The Supreme Court on Monday sought reply from PriceWaterhouseCoopers as to why the non-resident company should not pay advance tax on fee charged by it for providing services in India.

A bench headed by Justice S H Kapadia issued notice to PriceWaterhouseCoopers (PWC), being a non-resident firm, on an appeal filed by the Income Tax department seeking the apex court's interference on the issue whether other statutory provisions charging interest can be applied to the assessee which had failed to pay advance tax.

The department has challenged the sectoral tribunal's ruling which held that PWC was not liable to pay advance tax even if the entire payment made to it by its clients in India was subject to TDS under Section 195 of the Income Tax Act.

It had also sought the apex court's directions on whether an assessee like PWC whose entire taxable receipts were subject to TDS was liable to pay advance tax and if the same was paid then whether interest was chargeable on it under Section 234A, 234B and 234C of the Act.

The US-based accountancy and consultancy firm had disclosed consultancy fee aggregating to more than Rs 5.88 crore during 2001-02 arising from various services rendered to its clients in India.

PWC, a limited liability partnership firm, had filed return declaring total income of Rs 5.88 crore on which the tax was worked out to be more than Rs 2.02 crore.

In its computation of income filed along with income return, the assessee had adjusted the amount of TDS aggregating to more than Rs 1.47 crore and the shortfall of tax of Rs 66.64 lakh inclusive of interest was deposited under Section 140A.