Sri. R. Prakash, Bangalore V. ITO, Bangalore

ITA 1097/BANG/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2262 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 02-07-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 31-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A SUNDARARAJAN JT
• Assessee Lawyers: H GURUSWAMY ITP
• Keywords: Capital asset
• Section: 54F; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.1097/BANG/2012 & IT(IT)A NO.778/BANG/2013 ASSESSMENT YEAR : 2009-10 SHRI R. PRAKASH, NO.10, 2 ND BLOCK, 3 RD STAGE, THIMMAIAH LAYOUT, BASAVESHWARANAGAR, BANGALORE 560 079. PAN : ACBPR 9997E VS. THE INCOME TAX OFFICER, INTERNATIONAL TAXATION, WARD 2(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI H. GURUSWAMY, ITP RESPONDENT BY : SHRI A. SUNDARARAJAN, JT.CIT(DR) DATE OF HEARING : 02.07.2013 DATE OF PRONOUNCEMENT : 12.07.2013 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THESE APPEALS ARE BY THE ASSESSEE AGAINST THE ORDE R DATED 25.06.2012 OF THE CIT(APPEALS)-IV, BANGALORE RELATING TO ASSES SMENT YEAR 2009-10. ITA NOS1097/BANG/2012 & 778/BANG/2013 PAGE 2 OF 9 2. IN THESE APPEALS, THE ASSESSEE HAS CHALLENGED TH E ORDER OF THE CIT(APPEALS) WHEREBY THE CIT(A) HELD THAT THE ASSES SEE IS AN ASSESSEE IN DEFAULT FOR NOT DEDUCTING TAX AT SOURCE U/S.201(1) OF ACT, WHILE MAKING PAYMENT FOR PURCHASE OF A PROPERTY. 3. THE MATERIAL FACTS GIVING RISE TO THE PRESENT AP PEALS ARE AS FOLLOWS. THE APPELLANT IS AN INDIVIDUAL. HE PURCHASED RESID ENTIAL PROPERTY BEARING NO.696, WOC ROAD, 3 RD STAGE, 3 RD BLOCK EXTENSION, BANGALORE, UNDER A REGISTERED SALE DEED DATED 27.04.2008. THE PROPERT Y IN QUESTION ORIGINALLY BELONGED TO ONE CMDR. J.R. VIJAI. MR. VIJAY DIED INTESTATE ON 21.09.2003 LEAVING BEHIND HIM, HIS WIFE, MRS. SHYAMALA VIJAI A ND ONLY DAUGHTER MRS. POORNIMA SHIVARAM AS CLASS-I LEGAL HEIRS, ENTITLED TO SUCCEED TO HIS PROPERTIES. THE APPELLANT PURCHASED THE AFORESAID PROPERTY FOR A TOTAL CONSIDERATION OF RS.1.20 CRORES. MRS. POORNIMA S HIVARAM, ONE OF THE CO- OWNERS OF THE PROPERTY WAS A NON-RESIDENT. SHE HAD GIVEN A GENERAL POWER OF ATTORNEY (GPA) TO HER MOTHER, MRS. SHYAMAL A VIJAI. MRS. SHYAMALA VIJAI EXECUTED THE SALE DEED IN FAVOUR OF THE APPELLANT FOR HERSELF AND AS GPA HOLDER OF MRS. POORNIMA SHIVARAM. THE S ALE CONSIDERATION OF RS.1.20 CRORES WAS PAID BY ONE CHEQUE FOR RS.10 LAK HS; 10 DDS FOR RS.9,50,000 AND 2 DDS FOR RS.9 LAKHS & RS.6 LAKHS R ESPECTIVELY. THE DDS WERE ISSUED IN THE NAME OF MRS. SHYAMALA VIJAI. TH E SALE DEED ACKNOWLEDGES THE RECEIPT OF RS.1.20 CRORES IN THE F OLLOWING MANNER:- IN PURSUANCE OF THE COVENANTS CONTAINED HEREIN AND THE PURCHASER HAVING PAID THE ENTIRE SALE CONSIDERATION OF ITA NOS1097/BANG/2012 & 778/BANG/2013 PAGE 3 OF 9 RS.1,20,00,000/- (RUPEES ONE CRORE TWENTY LAKHS ONL Y), THE RECEIPT OF WHICH SUM THE VENDORS HEREBY ACKNOWLEDGE AND ALSO CONFIRM THE FULL AND FINAL SETTLEMENT OF THE ENTIRE SALE PRICE OF THE SCHEDULE PROPERTY. 4. AS ALREADY STATED, MRS. POORNIMA SHIVARAM, ONE O F THE CO-OWNERS WAS A NON-RESIDENT. UNDER THE PROVISIONS OF SECTIO N 195 OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT'], A NY PERSON RESPONSIBLE FOR PAYING TO A NON-RESIDENT ANY INTEREST NOR BEING INT EREST REFERRED TO IN SECTION 194LB OR SECTION 194LC OR ANY OTHER SUM CHARGEABLE UNDER THE PROVISIONS OF THE ACT , SHALL AT THE TIME OF SUCH SUM TO THE ACCOUNT OF T HE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, D EDUCT INCOME TAX THEREON AT THE RATES IN FORCE. 5. ADMITTEDLY, THE APPELLANT DID NOT DEDUCT TAX AT SOURCE WHILE MAKING THE PAYMENT. THE ITO, INTERNATIONAL TAXATION, WARD 2(1) ISSUED A SHOW CAUSE NOTICE U/S. 201(1) OF THE ACT CALLING UPON TH E ASSESSEE TO SHOW CAUSE AS TO WHY HE SHOULD NOT BE TREATED AS AN ASS ESSEE IN DEFAULT IN RESPECT OF TAX NOT DEDUCTED AT SOURCE AS MANDATED B Y THE PROVISIONS OF SECTION 195 OF THE ACT. THE ASSESSEE DID NOT GIVE ANY REPLY TO THE SHOW CAUSE NOTICE. THE ASSESSING OFFICER THEREFORE PRO CEEDED TO PASS AN ORDER U/S. 201(1) OF THE ACT AS FOLLOWS:- AS STATED ABOVE, DURING THE FINANCIAL YEAR 2008-09 , THE ASSESSEE PURCHASED THE PROPERTY AT WEST OF CHORD ROAD, BANGA LORE, FROM ITA NOS1097/BANG/2012 & 778/BANG/2013 PAGE 4 OF 9 SMT. PURNIMA SHIVARAM FOR A CONSIDERATION OF RS.1,2 0,00,000/-. THIS AMOUNT WAS PAID BY THE ASSESSEE TO THE SELLER ON 04.04.2008 AMID 19.04.2008 BY DEMAND DRAFTS. THE PAYEE, SMT.PU RNIMA SHIVARAM, WAS A NON-RESIDENT. THE ASSESSEE HAS NOT DEDUCTED ANY TAX AT SOURCE AT THE TIME OF MAKING THIS PAYMENT. HERE IT MAY BE NOTED THAT IN THE REGISTERED SALE DE ED DTD.21.04.2008, THE SELLER HAS GIVEN HER RESIDENTIA L ADDRESS AS NO.8, ALLEN DRIVE, KINNELON, NJ 07405, U.S.A. THUS, THE ASSESSEE, AT THE TIME OF MAKING PAYMENT O F RS.1,20,00,000/- TO THE NON-RESIDENT SELLER, HAS NO T DEDUCTED ANY TAX A SOURCE AS PER THE PROVISIONS OF SEC.195 OF TH E INCOME TAX ACT. AS THE PAYMENT OF SALE CONSIDERATION OF RS. 1, 20,00,000/- TO SMT.PURNIMA SHIVARAM, A NON-RESIDENT, IS CHARGEABLE TO TAX IN INDIA, AND AS THE ASSESSEE HAS FAILED TO DISCHARGE ITS OBLIGATION TO DEDUCT TAX AT SOURCE AS STIPULATED U/S. 195 OF THE INCOME TAX ACT, 1961, AS PER THE PROVISIONS OF SEC.201(1) OF THE IN COME TAX ACT, 1961, FOR THE ASST. YEAR 2009-10, 1 AM HOLDING THE ASSESSEE, SRI.R.PRAKASH, AS DEEMED TO BE AN ASSESSEE IN DEFAU LT IN RESPECT OF TAX NOT DEDUCTED AT SOURCE IN RESPECT OF PAYMENT OF RS.1,20,00,000/-. HE IS LIABLE TO PAY THE TAX DEDUC TIBLE IN THIS REGARD ALONG WITH THE INTEREST U/S. 201(1A). THE TAX LIABILITY OF THE ASSESSEE, SRI.R.PRAKASH, U /S.201(1) FOR ASST. YEAR 2009-10 IS WORKED OUT AS UNDER: AMOUNT OF SALE CONSIDERATION PAID BY THE ASSESSEE ON WHICH NO TAX WAS DEDUCTED AT SOURCE 1,20,00,000 TAX DEDUCTIBLE AT SOURCE @ 20% 24,00,000 TAX LIABILITY U/S. 201(1) OF THE INCOME TAX ACT. 24,00,000 ADD: SURCHARGE@ 10% 2,40,000 ADD: EDUCATION CESS@2% 48,000 TOTAL TAX LIABILITY U/S. 201(1) OF THE INCOME TAX ACT 26,88,000 AS PER THE PROVISIONS OF SEC.201(1A) THE ASSESSEE I S LIABLE TO PAY INTEREST @ 1% FOR EVERY MONTH OR PART OF A MONTH ON THE TAX ITA NOS1097/BANG/2012 & 778/BANG/2013 PAGE 5 OF 9 WHICH IT HAD FAILED TO DEDUCT. TAX LIABILITY U/S. 2 01(1A) FOR THE ASST. YEAR 2009-10 IS CALCULATED AS UNDER: TAX LIABILITY U/S.201(L) FOR THE ASST. YEAR 2007-08 (SIC) AS COMPUTED ABOVE 26,88,000 INTEREST @ 1% PER MONTH FOR 33 MONTHS - FROM APRIL 2008 TO DECEMBER 2010 ON 26,88,000 13,87,040 TAX LIABILITY U/S. 201(1A) 40,75,040 THE TOTAL TAX LIABILITY OF THE ASSESSEE, SRI.R.PRAK ASH, FOR THE ASST. YEAR 2009-10, UNDER SECTIONS 201(1) AND 2 01(1A) OF THE INCOME TAX ACT, 1961, IS AS UNDER: AMOUNT IN RS. TAX LIABILITY U/S.201(L) 26,88,000 TAX LIABILITY U/S.201(LA) 13,87,040 TOTAL TAX PAYABLE FOR THE ASST. YEAR 2009-10 40,75,040 6. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE APPELLANT PREFERRED APPEAL BEFORE THE CIT(APPEALS). 7. BEFORE THE CIT(APPEALS), THE ASSESSEE SUBMITTED THAT THE ENTIRE SALE CONSIDERATION OF RS.1.20 CRORES WAS PAID TO MRS. SH YAMALA VIJAI, WHO WAS A RESIDENT AND THEREFORE THE PROVISIONS OF SECTION 195 OF THE ACT WERE NOT ATTRACTED. IT WAS ALSO ARGUED THAT MRS. SHYAMALA V IJAI WAS THE ABSOLUTE OWNER OF THE PROPERTY AND MRS. POORNIMA SHIVARAM, H ER DAUGHTER WAS SHOWN AS A PARTY ONLY BY WAY OF ABUNDANT CAUTION. ALTERNATIVELY, IT WAS SUBMITTED THAT MRS. SHYAMALA VIJAI HAD INVESTED THE ENTIRE CAPITAL GAIN FOR PURCHASE OF A NEW PROPERTY AND WAS ENTITLED TO CLAI M DEDUCTION U/S. 54F OF ITA NOS1097/BANG/2012 & 778/BANG/2013 PAGE 6 OF 9 THE ACT AND THEREFORE NO CAPITAL GAIN WAS CHARGEABL E TO TAX IN THE HANDS OF MRS. SHYAMALA VIJAI AND HENCE THERE COULD BE NO LIA BILITY ON THE PART OF THE ASSESSEE U/S. 195 OF THE ACT. THE CIT(APPEALS), H OWEVER, REJECTED THE CONTENTION OBSERVING AS FOLLOWS:- HAVING HEARD THE CONTENTION OF THE APPELLANT AND ON PERUSAL OF THE ORDER OF THE ASSESSING OFFICER, THE ABOVE CONTENTIONS OF THE APPELLANT ARE NOT FOUND ACCEPTAB LE DUE TO THE REASONS GIVEN BELOW: (I) THE SALE DEED IN RESPECT OF THE PROPERTY CLEAR LY INDICATES THAT SMT SHAMALA VIJAY (RESIDENT) AND SMT PURNIMA S HIVARAM (NON RESIDENT) WERE THE JOINT OWNERS OF THE PROPERT Y. IT IS ALSO CLEAR FROM THE SALE DEED THAT SMT PURNIMA SHIVARAM AUTHORISED SMT SHAMALA VIJAY THROUGH A GENERAL POWER OF ATTORN EY. (II) THE SALE DEED HAS BEEN SIGNED BY SMT SHAMALA VIJAY IN TWO CAPACITIES I.E. ONE FOR HERSELF AND ANOTHER AS THE GPA HOLDER OF SMT PURNIMA SHIVARAM. (III) EVEN AFTER THE REPEATED OPPORTUNITIES AND SH OW CAUSE NOTICES ISSUED BY THE ASSESSING OFFICER, THE APPELL ANT FAILED TO PRODUCE ANY EVIDENCE IN RESPECT OF THE SHARE OF SMT PURNIMA SHIVARAM IN THE SAID PROPERTY. THE ABOVE FACTS MAKE IT CLEAR THAT THE PAYMENT OF 1 ,20,00,000/- INCLUDES THE CONSIDERATION FOR THE SHAREHOLDING IN THE PROPERTY OF THE NON RESIDENT. THE SHARE OF THE NON RESIDENT IN THE SALE OF THE PROPERTY WAS CHARGEABLE TO TAX IN INDIA AS PER THE PROVISIONS OF THE INCOME TAX ACT. 8. THE CIT(APPEALS) ALSO REFERRED TO THE DECISION O F THE HONBLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE PVT. LTD. V. CIT, 327 ITR 456 (SC) AND HELD THAT IN THE EVENT OF THE ASSESSEE HAVING A DOUBT WITH REGARD TO DEDUCTIBILITY OF TAX AT SOURCE ON PAYMENTS ITA NOS1097/BANG/2012 & 778/BANG/2013 PAGE 7 OF 9 MADE TO A NON-RESIDENT, HE OUGHT TO HAVE APPROACHED THE ASSESSING OFFICER U/S. 195(2) OF THE ACT AND CANNOT TAKE A PL EA THAT THE INCOME IS NOT CHARGEABLE TO TAX IN THE HANDS OF THE RECIPIENT. T HE APPEAL OF THE ASSESSEE WAS ACCORDINGLY DISMISSED BY THE LD. CIT(APPEALS). 9. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE ASSESSEE HAS PREFERRED THE PRESENT APPEALS BEFORE THE TRIBUNAL. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS. IN OUR VI EW, THE ORDER OF THE CIT(APPEALS) CAN BE SUSTAINED IN PART ONLY I.E., WI TH REGARD TO THE QUANTUM OF TAX THAT NEEDS TO BE DEDUCTED AT SOURCE AND CONS EQUENTIAL LEVY OF INTEREST U/S. 201(1A) OF THE ACT. IT IS NOT IN DIS PUTE THAT MRS. SHYAMALA VIJAI AND MRS. POORNIMA SHIVARAM WERE ENTITLED TO HALF SH ARE EACH OVER THE PROPERTY THAT WAS SOLD TO THE APPELLANT. IN FACT, AS WE HAVE ALREADY SEEN, THE SALE DEED CLEARLY ACKNOWLEDGES THE RECEIPT OF S ALE CONSIDERATION OF RS.1.20 CRORE BY BOTH THE VENDORS IN EQUAL SHARES. IN LAW, MRS. SHYAMALA VIJAI AND MRS. POORNIMA SHIVARAM ARE ENTITLED TO HA LF SHARE EACH OVER THE PROPERTY. THE SHARE OF EACH OF THE VENDORS WOULD T HEREFORE BE RS.60 LAKHS. MRS. SHYAMALA VIJAI IS, ADMITTEDLY, A NON-R ESIDENT AND TO THE EXTENT OF RS.60 LAKHS PAID TO HER, THE PROVISIONS OF SECTI ON 195 ARE ATTRACTED AND THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE W HILE MAKING PAYMENTS TO THE NON-RESIDENT THROUGH MRS. SHYAMALA VIJAI. 11. THE LD. DR HAS, HOWEVER, RELIED ON THE DECISION OF THE ITAT BANGALORE BENCH IN THE CASE OF SYED ASLAM HASHMI V. ITO IN ITA ITA NOS1097/BANG/2012 & 778/BANG/2013 PAGE 8 OF 9 NO.1313/BANG/2010 & 107 6/BANG/2012, DATED 28.09.20 12 . THE LD. DR POINTED OUT BEFORE US THAT THE TRIBUNAL IN T HE AFORESAID DECISION HAS HELD THAT U/S. 195 OF THE ACT, TAX IS TO BE DEDUCTE D ON THE ENTIRE SALE CONSIDERATION. WE HAVE PERUSED THE AFORESAID DECIS ION AND ARE OF THE VIEW THAT THE SAME IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THE AFORESAID CASE, THE ISSUE WAS AS TO WHETHER U/S. 19 5 OF THE ACT, TAX IS TO BE DEDUCTED AT SOURCE ON THE CAPITAL GAIN ARISING OUT OF THE TRANSFER OF A CAPITAL ASSET OR ON THE ENTIRE SALE CONSIDERATION FOR WHICH THE CAPITAL ASSET IS TRANSFERRED. IN THE AFORESAID CASE, THERE WAS NO DISPUTE THAT THE PAYMENT OF THE ENTIRE SALE CONSIDERATION WAS MADE TO A NON- RESIDENT. THE TRIBUNAL HELD THAT TAX HAS TO BE DEDUCTED AT SOURCE U/S. 195 OF THE ACT ON THE ENTIRE SALE CONSIDERATION AND NOT ON THE CAPITAL GAIN ARIS ING ON TRANSFER OF THE CAPITAL ASSET. AS WE HAVE ALREADY SEEN, THE FACTS OF THE PRESENT CASE ARE DIFFERENT AND THE ISSUE IS ONLY WITH REGARD TO WHET HER THE TAX DEDUCTION AT SOURCE IS ON THE ENTIRE SALE CONSIDERATION OF RS.1. 20 CRORES OR RS.60 LAKHS WHICH WAS THE PAYMENT MADE TO THE NON-RESIDENT OUT OF RS.1.20 CRORES. WE ARE THEREFORE OF THE VIEW THAT THE DECISION RELI ED UPON BY THE LD. DR IS OF NO ASSISTANCE TO THE PLEA OF THE DEPARTMENT. 12. WE THEREFORE ALLOW THE APPEALS OF THE ASSESSEE IN PART AND HOLD THAT THE ASSESSEE CAN BE CONSIDERED AS AN ASSESSEE IN D EFAULT ONLY TO THE EXTENT OF RS.60 LAKHS PAID TO THE NON-RESIDENT. LE VY OF CONSEQUENTIAL ITA NOS1097/BANG/2012 & 778/BANG/2013 PAGE 9 OF 9 INTEREST U/S. 201(1A) SHOULD BE MODIFIED ACCORDINGL Y. WE ORDER ACCORDINGLY. 13. IN THE RESULT, THE APPEALS ARE TREATED AS PARTLY ALLOWED . PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF JULY, 2013. SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 12 TH JULY, 2013. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.