Vobilineni Surya Prasad, Kakinada V. The DCIT(IT & TP), Visakhapatnam

ITA 348/VIZ/2016

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 4302 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 12-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V RAMA MOHAN
• Assessee Lawyers: C V S MURTHY

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER . / I . T .A.NO. 3 48 /VIZ/ 201 6 ( / ASSESSMENT YEAR: 20 09 - 20 1 0 ) VO BILINENI SURYA PRASAD D.NO.67 - 3 - 14/2 KAKINADA EAST GODAVARI DIST. [PAN : A COPV9063E ] VS. D D IT (IT & TP) VISAKHAPATNAM ( / APPELLANT) ( / RESPONDENT) / ASSESSEE BY : SHRI C.V.S.MURTHY , AR / REVENUE BY : SHRI V.RAMA MOHAN , DR / DATE OF HEARING : 03 . 10 . 2018 / DATE OF PRONOUNCEMENT : 10 . 10 .2018 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: TH IS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] - 10, HYDERABAD VIDE I.T.A.NO.0101/CIT(A) - 10/2014 - 15 DATED 05.02.2016 FOR THE ASSESSMENT YEAR 2009 - 10 . 2 I.T.A. NO .3 48 /VIZ/201 6 VO BILINENI SURYA PRASAD, KAKINADA 2. ALL THE GROUNDS OF APPEAL ARE RELATED TO THE ISSUE OF NON - DEDUCTION OF TAX AT SOURCE AND PAYMENTS MADE TO THE NON - RESIDENTS AND CONSEQUENT LEVY OF INTEREST U/ S 201(1)/201(1A) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER CALLED AS ACT). 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS PURCHASED AN IMMOVABLE PROPERTY OF LAND ADMEASURING 399.71 SQ.YARDS LOCATED AT D.NO.67 - 3 - 14/2, KAKINADA, EAST GODAVARI DIST., FROM SHRI MARLA VEERABHADRA SASTRY (SHRI M.V.SASTRY) , FATHER AND HIS TWO NON RESIDENT SONS NAMELY SHRI MARLA VISHNU TEJ AND SHRI MARLA KRISHNA TEJ RESIDENTS OF U.S.A. THE SALE TRANSACTION WAS REPRESENTED BY SHRI M.V.SASTRY AS A GENERAL POWER OF ATTORNEY ( GPA)HOLDER FOR BOTH SHRI MARLA VISHNU TEJ AND SHRI MARLA KRISHNA TEJ. SHRI M.V.SASTRY WAS GIVEN GPA BY BOTH THE NON - RESIDENT SONS ON 21.03.2008 TO TRANSACT THE IMPUGNED PROPERTY JOINTLY HELD BY THE FATHER AND THE TWO SONS. SHRI M.V.SASTRY ENTERED INTO A GREEMENT WITH THE ASSESSEE FOR SALE OF THE PROPERTY BY SALE DEED DATED 10.04.2008 AND RECEIVED THE CONSIDERATION OF RS.30,74,000/ - . THE ENTIRE SALE CONSIDERATION WAS PAID INTO THE BANK ACCOUNT OF SHRI M.V.SASTRY, FATHER AND THE GPA HOLDER BEARING SB A/C N O.26010, SYNDICATE BANK, KAKINADA. ON FINDING THAT THE ASSESSEE HAD PURCHASED THE PROPERTY FROM SHRI M.V.SASTRY AND HIS TWO NON - RESIDENT SONS, THE AO ISSUED THE NOTICE U/S 201/201(1A) OF THE 3 I.T.A. NO .3 48 /VIZ/201 6 VO BILINENI SURYA PRASAD, KAKINADA ACT, TREATING THE ASSESSEE AS ASSESSEE IN DEFAULT. IN RESPONSE T O THE NOTICE, THE ASSESSEE FILED REPLY STATING THAT THE ENTIRE CONSIDERATION OF RS.30,74,000/ - WAS RECEIVED BY SHRI M.V.SASTRY, THE RESIDENT INDIVIDUAL INCLUDING THE SHARES OF HIS TWO NON - RESIDENT SONS , AND NO PAYMENT WAS MADE TO THE NON RESIDENT SONS , THUS THERE IS REQUIREMENT TO DEDUCT THE TAX AT SOURCE U/S 195 OF THE ACT AND THE ASSESSEE HAS NOT COMMITTED ANY DEFAULT. HOWEVER, NOT BEING CONVINCED WITH THE REPLY OF THE ASSESSEE, THE AO TREATED THE ASSESSEE, AS ASSESSEE IN DEFAULT U/S 201(1)/201(1A) OF THE ACT WITH RESPECT TO THE SHARE S OF PROPERTY OF SHRI VISHNU TEJ AND SHRI KRISHNA TEJ, THE SONS OF SHRI M.V.SASTRY FOR RS.20,49,330/ - AND ACCORDINGLY PASSED THE ORDER U/S 201/201(1A) OF THE ACT AND RAISED THE DEMAND OF RS.6 ,71,230/ - AS UNDER : 5 .THE TAX DEDUCTIBLE IS WORKED OUT AT 20.60% (TREATING THE RATE OF TDS @20% ON CAPITAL GAINS, EDUCATION CESS @2% AND SECONDARY AND HIGHER EDUCATIONAL CESS @1% AND INTEREST @1%P.M. AND THE DETAILS ARE AS UNDER : AMOUNT PAID (RS.) TAX D EDUCTIBLE @20.60% (RS.) NO. OF MONTHS FOR WHICH INTEREST U/S 201(1A) IS PAYABLE FROM APRIL 2008 TO FEB 2013 INTEREST U/S 201(1A) @ 1% P.M. TOTAL AMOUNT PAYABLE (RS.) 20,49,330 4,22,160 59 2,49,070 6,71,230 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE LD.CIT(A) AND THE LD.CIT(A) CONFIRMED THE ORDER OF THE AO. 4 I.T.A. NO .3 48 /VIZ/201 6 VO BILINENI SURYA PRASAD, KAKINADA 5. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. IN THIS CASE, THE ASSESSEE HAD PURCHASED THE PROPERTY FROM SHRI M.V.SASTRY AND HIS TWO NON RESIDENT SONS. BOTH THE NON RESIDENT SONS HAVE GIVEN THE GPA TO THEIR FATHER TO HANDLE THE TRANSACTION. AS PER THE GPA RECEIVED BY SHRI M.V.SASTRY, HE HAS EXECUTED THE SALE DEED, RECEIVED THE ENTIRE SALE CONSIDERATION AND CREDITED TO HIS SAVINGS BANK ACCOUNT. THE PAYMENT WAS MADE TO SHRI M.V.SASTRY WHO IS RESIDENT INDIVIDUAL. AS PER THE PROVISIONS OF SECTION 195 OF THE ACT, THE PAYMENTS MADE TO THE NON RE SIDENTS SUFFERS THE DEDUCTION OF TAX AT SOURCE. IN THE INSTANT CASE THE PAYMENT WAS MADE TO THE RESIDENT INDIVIDUAL. THE ITAT VISAKHAPATNAM IN THE CASE OF MVV BUILDERS IN I.T (TP)A NOS.3, 4 & 5/VIZ/2014 OPINED THAT THE PAYMENTS DIRECTLY MADE TO NON - RESIDEN TS TOWARDS PURCHASE OF PROPERTY ARE IN THE NATURE OF ANY OTHER SUM CHARGEABLE TO TAX UNDER THE ACT AND ATTRACTS TDS U/S 195 OF THE ACT. IN THE INSTANT CASE, THERE WAS NO DIRECT PAYMENT MADE BY THE ASSESSEE TO THE NON - RESIDENTS. THE ENTIRE PAYMENT WAS MAD E TO THE RESIDENT INDIAN WHO IS ALSO THE FATHER OF THE NON RESIDENTS. THE REVENUE DID NOT ESTABLISH THAT THE PAYMENT HAS GONE TO THE NON - 5 I.T.A. NO .3 48 /VIZ/201 6 VO BILINENI SURYA PRASAD, KAKINADA RESIDENTS. IN THE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THERE IS NO CASE FOR INVOKING THE PROVISIONS O F SECTION 195 OF THE ACT. 6.1. ON THE SIMILAR FACTS, THE HONBLE ITAT, CHANDIGARH A BENCH IN RAKESH CHAUHAN VS. DEPUTY DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) IN ITA NOS. 752 & 753/CHD/2009 DATED 27 TH NOVEMBER 2009 HAS TAKEN THE SIMILAR VIEW. FOR READY REFERENCE, WE EXTRACT RELEVANT PART OF THE ORDER OF THE COORDINATE BENCH WHICH READS AS UNDER : WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. WE FIND IN THE CASE BEFORE US THAT THE PAYMENT HAS BEEN MADE TO AN INDIVIDUAL RESIDENT IN INDIA I.E., SHRI PARAMJIT SINGH. THIS PAYMENT HAS BEEN MADE IN RESPECT OF PURCHASE OF LAND WHICH BELONGS TO THE NON - RESIDENTS BUT THE RIGHTS THEREIN WERE ASSIGNED UNEQUIVOCALLY TO THE POWER OF ATT ORNEY HOLDER. THE AGREEMENT HAS BEEN ENTERED INTO WITH THE POWER OF ATTORNEY HOLDER AND IT IS NOT A CASE THAT THE PAYMENT HAS BEEN MADE TO SHRI PARAMJIT SINGH AS A REPRESENTATIVE NOMINATED BY THE NON - RESIDENT. NO DOUBT, WHEN NON - RESIDENT HIMSELF NOMINATES A PARTICULAR AGENT TO WHOM PAYMENT SHOULD BE MADE AND PURSUANT TO THAT DIRECTION, THE ASSESSEE PAYS THE SUM TO THE AGENT SO NOMINATED, THE PROVISIONS OF S. 195 OF THE ACT WILL APPLY, IN VIEW OF THIS LEGAL POSITION SET OUT BY THE HONBLE BOMBAY HIGH COURTS JUDGMENT IN NARSEE NAGSEE & CO. VS. CIT (1959) 35 ITR 134 (BOM) BUT THE FACTS BEFORE US ARE MATERIALLY DIFFERENT IN AS MUCH AS BY WAY OF POWER OF ATTORNEYS EXECUTED BY THE CO - OWNERS OF THE LAND, THE RIGHTS IN THE LAND WERE ADMITTEDLY ASSIGNED TO THE POWER OF ATTORNEY HOLDER. IN THESE CIRCUMSTANCES, THE POWER OF ATTORNEY HOLDER WAS NOT MERELY ACTING AS AN AGENT OF THE NON - RESIDENTS TO RECEIVE MONEY BUT AS A PERSON WHO HAD THE RIGHT TO ALIENATE THE LAND BY THE VIRTUE OF RIGHTS VESTED IN HIM BY THE POWER OF A TTORNEYS SIGNED BY THE COOWNERS. THERE IS NO DISPUTE THAT SHRIPARAMJIT SINGH HAD THE RIGHT TO SELL THE LAND IN QUESTION. THE QUESTION OF TDS UNDER S. 195 WILL ONLY ARISE WHEN PAYMENT IS MADE BY THE SAID SHRIPARAMJIT SINGH TO THE ACTUAL OWNERS OF LAND SOLD. THERE IS NO AMBIGUITY ABOUT THE LEGAL POSITION INSOFAR AS IN THE QUESTION AS TO WHETHER THE PAYMENTS TO THE RESIDENT CAN BE COVERED BY S. 195 OF THE ACT. THIS SECTION ONLY APPLIES TO PAYMENTS WHICH ARE MADE TO NONRESIDENTS. UNDER THESE CIRCUMSTANCES, UNLE SS THE REVENUE CAN DEMONSTRATE THAT THE RESIDENT HAS ONLY ACTED AS AN AGENT TO RECEIVE THE MONEY AT THE INSTRUCTION OF NON - RESIDENTS AS WAS THE CASE BEFORE THE HONBLE BOMBAY HIGH COURT IN NARSEENAGSEE& CO. (SUPRA), THE PROVISIONS OF S. 195 CANNOT BE INVOK ED. A CO - ORDINATE BENCH OF THIS TRIBUNAL IN TECUMESH PRODUCTS (I) LTD. VS. DY. CIT (2007) 13 SOT 489 (HYD), HAS 6 I.T.A. NO .3 48 /VIZ/201 6 VO BILINENI SURYA PRASAD, KAKINADA EVEN HELD THAT WHEN A PAYMENT IS MADE TO RESIDENT EVEN ON BEHALF OF THE NON - RESIDENT, THE PROVISIONS OF S. 195 OF THE ACT DO NOT APPLY. IF SUCH BE THE ESTEEMED VIEWS OF A CO - ORDINATE BENCH, IT IS FUTILE TO SUGGEST THAT MERELY BECAUSE PAYMENT IS MADE TO A RESIDENT, IN RESPECT OF A PROPERTY WHICH HAS LEGAL OWNERSHIP BY NON - RESIDENTS, THE PROVISIONS OF S. 195 OF THE ACT WILL APPLY. IN VIEW OF THIS DI SCUSSION AND BEARING IN MIND ENTIRETY OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE PAYMENT OF RS. 13.12 LAKHS MADE BY THE ASSESSEE TO SHRI PARAMJIT SINGH, ON THE FACTS OF THIS CASE CANNOT BE CONSIDERED AS PAYMENT MADE TO NON - RESIDENT AND, ACCORDINGL Y, S. 195 OF THE ACT DOES NOT COME INTO PLAY. WE, THEREFORE, QUASH THE IMPUGNED TAX WITHHOLDING DEMAND AND HOLD THAT THE ASSESSEE CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT UNDER SS. 201 AND 201(1A) OF THE ACT. THE ASSESSEE GETS RELIEF ACCORDINGLY. 6.2. SINCE THE FACTS ARE IDENTICAL, RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDINATE BENCH OF CHANDIGARH, WE SET ASIDE T HE ORDER PASSED BY THE LD.CIT(A) AND QUASH THE ORDER PASSED UNDER SECTION 201/201(1A) OF THE ACT AND ALLOW THE APPEAL OF THE ASSESSEE . 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. T HE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 10 TH OCTOBER, 201 8 . S D/ - S D/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 10 . 10 .2018 L.RAMA, SPS 7 I.T.A. NO .3 48 /VIZ/201 6 VO BILINENI SURYA PRASAD, KAKINADA / COPY OF THE ORDER FORWARDED TO: - 1. / THE APPELLANT VO BILINENI SURYA PRASAD , D.NO.67 - 3 - 14/2 , KAKINADA , EAST GODAVARI DIST. 2 . / THE RESPONDENT THE DDIT (IT & TP), VISAKHAPATNAM 3 . THE COMMISSIONER OF INCOME TAX (IT&TP) , HYDERABAD 4. THE COMMISSIONER OF INCOME TAX (APPEALS) - 1 0 , HYDERABAD 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM