Bhawandas Nagla, Hyderabad, Hyderabad V. ITO, international Taxantion-2, Hyd, Hyderabad

ITA 143/HYD/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2689 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 31-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANJALA SAHU
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Transfer pricing; Residential status; Double taxation relief; International transaction; Cost of acquisition
• Section: 50C; 201(1); 148; 10

Judgement Text

ITA NO 1 43 OF 2017BHAGWANDAS NAGLA HYDERABAD. PAGE 1 OF 12 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.143/HYD/2017 (ASSESSMENT YEAR: 2010-11) SHRI BHAGWANDAS NAGLA HYDERABAD PAN: AB JPN 2919 H VS ITO (INTERNATIONAL TAXATION)-2 HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.C. DEVDAS FOR REVENUE : SMT. ANJALA SAHU, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2010-11 AGAIN ST THE ORDER OF THE CIT (A)-10, HYDERABAD, DATED 31.08 .2016 CONFIRMING THE ORDER OF THE AO PASSED U/S 201(1) AN D 201(1A) OF THE ACT. THE ASSESSEE HAS RAISED THE FOLLOWING GROU NDS OF APPEAL: 1. THE ORDER OF THE LD. CIT(A) IS WHOLLY UNSUSTAINABLE BOTH IN LAW AND IN FACTS OF THE CASE. 2. THE LD. CIT(A) ERRED IN HOLDING THE APPELLANT AS AN 'ASSESSEE-IN-DEFAULT' BY LEVYING A TAX OF RS. 10,55,677/- U/S 201(1) & 201(1A) OF THE INCOME TAX ACT ,1961. 3. THE LD. CIT(A) FAILED TO CONSIDER THAT THE LD. A O HAD APPLIED THE PROVISIONS OF SEC.50C OF THE DATE OF HEARING: 13.11.2017 DATE OF PRONOUNCEMENT: 2 5 . 0 1 .201 8 ITA NO 1 43 OF 2017BHAGWANDAS NAGLA HYDERABAD. PAGE 2 OF 12 INCOME TAX ACT, 1961 ('ACT') WHICH IS A DEEMING PROVISION AND HENCE CANNOT BE CONSIDERED FOR THE APPLICATION OF PROVISIONS OF SECTION 201(1) AND SECTION 201(1A) OF THE ACT. 4. IN VIEW OF THE ARTICLE 26 OF INDO-US DOUBLE TAXATION AVOIDANCE AGREEMENT, THE APPELLANT CANNOT BE TREATED AS AN 'ASSESSEE-IN-DEFAULT'. 5. WITHOUT PREJUDICE TO THE AFORESAID FACTS, THE LEARNED CIT(A) ERRED IN ADOPTING THE SALE CONSIDERATION U/S 50C OF THE IT ACT, 1961 WHICH IS SUBJECT TO CONDITIONS LAID DOWN THEREIN AND IS NOT APPLICABLE TO THE PROVISIONS OF SEC.195 OF THE IT ACT, 1961 AS THE DEEMED CONSIDERATION IS NEVER PAID BY THE APPELLANT. 6. THE APPELLANT DENIES TO THE TAX LIABILITY U/S 201(1) & 201(1A) OF THE IT ACT, 1961 AND PRAYS THAT THE TAX LIABILITY FOR RS. 10,55,677/- KINDLY B E DELETED. 7. ANY OTHER GROUND/GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF APPEAL. 2. IN ADDITION TO THE ABOVE, VIDE LETTER DATED 11.3 .2017, THE ASSESSEE FILED THE FOLLOWING ADDITIONAL GROUNDS OF APPEAL: 1. THE ENTIRE ORDER PASSED U/S 201 IS A DEVICE OR SCHEME ADOPTED BY THE ASSESSING OFFICER (' A.O') TO TAX THE INCOME OF THE NON-RESIDENT IN THE HANDS OF AN APPELLANT AND THEREFORE THE ORDER U/S 201 NOT BEING IN ACCORDANCE WITH THE STATUTORY PROVISIONS MUST BE QUASHED. 2. THE ORDER PASSED U/S 201 IS NOTHING BUT AN ASSESSMENT MADE ON THE NON-RESIDENT TO TAX THEIR INCOME IN HANDS OF APPELLANT WITHOUT GIVING NOTICE TO THE APPELLANT AS AN AGENT U/S 163 OF THE INCOME TAX ACT 1961. ITA NO 1 43 OF 2017BHAGWANDAS NAGLA HYDERABAD. PAGE 3 OF 12 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A N INDIVIDUAL, PURCHASED A RESIDENTIAL FLAT BEARING FL AT NO.414 WITH MUNICIPAL PROPERTY ASSESSMENT NO.8-3-833/K/1 TO 8/2 14 ADMEASURING 2750 SFT ON 31.12.2009 VIDE DOCUMENT NO .38/2010 OF SRO, BANJARA HILLS, FROM TWO PERSONS I.E. MRS. A ARTHI S. GADASALLI AND MR. SURESH N. GADASALLI, WHO ARE BOTH NON- RESIDENTS RESIDING AT NO.21, SANTA FE PLACE, ODESSA , TEXAS 79765, USA, THE CONSIDERATION WAS RS.48.00 LAKHS. 4. SINCE THE ASSESSEE HAD MADE PAYMENT TO A NON- RESIDENT, BUT HAD NOT DEDUCTED TAX AT SOURCE BEFORE MAKING THE PAYMENT, THE AO INITIATED PROCEEDINGS U/S 201(1) BY ISSUING A LETTER DATED 19.6.2013 ASKING FOR THE DETAILS OF TH E TDS MADE BY THE ASSESSEE U/S 195 OF THE ACT. IN REPLY TO THE SA ME, THE ASSESSEE FURNISHED A LETTER ON 12.07.2013 REQUESTING FOR SOM E TIME. BUT, EVEN ON SUBSEQUENT DATE I.E. ON 29.12.2014, NO DETA ILS WERE FURNISHED. HOWEVER, ON 16.1.2015, THE ASSESSEE FILE D A COPY OF THE SALE DEED ALONG WITH THE POWER OF ATTORNEY OF THE V ENDORS AND AGAIN ON 27.1.2015, A LETTER ALONG WITH THE COMPUTA TION OF THE CAPITAL GAIN AND THE COPIES OF THE SALE DEEDS OF TH E VENDORS WERE FILED. IN THE SAID LETTER, IT WAS STATED THAT IT WA S HIS MAIDEN TRANSACTION FOR ACQUISITION OF A PROPERTY AND THUS HE WAS NOT AWARE OF THE LEGAL PROVISIONS OF INCOME TAX ACT, MO RE PARTICULARLY ABOUT THE PROVISIONS RELATING TO TDS U/S 195 OF THE ACT, DUE TO WHICH, HE HAD NOT DEDUCTED TAX AT SOURCE BEFORE MAK ING THE PAYMENT TO THE VENDORS. FURTHER, HE ALSO SUBMITTED THE ITA NO 1 43 OF 2017BHAGWANDAS NAGLA HYDERABAD. PAGE 4 OF 12 COMPUTATION OF THE LONG TERM CAPITAL GAIN (LTCG) IN THE HANDS OF THE VENDORS AND OFFERED TO PAY TAX THEREON. 5. THE AO VERIFIED THE RECORD AND FOUND THAT THE VE NDORS SHRI SURESH GADASALLI AND SMT. AARATI S. GADASALLI HAVE NEITHER FILED THEIR RETURNS OF INCOME FOR THE A.Y 2010-11 A DMITTING LTCG NOR HAVE THEY PAID THE TAX. HE ALSO OBSERVED THAT N OTICES U/S 148 DATED 14.2.2014 WERE ALSO ISSUED TO THEM, BUT THEY WERE RETURNED UNSERVED BY THE POSTAL DEPARTMENT. THE AO OBSERVED THAT THE VENDORS ARE LIABLE TO PAY TAX ON THE CAPITAL GAIN A RISING ON ACCOUNT OF THE SALE OF THE ABOVE MENTIONED PROPERTY . SINCE THE ASSESSE, BY HIMSELF HAD ARRIVED AT THE TAXABLE LTCG AT RS.7,93,205 AFTER CLAIMING THE INDEXED COST OF ACQU ISITION OF THE PROPERTY, THE AO HELD THAT THE ASSESSEE IS LIABLE T O PAY THE TAX ON LTCG. HE, THEREAFTER, OBSERVED THAT THE SALE CONSID ERATION SHOULD BE TAKEN U/S 50C OF THE ACT AT RS.58,11,100. HE ALS O PROCEEDED TO CONSIDER THE COST OF ACQUISITION AND OBSERVED THAT THERE IS A MISTAKE IN THE COMPUTATION OF LTCG AS PER THE INSTR UCTION NO.2/2014 DATED 26.02.2014 AND THEREFORE, ASKED THE ASSESSEE TO STATE HIS OBJECTIONS, IF ANY, TO ADOPT THE LTCG AT RS.30,33,556. BUT THE ASSESSEE DID NOT MAKE ANY SUBMISSION. THERE FORE, THE AO COMPUTED THE LTCG AT RS.30,33,556 AND TREATED THE A SSESSEE AS AN ASSESSEE IN DEFAULT FOR A SUM OF RS.6,06,711 W HICH IS THE TAX DEDUCTIBLE AT SOURCE AT 20% OF RS.30,33,556. THEREA FTER, HE COMPUTED THE INTEREST PAYABLE U/S 201(1A) OF THE AC T AT RS.4,48,966. THUS, THE TOTAL TAX LIABILITY WAS COMP UTED AT RS.10,55,677. ITA NO 1 43 OF 2017BHAGWANDAS NAGLA HYDERABAD. PAGE 5 OF 12 6. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT (A) RAISING A GROUND THAT BY VIRTUE OF ARTICLE 26 OF THE INDO-US TAXATION AVOIDANCE AGREEMENT, THE PROVISIONS OF SEC TION 195 ARE NOT ATTRACTED TO THIS TRANSACTION. HE ALSO RAISED G ROUNDS OF APPEAL AGAINST TREATING THE ASSESSEE AS AN ASSESSEE IN DEF AULT U/S 201(1) AND LEVYING THE INTEREST U/S 201(1A) OF THE ACT. TH E CIT (A) DISMISSED THE GROUND OF APPLICABILITY OF ARTICLE 26 OF INDO-US DTAA TO THE FACTS OF THE CASE BEFORE HIM AND ALSO T HE COMPUTATION OF TAX ON LTCG AND UPHELD THE ORDERS U/S 201(1) AND 201(1A) OF THE ACT. THUS, THE CIT (A) DISMISSED THE APPEAL OF THE ASSESSEE AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 7. THE LEARNED COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THOUGH THE ORDER IS MENTIONED AS AN ORDER PASSED U/ S 201(1) OF THE I.T. ACT, THE AO HAS TREATED THE ASSESSEE AS AN ASSESSEE IN DEFAULT ONLY BECAUSE THE ASSESSEES VENDORS HAVE N OT FILED THEIR RETURNS OF INCOME AND HAVE NOT OFFERED THE CAPITAL GAINS TO TAX. THEREFORE, ACCORDING TO HIM, THE ASSESSEE SHOULD HA VE BEEN FIRST TREATED AS A REPRESENTATIVE ASSESSEE OF THE VENDO RS U/S 163 OF THE ACT BEFORE PASSING AN ORDER U/S 201(1) OF THE A CT AND DUE TO THIS DEFICIENCY, THE ORDER U/S 201(1) IS NOT SUSTAI NABLE. HE THUS PRAYED THAT THE ADDITIONAL GROUNDS OF APPEAL BE ADM ITTED AND ADJUDICATED. WITH REGARD TO THE ORIGINAL GROUNDS OF APPEAL FILED ALONG WITH FORM NO.36, HE REITERATED THE SUBMISSION S MADE BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW. ITA NO 1 43 OF 2017BHAGWANDAS NAGLA HYDERABAD. PAGE 6 OF 12 8. THE LEARNED DR, HOWEVER, OPPOSED THE ADMISSION O F ADDITIONAL GROUNDS AND RELIED UPON THE ORDERS OF TH E AUTHORITIES BELOW TO SUBMIT THAT THE ORDER OF THE CIT (A) SHOUL D BE SUSTAINED. 9. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THOUGH THE ASSESSEE HAS RAI SED THE ADDITIONAL GROUNDS OF APPEAL, THE ASSESSEE HAS NOT FILED ANY APPLICATION SEEKING THEIR ADMISSION AND GIVING REAS ONS FOR NOT RAISING THESE GROUNDS BEFORE THE AUTHORITIES BELOW AND AS TO WHY THESE GROUNDS OF APPEAL ARE BEING FILED OR RAISED A T THIS STAGE OF HEARING. IN THE ABSENCE OF THE SAME, WE CANNOT ADMI T THE ADDITIONAL GROUNDS OF APPEAL RAISED BY THE ASSESSEE AND ADJUDICATE THE SAME AT THIS STAGE. EVEN OTHERWISE, WE FIND THAT THE LIABILITY OF THE ASSESSEE U/S 195 OF THE ACT IS DIFFERENT FROM THE LIABILITY OF THE VENDORS TO ADMIT THE CAPITAL GAINS IN THEIR HANDS. BOTH THE SECTIONS ARE INDEPENDENT AND ARE MUTUALLY EXCLUSIVE. U/S 195, THE ASSESSEE WHO IS MAKING PAYMENT TO A NO N-RESIDENT IS REQUIRED TO DEDUCT TAX AT SOURCE AT THE TIME OF PAYMENT OR CREDITING THE A/C WHICHEVER IS EARLIER. THERE IS NO DISPUTE THAT THE VENDORS ARE THE NON-RESIDENTS AND THEREFORE, THE PR OVISIONS OF SECTION 195 ARE CLEARLY ATTRACTED AND THE LIABILITY OF THE ASSESSEE U/S 195 IS CLEARLY ESTABLISHED AS THE VENDORS ARE R EQUIRED TO FILE THEIR RETURNS OF INCOME AND OFFER THE CAPITAL GAINS TO TAX. THUS, THE LIABILITY OF THE ASSESSEE PRECEDES THE LIABILIT Y OF THE VENDORS. THOUGH THE AO HAS BROUGHT ON RECORD THAT THE VENDOR S HAVE NOT PAID THE TAX ON THE LTCG ARISING OUT OF THE SALE OF THE PROPERTY, WE FIND THAT THE ORDER UNDER APPEAL BEFORE US IS AN ORDER U/S 201(1) AND IT IS NOT CONSEQUENT TO OR TO BRING TO T AX THE INCOME OF ITA NO 1 43 OF 2017BHAGWANDAS NAGLA HYDERABAD. PAGE 7 OF 12 THE VENDORS. THEREFORE, ON THIS GROUND ALSO, THE AD DITIONAL GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE NOT AD MISSIBLE. 10. AS REGARDS THE MERITS OF THE CASE IS CONCERNED, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SALE DEED HAS BEEN EXECUTED IN FAVOUR OF THE ASSESSEE BY THE GPA HOLDER OF THE VENDORS WHO IS A RESIDENT OF INDIA AND SINCE, THE A SSESSEE HAS MADE THE PAYMENT TO THE SAID GPA HOLDER, THE ASSESS EE WAS NOT REQUIRED TO MAKE ANY TDS U/S 195 OF THE ACT. THE 2 ND OBJECTION TAKEN BY THE ASSESSEE IS THAT UNDER ARTICLE 26 OF T HE DTAA BETWEEN INDIA AND THE USA, THE NON-RESIDENTS ARE NO T LIABLE TO TAX IN INDIA AND THEREFORE, THERE WAS NO REQUIREMENT OF THE ASSESSEE TO MAKE TDS. THE 3 RD OBJECTION OF THE ASSESSEE IS THAT EVEN IF THE ASSESSEE IS REQUIRED TO MAKE THE TDS, IT CAN ONLY B E ON THE SUM OF RS.48.00 LAKHS PAID AS SALE CONSIDERATION AND NO T ON THE SALE CONSIDERATION TO BE ADOPTED U/S 50C OF THE ACT. FUR THER, HE ALSO RAISED AN OBJECTION THAT THE ASSESSEE IS REQUIRED T O MAKE TDS ON THE GROSS SUM PAID, WHEREAS THE AO HAS TREATED THE ASSESSEE AS AN ASSESSEE IN DEFAULT AFTER COMPUTING THE LTCG WHI CH IS NOT PERMISSIBLE UNDER LAW. 11. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED TH E ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE WAS REQUIRED TO MAKE TDS SINCE THE RECIPIENTS OF TH E CONSIDERATION ARE NRIS AND THE GPA HOLDER IS ONLY A UTHORIZED TO EXECUTE THE SALE DEED BUT CANNOT STEP INTO THE SHOE S OF THE VENDORS. FURTHER, SHE SUBMITTED THAT UNDER THE INST RUCTION NO.2 OF 2014 OF THE CBDT, WHERE AN ASSESSEE IS TO BE TRE ATED AS AN ITA NO 1 43 OF 2017BHAGWANDAS NAGLA HYDERABAD. PAGE 8 OF 12 ASSESSEE IN DEFAULT, THE AO IS REQUIRED TO COMPUT E THE LTCG AND TREAT THE ASSESSEE IN DEFAULT ONLY IN RESPECT OF THE INCOME COMPONENT WHICH IS TAXABLE IN INDIA AND THEREFORE, THE AO WAS REQUIRED TO CONSIDER THE SALE CONSIDERATION U/S 50C OF THE ACT AND AFTER ALLOWING THE COST OF ACQUISITION, HE WAS REQU IRED TO ARRIVE AT THE TAXABLE INCOME AND IN RESPECT OF SUCH TAXABLE C APITAL GAINS ONLY, THE ASSESSEE CAN BE TREATED AS AN ASSESSEE I N DEFAULT. THEREFORE, SHE SUBMITTED THAT THE AO HAS CORRECTLY CALCULATED THE LIABILITY BOTH U/S 201(1) AND ALSO U/S 201(1A) OF T HE ACT. 12. IN REBUTTAL, THE LEARNED COUNSEL FOR THE ASSESS EE HAS PLACED RELIANCE ON THE DECISION OF THE TRIBUNAL AT DELHI IN THE CASE OF ITO VS. SANTUR DEVELOPERS PVT. LTD, IN ITA NO.15 32/DEL/2011 FOR THE A.Y 2006-07, WHERE UNDER SIMILAR CIRCUMSTAN CES, THE TRIBUNAL HELD THAT IN THE SAID CASE REFERENCE TO AR TICLE 26 OF DTAA BETWEEN INDIA AND USA IS FULLY JUSTIFIED SINCE, THE RE IS NO PROVISION UNDER THE I.T. ACT REQUIRING THE RESIDENT TO DEDUCT THE TAX AT SOURCE FROM THE SALE PROCEEDINGS OF LAND PAY ABLE TO ANY OTHER RESIDENT AND THEREFORE, THE ASSESSEE COULD NO T BE BURDENED WITH THE REQUIREMENT OF TDS IN CASE OF PAYMENT TO N ON-RESIDENT. 13. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE, BEING A RESID ENT, HAS PURCHASED AN IMMOVABLE PROPERTY FROM THE NRIS AND T HE SALE DEED HAS BEEN EXECUTED BY THE GPA HOLDER OF THE NON -RESIDENTS. THE ASSESSEES CLAIM THAT HE HAS PAID THE SALE CONS IDERATION TO THE GPA HOLDER IN INDIA AND THEREFORE, IS NOT REQUI RED TO MAKE TDS IS NOT ACCEPTABLE BECAUSE, AT BEST, THE GPA HOL DER CAN BE ITA NO 1 43 OF 2017BHAGWANDAS NAGLA HYDERABAD. PAGE 9 OF 12 CONSIDERED AS ONLY A CONDUIT BETWEEN THE ASSESSEE A ND THE OWNERS OF THE PROPERTY AND THEREFORE, IN THE TRUE S ENSE, THE ASSESSEE HAS MADE THE PAYMENT TO THE NON-RESIDENTS ONLY. IN SUCH CIRCUMSTANCES, THE ASSESSEE IS REQUIRED TO DED UCT THE TAX AT SOURCE U/S 195 OF THE ACT BEFORE MAKING THE PAYMENT . THE ASSESSEE HAS CLEARLY FAILED TO DO SO AND THEREFORE, THE AO HAS INITIATED THE PROCEEDINGS U/S 201(1) OF THE ACT BY ISSUANCE OF A NOTICE DATED 19.6.2013. THE CONTENTION THAT SECTION 201(1) PROCEEDINGS HAVE BEEN INITIATED ONLY BECAUSE THE VE NDORS HAVE NOT PAID THE TAX ALSO IS INCORRECT AS IN THE CASE O F THE VENDORS, NOTICES U/S 148 WERE ISSUED ON 14.2.2014 I.E. AFTER INITIATION OF THE PROCEEDINGS U/S 201(1) OF THE ACT IN THE CASE O F THE ASSESSEE ON 19.06.2013. FURTHER, IT IS NOTICED THAT THE ORDE R U/S 201(1) IS DATED 27.1.2016 I.E. AFTER INTRODUCTION OF THE PROV ISO TO SECTION 201(1) OF THE ACT, WHEREIN IT HAS BEEN PROVIDED THA T AN ASSESSEE SHALL NOT BE TREATED AS AN ASSESSEE IN DEFAULT IF THE RECIPIENT HAS FILED THE RETURN OF INCOME AND HAS OFFERED THE RECE IPT TO TAX. THEREFORE, WE ARE OF THE OPINION THAT THE AOS RECI TALS ABOUT THE NON-FILING OF THE RETURN AND NON-OFFERING OF THE IN COME BY THE VENDORS IS ONLY TO DEMONSTRATE THAT THE INCOME OF T HE VENDORS HAS ESCAPED ASSESSMENT. 14. THE SECOND OBJECTION THE ASSESSEE IS THAT ARTIC LE 26 OF INDO-US DTAA IS APPLICABLE TO THE FACTS OF THE CASE BEFORE US. ARTICLE 26 OF INDO-US DTAA, IS A NON-DISCRIMINATION ARTICLE TO PROTECT THE NON-RESIDENTS FROM TAX DISCRIMINATION O N THE BASIS OF (1) NATIONALITY, (2) LOCATION (PE), (3) DEDUCTIONS OF EXPENSES PAYMENTS MADE TO NON-RESIDENTS & (4) OWNERSHIP. ITA NO 1 43 OF 2017BHAGWANDAS NAGLA HYDERABAD. PAGE 10 OF 12 15. U/S 90(2) OF THE ACT, THE DTAA PROVISIONS WOULD APPLY TO THE NON-RESIDENT ASSESSEES TO THE EXTENT THEY A RE MORE BENEFICIAL TO SUCH ASSESSEE. IN INDIA, THE TAXATION IS BASED ON RESIDENCE OR SOURCE IN INDIA. THE VENDORS ARE NOT R ESIDENTS OF INDIA, BUT THE SOURCE OF THEIR INCOME IS IN INDIA. THEREFORE, THEY ARE LIABLE TO PAY TAX IN INDIA. SINCE, THEY ARE NON -RESIDENTS, U/S 195 OF THE ACT, ANY PERSON RESPONSIBLE FOR PAYING T O A NON- RESIDENT, NOT BEING A COMPANY, OR TO A FOREIGN COMP ANY, ANY INTEREST, OR ANY OTHER SUM CHARGEABLE UNDER THE PRO VISIONS OF THE ACT (NOT BEING INCOME CHARGEABLE UNDER THE HEAD SA LARIES) SHALL AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, D EDUCT INCOME- TAX THEREON AT THE RATES IN FORCE. 16. IN THE CASE ON HAND, THE INCOME IN THE HANDS OF THE NRIS IS TAXABLE UNDER THE HEAD CAPITAL GAINS AND T HE PROVISIONS OF SECTION 195 ARE ATTRACTED ALSO BECAUSE THEY ARE NON -RESIDENTS. 17. SECTION 40(A)(IA) PROVIDES THAT A DEDUCTION IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PRO FITS AND GAINS OF BUSINESS OR PROFESSION IS NOT ALLOWABLE I F THE TAX IS NOT DEDUCTED OR AFTER DEDUCTION HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 13 9, BUT THERE IS NO SUCH PROVISION OF TDS IN CASE OF PAYMENT OF SALE CONSIDERATION FOR TRANSFER OF A CAPITAL ASSET. ITA NO 1 43 OF 2017BHAGWANDAS NAGLA HYDERABAD. PAGE 11 OF 12 18. WE FIND THAT THE TRIBUNAL HAS CONSIDERED THAT T HE RECIPIENTS HAVE OFFERED THE INCOME TO TAX AND THERE IS NO REVENUE LOSS AND THAT IS THE MAIN REASON FOR ALLOWING THE A PPEAL. AS REGARDS ARTICLE 26 OF INDO-US DTAA, WE FIND THAT IT IS AGAINST DISCRIMINATION OF NON-RESIDENTS VIS--VIS THE RESID ENTS OF THE CONTRACTING STATES UNDER SIMILAR CIRCUMSTANCES. THE UNDERLYING PRINCIPLE OF ARTICLE 26 IS THAT THE NON-RESIDENT SH ALL NOT BE TREATED LESS FAVOURABLY THAN THE RESIDENTS OF THE CONTRACTI NG STATE AND THE REQUIREMENTS CONNECTED WITH TAXATION SHALL NOT BE M ORE BURDENSOME THAN THEY ARE FOR RESIDENTS. BUT IN THE CASE BEFORE US, THERE IS NO DISCRIMINATION AGAINST THE NRIS. W E ARE DEALING WITH THE LIABILITY OF THE ASSESSEE TO DEDUCT TDS AN D NOT ABOUT THE LIABILITY OF THE NON-RESIDENTS. THEREFORE, CLEARLY, THE ABOVE DECISION IS NOT APPLICABLE TO THE FACTS OF THE CASE BEFORE U S. 19. FURTHER, THE ASSESSEE HAS ALREADY PAID TAX ON T HE LONG TERM CAPITAL GAIN COMPUTED ON THE ACTUAL PAYMENT MA DE BY THE ASSESSEE THAT HAS ARISEN TO THE VENDORS AND THERE I S NO ESCAPEMENT OF TAX DUE TO THE REVENUE TO THAT EXTENT . BUT, THE AO HAS INVOKED THE PROVISION OF SECTION 50C TO COMPUTE THE LTCG. WE ARE NOT DEALING WITH THE LIABILITY OF THE VENDOR S TO PAY THE TAXES, BUT, WE ARE DEALING WITH THE LIABILITY OF TH E ASSESSEE TO DEDUCT TAXES AT SOURCES. AS RIGHTLY ARGUED BY THE L EARNED COUNSEL FOR THE ASSESSEE, THE ASSESSEE IS REQUIRED TO MAKE THE TDS FROM CREDIT OR PAYMENTS MADE BY IT AND NOT ON WHAT THE V ENDORS ARE DEEMED TO HAVE RECEIVED FROM THE SALE OF THEIR PROP ERTY. THEREFORE, AS FAR AS THE LIABILITY OF THE ASSESSEE IS CONCERNE D, WE HAVE NO HESITATION TO HOLD THAT IT SHALL ONLY BE ON THE ACT UAL CONSIDERATION ITA NO 1 43 OF 2017BHAGWANDAS NAGLA HYDERABAD. PAGE 12 OF 12 CREDITED OR PAID BY THE ASSESSEE, WHICHEVER IS EARL IER. FURTHER, AS SEEN FROM THE ASSESSMENT ORDER, THE ASSESSEE HAS AL READY PAID TAXES ON THE LTCG ACCRUING TO THE VENDORS ON THE AC TUAL PAYMENT MADE BY HIM. THEREFORE, WE ARE OF THE OPINION THAT THE ASSESSEE CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT U/S 2 01(1) OF THE ACT, BUT IS ONLY LIABLE FOR INTEREST U/S 201(1A) OF THE ACT TILL THE DATE OF PAYMENT OF TAXES BY HIM. 20 IN THE RESULT, ASSESSEES GROUNDS OF APPEAL NO. 2, 3 & 5 RAISED IN FORM 36 ARE ALLOWED AND GROUND 4 IS REJEC TED AND THE ADDITIONAL GROUNDS OF APPEAL ARE ALSO REJECTED. 21. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JANUARY, 2018. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 25 TH JANUARY, 2018. VINODAN/SPS COPY TO: 1 SHRI BHAGWANDAS NAGLA, H.NO.8-3-833 KRISHE MEADOW S, SRI NAGAR COLONY, HYDERABAD 2 ITO, INTERNATIONAL TRANSACTION - II HYDERABAD 3 CIT (A) - 10 HYDERABAD 4 CIT (IT & TP) HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER