2021 (12) TMI 394 - AT - Income Tax

ITAT Delhi Upholds Assessee's Position on TDS, Citing CBDT Circular

The I.T.O Circle 1 (1) (1), New Delhi Versus Bhartiya Urban Infrastructure and Land Development

The ITAT Delhi dismissed the Revenue's appeal, upholding the CIT(A)'s decision that the assessee was not required to deduct tax at source on the ... TDS u/s 195 - deduct tax at source on the remittance to IIRF Holdings XVI Ltd. towards buyback of shares - AO was of the firm belief that neither any tax has been deducted at all in respect of the above remittances to the non-residents nor any copy of the order has been furnished by the assessee u/s 195(2) /195(3) of the Act or certificate issued u/s 197(1) - HELD THAT:- As gone through the statement of HSBC placed at PDF. We find that the remittances have been made on 31.05.2013 which conclusively proves that the assessee company remitted the buy-back of equity shares on or before 31.05.2013 which makes the CBDT Circular 3/2016 dated 26.02.2016 squarely applicable as in that Circular, the Board has categorically spelled out that the consideration received on 01.04.2000 to 31.05.2013 would be taxed as capital gains in the hands of the recipients in accordance with section 46A of the Act and no such amount shall be treated as dividend in view of provisions of section 222(iv) of the Act. We are of the considered view that the facts of the case squarely fall within the circular of CBDT [supra] which is binding on the Revenue authorities and has been rightly followed by the first appellate authority. Therefore, no interference is called for. Issues Involved:1. Whether the assessee was required to deduct tax at source on remittance to a foreign company for buyback of shares.2. Applicability of CBDT Circular No. 3/2016 dated 26.02.2016 in the case.3. Taxability of remittances to non-residents without deduction of tax at source.4. Compliance with provisions of the Income Tax Act regarding TDS.Analysis:Issue 1:The Revenue contended that the assessee should have deducted tax at source on remittances for buyback of shares. The CIT(A) held that the assessee was not required to deduct tax at source based on various arguments, including the applicability of CBDT Circular No. 3/2016 dated 26.02.2016. The Circular specified that consideration received for buyback of shares between 01.04.2000 and 31.05.2013 would be taxed as capital gains, not as dividend income. The CIT(A) found that the remittance made by the assessee on 31.05.2013 fell within this period, thus no tax deduction was necessary.Issue 2:The crucial point of contention was the applicability of the CBDT Circular. The CIT(A) observed that the Circular clearly outlined the tax treatment for buyback of shares during a specific period, emphasizing that such amounts should be taxed as capital gains. The CIT(A) concluded that since the remittance for buyback of shares was made before 31.05.2013, the Circular's provisions applied, and no tax deduction at source was required.Issue 3:The Assessing Officer argued that the remittances to non-residents were taxable in India and that the assessee had not fulfilled TDS obligations. However, the CIT(A) disagreed, citing the provisions of the CBDT Circular and the specific date of the remittance, which aligned with the Circular's guidelines. The CIT(A) emphasized that the Circular's directives were binding and correctly followed.Issue 4:The case involved a detailed examination of compliance with TDS provisions under the Income Tax Act. The CIT(A) scrutinized the documents provided by the assessee, including Form 15 CA & 15CB, Tax Residency Certificate, and other relevant records. The CIT(A) also considered the legal position regarding tax deductions on remittances, ultimately ruling in favor of the assessee based on the CBDT Circular's applicability and the specific circumstances of the case.In conclusion, the ITAT Delhi dismissed the Revenue's appeal, upholding the CIT(A)'s decision that the assessee was not required to deduct tax at source on the remittance to the foreign company for buyback of shares, as the transaction fell within the scope of the CBDT Circular's provisions. The judgment highlighted the importance of adhering to specific legal directives and the significance of timely compliance with tax regulations.