Tax Interest Upheld on Non-Resident, Jurisdiction Challenge Dismissed

The ITAT upheld the levy of interest under section 201(1A) of the Income Tax Act, emphasizing that the liability remains until the tax is paid by the deductee. The jurisdictional challenge was not entertained as it was not part of the earlier directions. The claim regarding the non-resident's liability under section 115E was rejected, clarifying its inapplicability to the transaction. Despite the non-resident paying the tax, interest under section 201(1A) was upheld. The ITAT dismissed the appeal, confirming the interest levy and rejecting jurisdiction and section 115E claims.

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Issues Involved:
1. Levy of interest under section 201(1A) of the Income Tax Act.
2. Jurisdiction of the Assessing Officer (AO) in passing the order under section 201(1A).
3. Applicability of section 115E to non-resident regarding capital gains.
4. Impact of the non-resident recipient paying the tax on the capital gains on the levy of interest under section 201(1A).

Issue-wise Detailed Analysis:

1. Levy of Interest under Section 201(1A):
The primary dispute revolves around the levy of interest amounting to Rs. 19,68,283 under section 201(1A) of the Income Tax Act. The assessee purchased a property from a non-resident for Rs. 22,42,00,000 without deducting tax at source as per section 195. The assessee argued that the vendor, being treated as an Indian resident, assured to pay the tax on capital gains, which was paid before the due date of the first installment of advance tax. The AO accepted that the vendor paid the capital gains tax but held that the interest under section 201(1A) is mandatory until the date of tax payment by the deductee, as per CBDT Circular No. 275/201/95-IT(B) and the Supreme Court's decision in Hindustan Coca Cola Beverage P. Ltd. v. CIT. The CIT(A) confirmed the levy of interest, and the ITAT upheld this decision, emphasizing that the liability to pay interest remains unaltered until the tax is paid by the deductee.

2. Jurisdiction of the Assessing Officer:
The assessee challenged the jurisdiction of the AO in passing the order under section 201(1A). However, this ground was not entertained by the ITAT in the first round of litigation and was not admitted as an additional ground. The ITAT, in the present proceedings, declined to entertain the jurisdictional issue again, as it was not part of the directions given in the earlier round.

3. Applicability of Section 115E to Non-Resident:
The assessee contended that under section 115E(a)(i), the non-resident is not liable to pay tax on long-term capital gains, and hence, there was no requirement to deduct tax under section 195. The CIT(A) rejected this claim, and the ITAT upheld this rejection. The ITAT clarified that section 115E(a) applies to income from investments or specified assets and not to immovable property transactions. The ITAT noted that the non-resident recipient correctly understood the provisions and filed a return declaring the capital gains, making the assessee's claim of exemption unsustainable.

4. Impact of Non-Resident Recipient Paying the Tax:
The assessee argued that since the non-resident recipient paid the entire tax on the capital gains as advance tax, there was no loss to the revenue, and hence, interest under section 201(1A) should not be levied. The ITAT, referring to the Supreme Court's decision in Hindustan Coca Cola Beverages Pvt. Ltd. v. CIT, held that the liability to pay interest under section 201(1A) till the date of tax payment by the deductee remains, regardless of the tax being paid by the recipient. Therefore, the ITAT found no merit in the assessee's contention and upheld the levy of interest.

Conclusion:
The ITAT dismissed the assessee's appeal, confirming the levy of interest under section 201(1A) and rejecting the claims regarding jurisdiction and applicability of section 115E. The decision emphasized the mandatory nature of interest under section 201(1A) until the tax is paid by the deductee and clarified the inapplicability of section 115E to the transaction in question.

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