AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (8) TMI 678
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....on of the Honourable Supreme Court.. 2. The liability to tax if any has to be determined in the hands of the nonresident sellers and collected from them once they have filed their returns of income. 3. The Ld. AO is not at all correct in treating the assessee as an assessee in default for non deduction of tax at source under section 195 for the principal amount of tax of Rs. 9, 83, 538/-. In view of the clear mandate of subsection (2) of section 201 that such a charge can be created only when tax was deducted and not paid to the Government and not when tax was not deducted. 4. The Ld. AO is not at all correct in the computation of long term capital gains by adopting an estimated value of the property as on 01.04.1981 without reference to any comparable cases. 5. All the above grounds are mutually exclusive and without prejudice to one another. 6. The appellant craves leave to add to, amend, alter all or any of the above grounds of appeal. During the appeal hearing, the Ld.AR did not press ground No.1, 4, 5 and 6 therefore ground No.1, 4, 5 and 6 dismissed as not pressed. 3. Ground No.2 and 3 are related to the non-deduction of tax at source as required u/s 195 of Income....
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....ils to deduct the tax at source, the assessee would be responsible for payment of interest u/s 201(1A) but not the principal amount of tax, thus the assessee cannot be held to be assessee in default. Only in the case of having deducted the TDs but not remitted to the Government account then the assessee required to be treated as assessee in default for the principal amount as well as the interest u/s 201(1A). The Ld.AR further argued that if the deductor does not deduct tax at source, the amount cannot be recovered from the deductor, but the same should be recovered from the deductee. The assessee relied on the decision of Hon'ble Allahabad High Court in the case of Jagran Prakashan Ltd. Vs. DCIT (TDS) 209 Taxmann 0092. 7. On the other hand, the Ld.DR supported the orders of the Ld.CIT(A). 8. We have heard both the parties and perused the material placed on record. In this case, the assessee made the payments to the non residents but not deducted the tax at source as required u/s 195 of the I.T.Act. The assessee also did not obtain the non-deduction certificate from the concerned assessing officer. Consequences for failure to deduct the tax at source are enshrined in section 201 ....
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....resident assesses as per proviso. In the instant case deductor is the resident and the recipient is the non resident and the payment is covered by section 195 of the Act and the concessions given in respect of exceptions as per proviso to section 201(1) are not extended to the non-residents covered by section 195 of the Act. Sub section 2 of section 195 allows the beneficiary to obtain the certificate from the assessing officer to submit the non deduction certificate in case the deductee is not liable for tax. Though Sub section 2 of section 201 enable the AO to hold charge on all the assets of the person in the case of second situation of deduction of tax at source but not remittance to government account, it does not bar the deductor to treat the assessee in default for the principal amount. Sub section 2 of section 201 cannot be read in isolation and both the sections 201(1) and 201(2) must be read harmoniously. Conjoint reading of section 201(1) and 201(2) establish that if the assessee failed to deduct the tax at source and does not remit to the Government account and tax deducted but not remitted to government account covers both the situations and makes the assessee deemed t....
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....furnishes a certificate to this effect from an accountant in such form as may be prescribed Therefore, the case law relied upon by the assessee which is dealing with the residents is not applicable in respect of the payments made to non-residents u/s 195 of the Act. Hon'ble ITAT, Bangalore in 26 taxmann.com 6 considered the similar issue of TDS u/s 195 and held that the AO has rightly held the as assessee in default for non deduction of tax at source u/s 201(1) of the Act. For ready reference we extract the relevant Para of the ITAT's order which reads as under: 7.3. We have heard both parties and carefully perused and considered the material on record and the relevant judicial decisions. The assessee's case is that the Assessing Officer should have quantified the tax to be deducted at source at the rates specified on the capital gains arising out of this transaction and not on the amount of sale consideration of Rs. 61, 62, 500 for a better appreciation of the issue the provisions of section 195 are extracted here below : "195.(1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest referred to....
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.... be deducted under subsection (1) may make an application in the prescribed form to the Assessing Officer for the grant of a certificate authorising him to receive such interest or other sum without deduction of tax under that sub-section, and where any such certificate is granted, every person responsible for paying such interest or other sum to the person to whom such certificate is granted shall, so long as the certificate is in force, make payment of such interest or other sum without deducting tax thereon under sub-section (1)." 7.3.1. From a plain reading of section 195(1) and as held by us in para 6.4 of this order (supra), it is clear that the assessee was liable to deduct tax at source at the specified rates (i.e. 20% plus surcharge 10% and education cess 2%) from out of the sale consideration paid by him to the seller of the said flat purchased by him as she was an NRI. If the assessee (i.e. the person responsible for paying such sum to the NRI seller) was of the view that the whole or part of such sum viz. the sale consideration, would not be income chargeable in the hands of the recipient (i.e. in this case the seller, an NRI), Section 195(2) of the Act required him ....
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....39; is to be deducted and it is the statutory obligation of the person responsible for making such payment of such 'sum' to deduct tax thereon before making payment. In the instant case of the assessee, the legal position is clear in as much as not having made the application under section 197 r.w.s. 195 of the Act to the Assessing Officer for lower or no deduction of tax, he was statutorily duty bound to have deducted tax at the specified rate on the 'sum' i.e. the sale consideration, before making payment to the seller who was an NRI. Consequently, the assessee's claim that TDS was to have been made by him on the Long Term Capital Gains which he worked out at 20% of Rs. 9, 29, 793 does not hold any water. In this view of the matter, we are of the considered opinion that the quantification of the TDS deductible by the assessee under section 195 of the Act was correctly made by the Assessing Officer under section 201(1) of the Act and rightly upheld by the learned CIT (Appeals) at Rs. 13, 82, 870 being 20.4% of the sale consideration of Rs. 61, 62, 500 and consequently dismiss this ground of the assessee. Since the facts identical respectfully following the vi....