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?
The Delhi High Court held that it does not. For assessment years before the Finance Act, 2012 proviso, s.209(1)(d) allowed the non-resident to reduce his advance tax by the tax that was deductible at source from the remittances, whether or not it was actually deducted, so no advance tax was payable and no s.234B interest could be charged — and the Court held that this remained so 'even though they filed returns declaring NIL income at the stage of reassessment'. It read the earlier decision in DIT v. Alcatel Lucent USA Inc. as turning on that assessee's initial denial of permanent establishment status followed by its volte face admitting it, not on the mere filing of a NIL return.
Decided by the High Court (S. Ravindra Bhat J and R.K. Gauba J) on 2015-01-12, reported as ITA 352/2014 and connected matters (Delhi High Court), assessment years 2000-01 to 2006-07. It bears on section 234B, section 209, section 209(1)(d), section 195, section 195(1), section 195(2), section 201, section 148, section 133A, section 143(2) of the Income Tax Act 1961, in TDS Defaults, Reassessment & Reopening and Assessment & Scrutiny matters.
This is the decision that keeps the Revenue's favourite counter-argument within bounds. The Revenue routinely says that any non-resident who first said it had no tax liability must have prompted the payer not to deduct, and so must bear the interest. The Court's answer is that the payer had its own statutory route: it was obliged to determine whether and to what extent the assessee was liable under s.195(1), 'by taking recourse to the mechanism provided in Section 195(2) of the Act', and its failure to do so leaves the Revenue with a remedy against the payer as an assessee-in-default under s.201 rather than against the payee under s.234B. The limit of the decision is the limit of the years it covers: it construes s.209(1)(d) as it stood before the proviso inserted by s.83 of the Finance Act, 2012, which operates from 1 April 2012 and withdraws the reduction where the payer paid or credited the income without deducting. For a financial year from 2012-13 onwards this reasoning does not carry the assessee where in fact no deduction was made; what survives for those years is the narrower point taken in Computer Modelling Group Ltd. — that the proviso is not attracted at all where tax was in fact deducted. Note also that the Delhi High Court's Alcatel Lucent judgment, which this decision distinguished, was itself later reversed by the Supreme Court, so the distinction drawn here has become academic on the facts of Alcatel Lucent while remaining useful as an analysis of what that judgment decided.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The General Electric group manufactured equipment for oil and gas, energy, transportation and aviation and supplied it to customers in India. Following a survey under s.133A at the premises of General Electric International Operations Company Inc., the liaison office, reassessment proceedings were initiated on 31 March 2008 against several group entities for assessment years 2000-01 to 2006-07. The respondents in the appeals were eight such entities. They filed NIL returns of income and sought the reasons for reopening, which were given; their objections were disposed of, notice under s.143(2) issued and final assessment orders passed. The Assessing Officer found that the assessees had a permanent establishment in India and levied interest under s.234B. The assessees argued, relying on DIT v. Jacabs Civil Incorporated, that the obligation on the payer to deduct under s.195 was absolute, and that under s.209(1)(d) as it stood before the Finance Act, 2012 they were entitled to reduce their advance tax by the tax deductible at source, so that no advance tax was payable and no interest could be charged. The Revenue relied on DIT (International Taxation) v. Alcatel Lucent USA Inc., ITA No. 327 of 2012 decided on 7 November 2013, arguing that an assessee which denies its tax liability cannot both say the payer should have deducted and take credit under s.209(1)(d), and that the present case was akin to Alcatel Lucent because the assessees had denied liability by filing NIL returns after the s.148 notices. The Tribunal had decided in the assessees' favour and the Revenue appealed.
The Revenue's appeal was dismissed without any order as to costs. No interest is leviable on the respondent assessees under s.234B even though they filed returns declaring NIL income at the stage of reassessment. The payers were obliged to determine whether and to what extent the assessees were liable to tax under s.195(1), by taking recourse to the mechanism in s.195(2); their failure to do so does not leave the Revenue without remedy, because the payer may be regarded an assessee-in-default under s.201 and the consequences in that provision will visit the payer. On the reading of Alcatel Lucent, the fact central to that decision was the assessee's initial denial of permanent establishment status, aggravated by its subsequent volte face in admitting that it was a permanent establishment liable to tax in India, which led that Court to conclude that the assessee had played a role in influencing the payer's non-deduction (paragraphs 15, 19 and 23).
The Court took the pre-2012 text of s.209(1)(d) as permitting the payee to reduce its advance tax by the tax deductible at source, and held that the law before the 2012 amendment must be read so as to prevent anomalies (paragraph 12). It then examined what Alcatel Lucent had actually decided, setting out that assessee's history — NIL returns maintained on the footing that there was no permanent establishment, followed by acceptance of the tax liability at the first appellate stage — and concluded that the central fact there was the initial denial of PE status aggravated by the later volte face, which supported the inference that the assessee had influenced the payer's non-deduction (paragraphs 12 and 15). It reproduced paragraph 26 of the Alcatel Lucent judgment in full and characterised that decision as one in which the levy was confirmed 'only on account of the equities that needed to be balanced in those peculiar facts, in favour of taxability' (paragraph 19). Because the present assessees had done no more than file NIL returns at the reassessment stage, and because the payers had their own statutory route under s.195(1) and s.195(2) to determine the chargeable proportion, the Court held that the Revenue's remedy lay against the payers under s.201 (paragraph 23).
For the above reasons, this Court finds that no interest is leviable on the respondent assessees under Section 234B, even though they filed returns declaring NIL income at the stage of reassessment.
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Handle my notice → Ask a CA on WhatsAppThe Delhi High Court held that it does not. For assessment years before the Finance Act, 2012 proviso, s.209(1)(d) allowed the non-resident to reduce his advance tax by the tax that was deductible at source from the remittances, whether or not it was actually deducted, so no advance tax was payable and no s.234B interest could be charged — and the Court held that this remained so 'even though they filed returns declaring NIL income at the stage of reassessment'. It read the earlier decision in DIT v. Alcatel Lucent USA Inc. as turning on that assessee's initial denial of permanent establishment status followed by its volte face admitting it, not on the mere filing of a NIL return. This was decided by the High Court (S. Ravindra Bhat J and R.K. Gauba J) and bears on section 234B, section 209, section 209(1)(d), section 195, section 195(1), section 195(2), section 201, section 148, section 133A, section 143(2) of the Income Tax Act 1961. It is reported as ITA 352/2014 and connected matters (Delhi High Court), assessment years 2000-01 to 2006-07. This is the decision that keeps the Revenue's favourite counter-argument within bounds. The Revenue routinely says that any non-resident who first said it had no tax liability must have prompted the payer not to deduct, and so must bear the interest. The Court's answer is that the payer had its own statutory route: it was obliged to determine whether and to what extent the assessee was liable under s.195(1), 'by taking recourse to the mechanism provided in Section 195(2) of the Act', and its failure to do so leaves the Revenue with a remedy against the payer as an assessee-in-default under s.201 rather than against the payee under s.234B. The limit of the decision is the limit of the years it covers: it construes s.209(1)(d) as it stood before the proviso inserted by s.83 of the Finance Act, 2012, which operates from 1 April 2012 and withdraws the reduction where the payer paid or credited the income without deducting. For a financial year from 2012-13 onwards this reasoning does not carry the assessee where in fact no deduction was made; what survives for those years is the narrower point taken in Computer Modelling Group Ltd. — that the proviso is not attracted at all where tax was in fact deducted. Note also that the Delhi High Court's Alcatel Lucent judgment, which this decision distinguished, was itself later reversed by the Supreme Court, so the distinction drawn here has become academic on the facts of Alcatel Lucent while remaining useful as an analysis of what that judgment decided. If it applies to you, the first step is this: Identify the financial year. This decision governs the pre-proviso years; from the financial year 2012-13 the proviso to s.209(1)(d) changes the analysis where no deduction was in fact made.
The General Electric group manufactured equipment for oil and gas, energy, transportation and aviation and supplied it to customers in India. Following a survey under s.133A at the premises of General Electric International Operations Company Inc., the liaison office, reassessment proceedings were initiated on 31 March 2008 against several group entities for assessment years 2000-01 to 2006-07. The respondents in the appeals were eight such entities. They filed NIL returns of income and sought the reasons for reopening, which were given; their objections were disposed of, notice under s.143(2) issued and final assessment orders passed. The Assessing Officer found that the assessees had a permanent establishment in India and levied interest under s.234B. The assessees argued, relying on DIT v. Jacabs Civil Incorporated, that the obligation on the payer to deduct under s.195 was absolute, and that under s.209(1)(d) as it stood before the Finance Act, 2012 they were entitled to reduce their advance tax by the tax deductible at source, so that no advance tax was payable and no interest could be charged. The Revenue relied on DIT (International Taxation) v. Alcatel Lucent USA Inc., ITA No. 327 of 2012 decided on 7 November 2013, arguing that an assessee which denies its tax liability cannot both say the payer should have deducted and take credit under s.209(1)(d), and that the present case was akin to Alcatel Lucent because the assessees had denied liability by filing NIL returns after the s.148 notices. The Tribunal had decided in the assessees' favour and the Revenue appealed. The matter was decided on 2015-01-12 by the High Court (S. Ravindra Bhat J and R.K. Gauba J). On those facts the High Court held as follows. The Revenue's appeal was dismissed without any order as to costs. No interest is leviable on the respondent assessees under s.234B even though they filed returns declaring NIL income at the stage of reassessment. The payers were obliged to determine whether and to what extent the assessees were liable to tax under s.195(1), by taking recourse to the mechanism in s.195(2); their failure to do so does not leave the Revenue without remedy, because the payer may be regarded an assessee-in-default under s.201 and the consequences in that provision will visit the payer. On the reading of Alcatel Lucent, the fact central to that decision was the assessee's initial denial of permanent establishment status, aggravated by its subsequent volte face in admitting that it was a permanent establishment liable to tax in India, which led that Court to conclude that the assessee had played a role in influencing the payer's non-deduction (paragraphs 15, 19 and 23).
The Court took the pre-2012 text of s.209(1)(d) as permitting the payee to reduce its advance tax by the tax deductible at source, and held that the law before the 2012 amendment must be read so as to prevent anomalies (paragraph 12). It then examined what Alcatel Lucent had actually decided, setting out that assessee's history — NIL returns maintained on the footing that there was no permanent establishment, followed by acceptance of the tax liability at the first appellate stage — and concluded that the central fact there was the initial denial of PE status aggravated by the later volte face, which supported the inference that the assessee had influenced the payer's non-deduction (paragraphs 12 and 15). It reproduced paragraph 26 of the Alcatel Lucent judgment in full and characterised that decision as one in which the levy was confirmed 'only on account of the equities that needed to be balanced in those peculiar facts, in favour of taxability' (paragraph 19). Because the present assessees had done no more than file NIL returns at the reassessment stage, and because the payers had their own statutory route under s.195(1) and s.195(2) to determine the chargeable proportion, the Court held that the Revenue's remedy lay against the payers under s.201 (paragraph 23). In the words reproduced by the source cited on this page: "For the above reasons, this Court finds that no interest is leviable on the respondent assessees under Section 234B, even though they filed returns declaring NIL income at the stage of reassessment." The decision followed or applied DIT v. Jacabs Civil Incorporated and Mitsubishi Corporation, (2010) 330 ITR 578 (Delhi) — relied on by the assessees and accepted; DIT (International Taxation) v. Alcatel Lucent USA Inc., ITA No. 327 of 2012 (Delhi, 7 November 2013) — distinguished.
It was decided by the High Court on 2015-01-12 and is reported as ITA 352/2014 and connected matters (Delhi High Court), assessment years 2000-01 to 2006-07. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 234B, section 209, section 209(1)(d), section 195, section 195(1), section 195(2), section 201, section 148, section 133A, section 143(2), 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. The Revenue's appeal was dismissed without any order as to costs. No interest is leviable on the respondent assessees under s.234B even though they filed returns declaring NIL income at the stage of reassessment. The payers were obliged to determine whether and to what extent the assessees were liable to tax under s.195(1), by taking recourse to the mechanism in s.195(2); their failure to do so does not leave the Revenue without remedy, because the payer may be regarded an assessee-in-default under s.201 and the consequences in that provision will visit the payer. On the reading of Alcatel Lucent, the fact central to that decision was the assessee's initial denial of permanent establishment status, aggravated by its subsequent volte face in admitting that it was a permanent establishment liable to tax in India, which led that Court to conclude that the assessee had played a role in influencing the payer's non-deduction (paragraphs 15, 19 and 23). It arises in TDS Defaults, Reassessment & Reopening and Assessment & Scrutiny matters, on section 234B, section 209, section 209(1)(d), section 195, section 195(1), section 195(2), section 201, section 148, section 133A, section 143(2) of the Income Tax Act 1961, and was decided by S. Ravindra Bhat J and R.K. Gauba J. 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. Do not accept the Revenue's equation of a NIL return with the Alcatel Lucent facts. On this judgment the fact that was central in Alcatel Lucent was the assessee's initial denial of PE status followed by its admission at the appellate stage, not the filing of a NIL return at reassessment. Put the payer's s.195(2) route in the forefront: the payer was obliged to determine whether and to what extent the sum was chargeable, and could have applied under s.195(2); its failure to do so is what s.201 addresses. Keep the s.201 point available as the Revenue's answer to itself — the Court expressly said the failure of the payers does not leave the Revenue without remedy, because the payer may be regarded an assessee-in-default. For years from 2012-13, do not cite this decision for the proposition that credit is available for tax merely deductible; cite it only for the reading of Alcatel Lucent and for the s.195(1)/195(2) analysis.
Still good law. The principle this judgment applies for pre-2012 years — that a payee whose income was liable to deduction at source could reduce its advance tax under s.209(1)(d) by the tax deductible whether or not deducted, so that no s.234B interest arose — was upheld by the Supreme Court in DIT v. Mitsubishi Corporation, decided 17 September 2021 (L. Nageswara Rao and Aniruddha Bose JJ), where at para 22 'the Appeals filed by the Revenue are dismissed'. That decision already sits in this library. The Delhi High Court's contrary decision in Alcatel Lucent USA Inc., which this judgment distinguished, was itself set aside in the same Supreme Court judgment, where at para 25 the Court recorded 'Accordingly, these Civil Appeals are allowed'. So the ground on which this judgment stands has been affirmed at the highest level, and the decision it had to work around has gone. No search for decisions specifically citing GE Packaged Power has been carried out, so no direct later treatment of this judgment has been checked. The limit is the limit of the years. The reasoning does not extend to a financial year from 2012-13 onwards in which the payer paid or credited the income without deducting, because the proviso to s.209(1)(d), inserted by s.83 of the Finance Act, 2012 with effect from 1 April 2012, then applies and withdraws the reduction. For those years what survives is the narrower point taken in Computer Modelling Group Ltd., that the proviso is not attracted at all where tax was in fact deducted. What would displace it for the years it does govern: nothing short of the Supreme Court revisiting Mitsubishi Corporation, which has not happened. What would narrow it: a decision holding that a non-resident who files a NIL return and denies taxability has thereby influenced the payer's non-deduction, which is the argument this Court rejected at paragraph 23 by pointing to the payer's own route under s.195(1) and s.195(2) and to the Revenue's remedy against the payer under s.201. 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.
A paragraph map first. The judgment carries a header block naming the court, ITA 352/2014 and connected matters, the coram — S. Ravindra Bhat J and R.K. Gauba J — and the date, 12 January 2015. This entry uses paragraphs 2, 4, 5, 6, 12, 15, 18, 19 and 23. Paragraph 23 is the last paragraph, ending with the disposal: 'The appeal of the Revenue is accordingly dismissed without any order as to costs.' Paragraph 18 is worth having, because it states the position after the amendment in the Court's own words: after the Finance Act, 2012, 'the payee/assessee would not be permitted a tax credit under the proviso in Section 209(1)(d)'. That is the sentence which fixes the boundary of the decision, and it is the Court's, not this entry's. IMPORTANT CAUTION FOR ANY LATER READER. This judgment reproduces long passages from other decisions inside its own text, and they are easy to mistake for the Court's own reasoning. Several pages of what is plainly a quotation from the Supreme Court's judgment in the GE Technology Centre line are printed with running page markers — 'ITA 352/2014 and connected matters Page 23', 'Page 24', 'Page 26' — instead of paragraph numbers. Those are quoted words. Nothing from them is quoted or attributed to this Court in this entry, and anyone working from the text should check, before pinning a proposition on this Court, whether the passage sits inside a block quotation. Similarly, paragraph 19 of this judgment reproduces the whole of paragraph 26 of the Delhi High Court's judgment in DIT v. Alcatel Lucent USA Inc. inside a block quotation. That reproduction is how the Alcatel Lucent quotation used in the separate entry on that case is independently corroborated: the same words appear in two judgments. But they remain Alcatel Lucent's words, and paragraph 19's own contribution is the characterisation that follows — that the levy there was confirmed 'only on account of the equities that needed to be balanced in those peculiar facts, in favour of taxability'. Later treatment has not been checked beyond what is stated in the validity note. One thing recorded there bears on how this judgment should now be read: the Delhi High Court's Alcatel Lucent judgment, which this Court distinguished at paragraphs 12, 15 and 19, was itself set aside by the Supreme Court in 2021. The distinction drawn here is therefore no longer needed to answer an Alcatel Lucent argument, but it remains the best available analysis of what that judgment had decided. 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.
The Revenue's appeal was dismissed without any order as to costs. No interest is leviable on the respondent assessees under s.234B even though they filed returns declaring NIL income at the stage of reassessment. The payers were obliged to determine whether and to what extent the assessees were liable to tax under s.195(1), by taking recourse to the mechanism in s.195(2); their failure to do so does not leave the Revenue without remedy, because the payer may be regarded an assessee-in-default under s.201 and the consequences in that provision will visit the payer. On the reading of Alcatel Lucent, the fact central to that decision was the assessee's initial denial of permanent establishment status, aggravated by its subsequent volte face in admitting that it was a permanent establishment liable to tax in India, which led that Court to conclude that the assessee had played a role in influencing the payer's non-deduction (paragraphs 15, 19 and 23).
TaxSphere, “DIT (International Taxation) v. GE Packaged Power Inc. — filing a NIL return at reassessment does not make a non-resident liable to s.234B interest for a pre-2012 year”, https://taxnotice.vittsphere.com/caselaw/case/ge-packaged-power-no-234b-interest-where-the-whole-receipt-was-liable-to-tds-before-the-2012-proviso/ (validity last checked 2026-09-08)
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In March 2026 I remitted a fee to a company outside India without deducting anything, because I did not think any part of it was taxable here. The Assessing Officer now says section 195 obliged me to deduct on the whole remittance, or at least to apply to him before paying. Does section 195 say that — and since the new Act has come in, which Act governs my payment at all?
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 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?
