Section 209

Section 209 — the law in short

What the courts have decided on section 209, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• DIT v Mitsubishi Corporation Supreme CourtCuts both ways
  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?
  Only from financial year 2012-13 onwards. The Supreme Court held that for every assessment up to and including financial year 2011-12, s.209(1)(d) entitled the assessee to reduce, in computing its advance tax, the income-tax that WOULD BE deductible at source, even though it had in fact received the full amount without deduction — so no s.234B interest could be charged. The proviso to s.209(1)(d) inserted by the Finance Act 2012 with effect from 1 April 2012 reverses that, and from financial year 2012-13 the assessee cannot reduce tax that the payer failed to deduct.
• 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 High CourtHelps taxpayer
  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.
• CIT v Smt. Premlata Jalani High CourtHelps taxpayerValidity unconfirmed
  My capital gain arose after 15 March, so I could not have paid advance tax on it in any instalment. The Assessing Officer has charged s.234C interest from the first instalment date. Can he?
  No. The Rajasthan High Court held that the liability to pay advance tax on a capital gain arises only once the gain has accrued, so interest under s.234C on the shortfall attributable to that gain can run only from the date the advance tax on it became payable, and not from any earlier instalment date. Where the gain arose after 15 March, the proviso required only that the tax be paid by 31 March, and interest ran for that period alone.
• 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 ITATHelps taxpayerValidity unconfirmed
  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.
• Statutory position — ss.207(1) and 208: who has to pay advance tax at all, and the ten thousand rupee threshold CBDT Circulars & InstructionsCuts both ways
  The notice charges me interest under s.234B for not paying advance tax. Before I argue about the computation, was I even liable to pay advance tax in the first place?
  Two conditions have to be satisfied before any advance tax liability arises. Section 207(1) makes tax payable in advance during a financial year, in accordance with ss.208 to 219, in respect of the total income of the assessee which would be chargeable for the assessment year immediately following that financial year — that income being called the "current income"; and s.208 then says advance tax shall be payable during a financial year only in every case where the amount of such tax payable by the assessee during that year, computed in accordance with Chapter XVII-C, is ten thousand rupees or more.
• Statutory position — s.210(3) to (6): the Assessing Officer's order to pay advance tax, the assessee's own lower estimate in Form 28A, and s.218 default CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  The Assessing Officer has served an order in February requiring my client to pay advance tax on the basis of an earlier year's assessed income. Can he do that, and what can my client do if the current year's income will be far lower?
  He can, but only within the limits s.210(3) sets: the power exists only where the person has already been assessed by way of regular assessment for some previous year, it must be exercised 'at any time during the financial year but not later than the last day of February', it must be by order in writing, the tax must be calculated in the manner laid down in s.209, and a notice of demand under s.156 specifying the instalments must issue. If the current income will be lower, s.210(5) lets the assessee send an intimation in the prescribed form — Form No. 28A under rule 39 — and pay according to his own estimate instead; if it will be higher, s.210(6) obliges him to pay the higher amount by the last instalment date without waiting to be asked.
• Statutory position — s.209(1)(d) and its proviso: credit against advance tax for tax deductible but not actually deducted CBDT Circulars & InstructionsCuts both ways
  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?
  It depends entirely on which side of 1 April 2012 the financial year falls. Clause (d) of s.209(1) reduces the income-tax computed under clause (a), (b) or (c) by 'the amount of income-tax which would be deductible or collectible at source during the said financial year' on income taken into account in the computation — words wide enough to cover tax that was deductible but never deducted; but the proviso inserted in clause (d) by s.83 of the Finance Act, 2012 removes that reduction where 'the person responsible for deducting tax has paid or credited such income without deduction of tax', so from the financial year 2012-13 onwards a payee who was in fact paid gross cannot use the deductible-but-not-deducted amount to wipe out his advance tax.
• DIT (International Taxation) v. Alcatel Lucent USA Inc. — the 'volte face' ground for charging s.234B interest on a non-resident, and its reversal by the Supreme Court High CourtHelps departmentOverruled
  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?
  It is not. The Delhi High Court did hold, on 7 November 2013, that where a non-resident first denies that it has a permanent establishment and then accepts its tax liability at the first appellate stage, it must take responsibility for its volte face and cannot shift the blame for non-deduction to the Indian payers, so s.234B interest was payable; it answered the question of law in favour of the Revenue and allowed the appeals. But the assessees' special leave petitions were entertained, and in the Supreme Court's judgment of 17 September 2021 in the Mitsubishi Corporation batch the Court, having set out the Alcatel Lucent history at paragraph 23, recorded at paragraph 25: 'Accordingly, these Civil Appeals are allowed.'

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.