tax has paid or credited the income without deduction of tax; where the income has been received after deduction of tax at source, the proviso is not applicable, and under s.209(1)(d) read with its proviso, where in the case of a non-resident company the tax deductible at source has been paid, it is not permissible for the Revenue to charge interest under s.234B for an alleged failure to pay advance tax (paragraph 19.2).
TaxSphere, “Computer Modelling Group Ltd. v. ACIT — for a year after 1 April 2012, the proviso to s.209(1)(d) is not attracted where tax was in fact deducted at source”, https://taxnotice.vittsphere.com/caselaw/case/computer-modelling-group-the-209-1-d-proviso-bites-only-where-the-payer-deducted-nothing/ (validity last checked 2026-09-08)
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The Assessing Officer is relying on the Delhi High Court's Alcatel Lucent judgment to charge my non-resident client s.234B interest because it first denied a permanent establishment and then accepted the assessment. Is that judgment still good?
My non-resident client filed a NIL return after a s.148 notice, the Assessing Officer found a permanent establishment and charged s.234B interest for years before 2012. Does the fact that he denied taxability defeat the s.209(1)(d) argument?
My Indian payer did not deduct tax at source and paid me gross. The Assessing Officer says I should have paid advance tax and has charged s.234B interest. Which years can he do that for?
My client is a payee whose income should have suffered TDS but the payer deducted nothing. Can he still reduce his advance tax by that tax when computing his liability, and does it matter which year it is?
