Recently, The Supreme Court (SC) of India issued its decision in the case of CIT v. NHK Japan Corp. (SLA No. 24913 of 2012) on 11 August 2014, that a Taxpayer cannot be regarded as an “assesse-in-default” on account of non-withholding of taxes when the proceeding against the Taxpayer was not initiated within a reasonable period. Also the Income Tax Act 1961 (ITA) has not prescribed any limitation period for the same.
In that case the Issue was whether the Taxpayer could be regarded as an “assesse in default” under the ITA?
Decisions of the court:
Firstly, on appeal by the Taxpayer, the Commissioner (Appeals), the Income Tax Appellate Tribunal and the High Court ruled in favor of the Taxpayer that the inhabitants tax is a statutory levy in Japan on Japanese citizens and that such tax constituted an overriding charge on salary income and therefore the same had to be excluded in the computation of taxable income. The tax authorities filed a special leave petition (SLP) before the SC of India.
Finally, The SC of India ruled in favor of the Taxpayer that it could not be regarded as an “assesse in default” under the ITA. The SC observed that, although the ITA does not prescribe any limitation period for the Taxpayer being declared as an “assesse-in-default”, the proceeding against the Taxpayer in treating it as an “assesse-in-default” was required to be initiated within a reasonable period. Since the said reasonable period had passed, the Taxpayer could not be regarded as an “assesse-in-default”. The SLP of the tax authorities was accordingly disposed.
