TaxTMI 
TaxTMI 
2022 (5) TMI 1470
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....of Income-tax [Appeals] vide her appellate order dated 27/11/2017, in so far as it is against the Appellant is against law, equity, facts and circumstances of the case. 2. The appellant denies itself liable to be taxed under section 201 [1] of the Act and further the appellant denies itself liable to be charged to under section 201 [1] of the Act amounting to Rs. 2,26,60,000/- and interest under section 201 [1A] of the Act amounting to Rs. 1,22,36,400/-, on the facts and circumstances of the case. 3. The order passed by the learned Commissioner of Income-tax [Appeals] is bad in law as the appellant was not afforded a reasonable and a fair opportunity of hearing, which is in grave violation of principles of natural justice, on the facts and circumstances of the case. 4. The learned authorities below failed to appreciate that the provisions of section 195 of the Act is not applicable consequently the appellant cannot be held as an assessee in default as per the provisions of section 201 [1] of the Act, on the facts and circumstances of the case. 5. The learned authorities below failed to appreciate that the provisions of section 201 of the Act does....
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....not applicable and leviable, on the facts and circumstances of the case. 13. Without prejudice if at all any interest is leviable then the period should be considered only from the month in which the payment is made by the appellant to the payee and only till the date of filing the return of income and payment of applicable taxes by the payee, on the facts and circumstances of the case. 14. The Appellant craves leave to add, alter, substitute and delete any or all the grounds of appeal urged above. 15. For the above and other grounds to be urged during the hearing of the appeal, the Appellant prays that the appeal be allowed in the interest of equity and justice." 3. Briefly, the facts of the case as per record are that the appellant assessee has purchased an immovable property from Elrice D'Souza and his wife for a consideration of Rs. 10 crores. However, the appellant did not deduct any tax on this amount of payment towards the purchase of immovable property. The AO discussed that the assessee was required to deduct tax under section 195 of the IT act. Accordingly, the AO has held the assessee in default and levied tax liability of rupees 2, 26,60,00....
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....thereunder applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or not the non-resident person has- 1. a residence or place of business or business connection in India; or 2. any other presence in any manner whatsoever in India.] (2) Where the person responsible for paying any such sum chargeable under this Act (other than S6[***] 37[***] 38[***] 39]***] salary) to a nonresident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application to the 4GBP[.Assessing] Officer to determine, n[by general or special order], the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable. 42f***] 43[(3) Subject to rules 44 made under sub section (5), any person entitled to receive any interest or other sum on which income-tax has to be deducted under sub-section (1) may make an to the 45/Assessing] Officer for the grant of a certificate authorising him to re....
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.... The next argument of the appellant is that it cannot be treated an assessee in default as the payee has filed the return of income declaring the consideration received by them and offered the same for tax in the return of Income. It placed reliance on the decision in the case of Hindustan Coca Cola Beverages (Supra). This argument is not acceptable as proviso to section 201 is applicable specifically in cases where payees are residents. The text of proviso is reproduced hereafter: 201. 48[(1) Where any person, including the principal officer of a company,- (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: 49 [Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in ....
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.... on the revenue to show that the taxes are not paid The appellant has raised the contention that it is the duty of the Revenue to demonstrate that the person concerned has not paid the amount directly. It relied on the decision of Hon'ble Allahabad High Court in case of Jagran Prakash 47 Taxmann.com 82(ALL). However, this decision was rendered on 23.05.2012 and the assessment years in question were AY 09-10 and AY10-11. Wef 01.07.2012, a proviso has been added to Section 201, whereby the assessee shall not be deemed to be assessee in default if certain conditions are fulfilled including the payment of tax on the income under consideration by the payee and the person i.e. the deductor furnishes a certificate to this effect from an accountant in the prescribed form. Thus, the onus lies squarely in the deduction to prove that the payee has paid taxes on such income. The burden cannot be shifted to the Revenue by merely claiming that the taxes have been paid by the payee. This observation is only in context of the appellant's reliance on the decision in case of Jagran Prakash (Supra). The fact, however remains that proviso to section 201 is applicable only to resident....
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.... service only by a non-resident, not a resident. The appellant in the present case is a resident and therefore it cannot take refuge under the non- discrimination Article of DTAA. Further, for purposes of application of non- discrimination, the key issue to notice is that the activities of the resident and the non-resident should be same, the circumstances should be same and the conditions should be same. The condition under section 195 requiring deduction of tax on any sum chargeable under the provisions of this Act is applicable only to payments made to non- residents and not to the residents. Therefore, the circumstances and the conditions cannot be said to be same. (v) Regarding the argument of the appellant that income component should have been considered (ground 8) The appellant argues that tire officer should have determined the income portion of the seller and only thereafter he should have quantified the taxable income. It relied on CBDT circular 3/2015 dated 12.02.2015 The circular relied upon by the appellant is in context of section 40(a)(i). Further, the appellant had the option to file an application under section 195(2) before the....
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....f the provisions are more beneficial than the domestic law. Contrary to this contentions, it was pointed out by the learned Counsel for the assessee that the assessee has complied with the procedural requirement contemplated under Rule37BB of the ITR 1962. It had submitted the details of the payee relevant clauses of the DTAA. According to him the entire literatures, commentaries and judicial decisions run counter to the argument of the Revenue. The judgment of the Hon'ble Andhra Pradesh High Court in the case of Sanofi Pasteur Holdings (supra), was brought to our notice during the course of hearing. The Hon'ble Court has made a reference with regard to the background giving rise to tax treaties and how the treaties and domestic law co-exists for administering the taxation of any assessee. The findings of the Hon'ble Court explaining the scope and role of the DTAA is worth to note here, it read as under: "Double tax treaties are international agreements, their creation and consequences determined according to the rules contained in the Vienna Convention on the Law of Treaties, 1969 (VCLT). The conclusion of a treaty/convention is preceded by negotiations. State....
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.... against their domestic tax for taxes paid in the other State. Klaus Wogel (Supra) explains that rules or double taxation are thus not conflict rules, similar to that in private international law but are rules of limitation of law, comparable to those of international administrative law'. 37. According to the learned Counsel for the Revenue, the treaty is not to be applied automatically. Section 90(2) of the Income Tax Act mandates application of treaty and it is applicable in relation to an assessee upon whom such agreements are applicable. In the present case it is applicable in the case of payee, if at all is applicable, he has highlighted that Article-1 in all the treaties specifies the type of person to whom treaty would be applicable. The treaty would be applicable to a person who is resident of State (R) or source of income in a State(s). It does not mean that it is applicable according to the domicile. He also questioned who will make inquiry about the residential status of the payee under Article-4. He also pointed that DTAA is not a parallel Code and not a complete Code. It only allocates taxing rights. The Hon'ble Andhra Pradesh High Court has specifical....
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....41 (Bangalore - Trib.) and also for the reasons mentioned herein above ground 13 of the appeals is dismissed." "5C. FINDINGS I have carefully considered the contentions of the Assessing officer and also gone through the appellant's submissions, as also the decisions relied upon. It will be profitable to reproduce the text of Section 201(1A). "(1A) Without prejudice to the provisions of sub-section (1), if any such person, principal officer or company as is referred to in that sub-section does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest,-- (i) At one per cent for every month or part of a month on the amount of such tax from the date on Which such tax was deductible to the date on which such lax is deducted; and (ii) at one and one-half per cent for every month or part, of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid, and such interest shall be paid before furnishing the statement in accordance with the provisions of sub-section (3) o....
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.... in a case where the recipient of income had no tax liability embedded in such payments, will there be any interest liability. This issue was considered by Hon'ble Punjab & Haryana High Court in the case of CIT(TDS) Chandigarh vs. Punjab infrastructure Development Board76 taxmann.com.365 and it was held that the interest U/s 201(1A) of the IT Act has to be calculated from the date on which tax should have been deducted to the date on which the deductee should have filed return and that de hors the amendment of first July 2012, the assessee would be liable to pay interest u/s 201(1A). The relevant extent from this judgment is reproduced below:- "13. The language of Section 201 is clear and unqualified. It indeed does not permit an assessee to decide for itself what the liability of the deductee assessee is or is likely to be. That is a matter for the assessing officer who assesses the returns of the deductee assessee. It is in fact not even possible for him to do so. He cannot ascertain with any degree of certainty as to the financial position of the deductee assessee. A view to the contrary would enable an assessee to prolong the matter indefinitely. If accepted, it may ev....
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....question of it further making a deduction and remitting to the State did not arise. The Circular referred to recognizes the fact that once the payee remits the differential tax, the question of further recovery of the self-same sum from the payer did not arise and till the payment made by the dedutee assessee, interest would be charged. 16. Applying the said circular herein, with no liability thus arisen at the hands of the payee, the terminal point as regards the calculation of interest necessarily has to be given a meaningful interpretation. Given the fact that the interest levy is an automatic one, the determination on the ultimate liability of the payee company to pay or not to make payment being a procedural exercise has nothing to do with the liability of the ^.assessee to deduct TDS. As such, the loss return filed by the payee company cannot be treated as a circumstance to be taken in favour of the assessee company from not applying the provisions of Section 201(1A) of the Income Tax Act. On the facts herein, the only reasonable interpretation one can give to the provision under Section 201(1 A) as regards the terminal point upto which interest has to be calculated ....
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....cision of Hon'ble Punjab and Haryana High Court drew strength from the judgment of Division Bench of Hon'ble Madras High Court in the case of CIT vs. Ramesh Enterprises 250 ITR 465 [2001] wherein the assessee had failed to deduct tax at source on the interest payments made. The Hon'ble Court held as under:- "5. The provision requiring deduction of tax on interest payment does not make the duty to effect deduction contingent upon the assessee's valuation of the likely liability for tax of the recipient of interest payment. It is only in cases where the recipients of interest is in a position to file any certificate or declaration to show that the person's total income is below the taxable limit that the tax on the interest payment made to such person is not to be deducted. In all other cases, it must be deducted as required under section 195 of the Act. 6. It is not the convenience of the assessee, and its assessment of the likely extent of the liability for payment of interest of the recipients of the interest, that determines the extent of the assessee's obligation to deduct tax at source on the interest paid by it. The provision requiring de....
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....ught to have determined the income portion / component of the seller and after verification ought to have quantified the taxable income of the payee and only on such portion of income of the payee the learned authorities below ought to have held the appellant as an 'assessee in default', on the facts and circumstances of the case and that when the appellant cannot be held as an assessee in default consequently the interest under section 201 [1A] of the Act amounting to Rs. 1,22,36,400/- is also not applicable and leviable, on the facts and circumstances of the case. He contended that without prejudice, if at all any interest is leviable then the period should be considered only from the month in which the payment is made by the appellant to the payee and only till the date of filing the return of income and payment of applicable taxes by the payee, on the facts and circumstances of the case. In support, the appellant assessee has filed a written synopsis which reads as under: "The brief facts of the case in the present appeal for adjudication before this Honhle Tribunal are as under: The appellant before your Honour is a Partnership Firm. During the impugned asses....
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....s of the learned assessing officer and also held that the proviso to section 201 [ 1 ] as it existed is applicable to the residents and not for the payments made to non-residents. The appellant being aggrieved by the said orders passed by the lower authorities has preferred this present appeal before this Honble Tribunal. As submitted in the earlier paragraphs it is not in dispute that the appellant has made payments to two non-residents and did not deduct TDS as per the provisions of section 195 of the Act. It is also submitted that the payees i.e. the two sellers of the property have disclosed the consideration received from the appellant in their respective return of income filed by them before the tax authorities. The submission and contention of the appellant are that since the said two sellers of the property having declared the sale consideration received from the appellant in their respective return of income, the appellant cannot be held as an assessee in default since as per the first proviso to section 201[1] of the Act though is applicable to the resident assessee as it stood on that particular date, the said beneficial relaxations allowed to the resident payee....
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....mitted before this Hon'ble Tribunal that since the payees in the instant case having filed their return of income and disclosed the consideration in their respective returns and have duly complied with the amended provisions of section 201 [ 1] of the Act which has been inserted in Finance [No. 2] Act, 2019. Wherefore, the humble submission of the appellant before this Hon'ble Tribunal that considering the decisions as relied upon by the appellant, this Hon'ble Tribunal may hold that the said proviso to section 201[1] wherein the benefit has also been extended to the payments made to non-residents have to be given retrospective effect and consequently the appellant humbly pray before this Hon'ble Tribunal no to hold the appellant as an assessee in default as per the proviso to section 201 [ 1 ] of the Act and delete the demand made by the learned assessing officer under section 201 [ 1 ] of the Act of Rs. 2,26,60.000/-. As regard to the interest under section 201 [1A] of the Act is concerned the A.O. has levied a sum of Rs. 1,22,36,400/-. It is humble submission of the appellant that the said property is sold by the appellant on 17/09/2011 and the return of income by the two pay....
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....ly in case of Resident payees, and it becomes amply clear with the conjoint reading with Section 40a(i) and 40a(ia). Section 40a(i) provides for payments to non-residents where 40a(ia) is for payments to a resident. Accordingly, the learned CIT[A] dismissed the appeal of the appellant by confirming the findings of the learned assessing officer by holding that the proviso to section 201[1] as it existed is applicable to the residents and not for the payments made to non-residents. 8.1 The CIT (A) has passed a detailed order addressing the objections of the assessee in the replies filed before him. After considering the submissions of the assessee, and amended provisions of TDS, focusing on the 2nd Proviso [that a person shall be deemed to have deducted and paid the tax on sum in question on the date of furnishing the Return of Income by the resident] and in such cases, the sum payable on which tax has not been deducted, not paid shall not be subjected to disallowance is only in context of Residents [u/s 40a(ia)]. He further noted that the benefit of proviso to section 201(1) is available subject to furnishing by the deductor a certificate from the accountant in Form 26. No such c....
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....nd consequently any provision which has been inserted for removing any anomaly has to be given retrospective effect. In this regard the appellant places its reliance on the following decisions in support of its contention that any provision which has been inserted with an object to remove any difficulty or anomaly then the said provision has to be given retrospective effect: [a]. Celltick Mobile Media Pvt. Ltd. V. DCIT (2021) 127 taxmann.com 598 (Mumbai-Trib.). [b]. CIT v. Ansal Land Mark Township Pvt. Ltd. (2015) 61 taxmann.com 45 (Delhi). [c]. CIT v. Calcutta Export Company [2018] 93 taxmann.com 51 [SC] [d]. DCIT v. Ananda Marakala (2014) 48 taxmann.com 402 (Bangalore-Trib.) 10. It is seen that the payees in the instant case having filed their return of income and disclosed the consideration in their respective returns and have duly complied with the amended provisions of section 201[1] of the Act, which has been inserted in Finance [No. 2] Act, 2019. After considering the decisions as relied upon by the appellant, we are of the considered view that the said proviso to section 201[1] wherein the benefit has also been extended to the payments made to non-residents a....