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Recently, the Delhi High Court (High Court) in the case of Alcatel Lucent USA Inc. (the taxpayer) held that a non-resident taxpayer is liable to pay interest under Section 234B of the Income-tax Act, 1961 (the Act) for default in payment of advance tax, since the liability to pay tax in India was not admitted by non-resident taxpayer in its tax return and the Indian payers did not deduct tax on payments made to such non-resident taxpayer.
The High Court held that the taxpayer cannot take credit for tax while computing its advance tax liability, for the tax which was ‘deductible’, though not actually deducted. It was held that the payer did not deduct the tax under Section 195(1) of the Act because of the request made by the taxpayer, consistent with its stand that it was not liable to be taxed in India. Therefore, interest under Section 234B of the Act has to be levied on the non-resident taxpayer.