JUDGMENT :

L. NAGESWARA RAO, J.

1. The conundrum before this Court concerns the liability of an assessee to pay interest on short payment of advance tax due to default of the payer in not deducting tax at the time of payment, under the provisions of the Income-tax Act, 1961 (hereinafter referred to as the “Act”). The facts giving rise to Civil Appeal No. 1262 of 2016 are referred to herein, for the sake of convenience.

2. Notice was issued to the Respondent-Assessee under Section 143 (2) of the Act on 12.10.2004. The Assessing Officer passed an assessment order on 24.03.2006 for the assessment years 1998-99 to 2004-05. The Assessee is a non-resident company incorporated in Japan, with operations in India. In spite of resistance from the Assessee, it was held by the Department that a portion of the Assessee’s income was attributable to its activities in India and was therefore liable to be taxed in India, under Articles 4, 5 and 6 of the Double Taxation Avoidance Agreement between India and Japan, read with the provisions of the Act. The Respondent-Assessee filed appeals against the assessment order dated 24.03.2006 before the Commissioner of Income-Tax (Appeals) (hereinafter referred