Sh. Harpal Singh, Chandigarh V. Dy. Director of Income Tax, Chandigarh

ITA 37/CHANDI/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4088 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 24-07-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 21-01-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: CHANDRA KANTA
• Keywords: Residential status
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCHA, CHANDIGARH BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO.37/CHD/2016 ASSESSMENT YEAR: 2010-11 SH. HARPAL SINGH, VS. THE DCIT H.NO. 205, SECTOR-36A (INTERNATIONAL TAXATION) CHANDIGARH CHANDIGARH PAN NO. AASPA8704D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI. TEJ MOHAN SINGH REVENUE BY : SMT. CHANDRAKANTA DATE OF HEARING : 24/07/2018 DATE OF PRONOUNCEMENT : 08/08/2018 ORDER PER DR. B.R.R. KUMAR, A.M: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF THE LD. CIT(A)-43, NEW DELHI DT. 30/12/2015. 2. IN THE PRESENT APPEAL ASSESSEE HAS RAISED FOLLOW ING GROUNDS: THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THE F ACTS AND CIRCUMSTANCES OF THE CASE AND HAS THEREBY ERRED IN UPHOLDING THE ASSESSE E IN DEFAULT U/S 201(IA) OF THE INCOME TAX ACT, 1961. THE APPELLANT HAS PURCHASED PROPERTY FROM NON-RESID ENT THROUGH HIS GPA WHO WAS RESIDENT OF INDIA. THE PAYMENT WAS MADE TO THE ATTORNEY HOLDER. THE APPELLANT IS NOT LIABLE TO DEDUCT TDS WHEN PAYMENT IS MADE TO A POWER OF ATTORNEY HOLDER. THE ISSUE IS COVERED BY THE JUDGMENT OF THE HONBLE ITAT IN 128 TTJ 116 (2010) IN THE CASE OF RAKESH CHAUHAN UNDER SECTION DDIT (INTE RNATIONAL TAXATION) IN VIEW OF THE ABOVE, IT SI PRAYED THAT THE ORDER U NDER SECTION 201(IA) OF THE INCOME TAX ACT 1961 MAY KINDLY BE QUASHED. 3. THE SHORT ISSUE TO BE DEALT IN THIS CASE IS WHET HER OR NOT THE ASSESSEE IS LIABLE TO DEDUCT TDS WHEN PAYMENT IS MADE TO A POWE R OF ATTORNEY HOLDER EVEN WHEN THE DE-FACTO AND AS WELL AS DE-JURE OWNERSHIP LIES WITH THE NRI. 2 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE PU RCHASED PROPERTY FROM NRI WITHOUT DEDUCTING TDS ON THE PAYMENTS MADE AS CONSI DERATION FOR THE SAID PURCHASE. THE ASSESSEE FAILED TO DEDUCT TAX FROM TH E PAYMENT OF RS. 1,15,00,000/- MADE TO THE NON RESIDENTS SHRI VINOD AND SMT. ANITA. THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE ASS ESSEE HAD ENTERED INTO AN AGREEMENT FOR PURCHASE OF PROPERTY WITH SHRI VINOD AND SMT. ANITA AND THE TRANSACTION WAS THROUGH POA HOLDER SHRI. D.S. SWANI WHO IS A RESIDENT AND HENCE THE ASSESSEE WAS UNDER THE IMPRESSION THAT AS HE WA S DEALING WITH A RESIDENT PERSON HE WAS NOT REQUIRED TO DEDUCT THE TDS. 5. THE PROPERTY WAS FINALLY SOLD BY THE SELLER THRO UGH A REGISTERED DEED WHICH PROVED THAT THE PERSON D.S. SWANI IS ONLY AN AGENT OF THE OWNER BUT NOT WHO IS A DE-FACTO OWNER BY THE VIRTUE OF HAVING ANY IN ALIENABLE RIG HT. THE NON-RESIDENT SELLERS HAVE LATER DECLARED THE CAPITAL GAIN AMOUNT ING TO RS. 3,00,800/- EACH ARISING ON THE SALE OF THE PROPERTY IN THEIR RETURN S AND PAID TAXES THEREOF. THE ASSESSING OFFICER HELD THAT THE ASSESSEE IS LIA BLE TO PAY INTEREST OF RS. 85,530/- UNDER SECTION 201(1)(A) CALCULATED @12% PER ANNUM. 6. BEFORE US, LD. AR ARGUED THAT SINCE THE ASSESSEE HAS BEEN DEALING WITH AN INDIAN RESIDENT AND SO NO TAX WAS TO BE DEDUCTED BY THE PURCHASER AND SINCE THE SELLER HAS ALREADY PAID THE TAXES THE INTEREST CANNOT BE CHARGED IN THE HANDS OF THE ASSESSEE. 7. THE PROVISIONS OF 201(1) STIPULATES THAT THE ASS ESSEE IS LIABLE TO DEDUCT TAX ON THE PAYMENT AND SECTION 201(1)(A) CASTS LIABILIT Y OF THE ASSESSEE TO PAY INTEREST ON THE DEFAULT. THOUGH THE STATUTORY PROVI SIONS CASTS LIABILITY ON THE ASSESSEE, KEEPING IN VIEW THE PAYMENT RECEIVED BY T HE EXCHEQUER, WHETHER BY THE ASSESSEE(PURCHASER) OR BY THE RECIPIENT(SELLER) LEVERAGE WAS GIVEN BY THE 3 AUTHORITIES NOT TO BURDEN THE ASSESSEE WITH THE STR ICT LIABILITY OF THE TDS DEDUCTION WHEN THE RECIPIENT PAYS THE DUE TAXES VIDE CIRCULAR NO. 275/201/95-IT DT. 29/01/1997. THIS DOESNT MEAN THE ASSESSEE IS ABSOL VED TOTALLY OF THE RESPONSIBILITY TO DEDUCT THE TAXES AND ALSO INTERES T IF ANY. THIS CIRCULAR ABSOLVES THE ASSESSEE IN THE CASES WHERE THE DUE PAYMENTS OF TAX OR INTEREST HAS BEEN DULY PAID BY THE RECIPIENT. HON'BLE DELHI HIGH COURT IN THE CASE OF DIT VS. JAC ABS CIVIL INCORPORATE (2011] 330 ITR 0578 (DELHI) AT PARA 7, HAVE HELD AS FOLLOWS:- ' SEC, 2O1{1A) SPECIFICALLY PROVIDES THAT IF A PERSON OR AUTHORITY WHO IS BOUND TO MAKE A DEDUCTION OF TAX AT SOURCE AS CONTEMPLATED, BY THE STATUTE DOES NOT DEDUCT OR AFTER DEDUCTING FAILS TO PAY THE TAX, THE N SUCH A PERSON OR AUTHORITY IS LIABLE TO PAY SIMPLE INTEREST ON THE AMOUNT OF TAX NOT DEDUCTED FROM THE DATE ON WHICH SUCH TAX WAS DEDUCTIBLE TO THE DATE ON WHICH THE SAID TAX WAS ACTUALLY PAID. THUS, IN RESPECT OF INTEREST INCOME ON WHICH DEDUCTION OF TAX AT SOURCE SHOULD HAVE BEEN MADE, THE LIABILITY TO PAY INTERES T IS FASTENED ON THE PERSON OR AUTHORITY WHO FAILED, TO MAKE DEDUCTION AS REQUIRED UNDER SECTION 194A. THEREFORE, IN RESPECT OF THE TAX PAYABLE ON THE SAI D INTEREST INCOME, THE ASSESSEE ALSO CANNOT BE TAKEN TO BE LIABLE TO PAY INTEREST.' OTHERWISE, IT WILL MEAN THAT THERE ARE TWO PERSONS UNDER THE ACT LIABLE TO PAY INTEREST ON TAX ON THE SAME INCOME. THE LEGISLATU RE WOULD NOT HAVE CONTEMPLATED SUCH A SITUATION WHERE IN RESPECT OF T HE TAX ON INTEREST INCOME, TWO PERSONS ARE LIABLE TO PAY INTEREST FOR THE DELA YED PAYMENT OF TAX. WE ARE, THEREFORE, INCLINED TO HOLD THAT WHATEVER THERE IS A POSSIBILITY OF A DEDUCTION OF TAX AT SOURCE, THE PERSON WHO HAD /AILED TO DEDUCT TAX AT SOURCE IS LIABLE TO PAY INTEREST AND NOT THE ASSESSES AS OTHERWISE, THERE WILL BE CHARGING OF INTEREST TWICE ON THE PAYMENT OF TAX IN RELATION TO THE SAME INCOM E, SUCH AN INTERPRETATION SHOULD NORMALLY BE AVOIDED. 8. IT WAS HELD, IN FACT, THE FIRST TWO SENTENCE OF THIS PARA GO AGAINST THE ASSESSEE, WHICH SAYS THAT AN AUTHORITY WHICH IS BOU ND TO MAKE A DEDUCTION OF TAX AT SOURCE AS PER STATUTE, IF DOES NOT DEDUCT, O R AFTER DEDUCTING FAILS TO PAY THE TAX, THAN SUCH A PERSON OR AUTHORITY IS LIABLE TO PAY SIMPLE INTEREST ON THE AMOUNT OF TAX NOT DEDUCTED. THIS SHOWS THAT, LIABIL ITY OF THE TAX DEDUCTOR IS ABSOLUTE. THE ASSESSEE WHO SHOULD BE THE DEDUCTOR A S PER STATUTE FAILED TO DEDUCT TAXES AND IS SEEKING TO BENEFIT ITSELF BY CL AIMING THE BENEFITS WHICH ARE AVAILABLE TO THE DEDUCTEE. 4 9. THE LD. AR HAS ALSO REFERRED TO THE DECISION OF THE ITAT, HYDERABAD IN THE CASE OF TECUMSEH PRODUCTS(I) LTD. ON PERUSAL WE FIN D THE FACTS OF THE CASE ARE NOT APPLICABLE TO THE ISSUE BEFORE US. HENCE, KEEPI NG IN VIEW THE PROVISIONS OF THE ACT AND FACTS OF THE CASE WE HOLD THAT THE INTE REST UNDER SECTION 201(1)(A) HAS BEEN RIGHTLY CONFIRMED BY THE LD.CIT(A). 10. AS A RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DIVA SINGH) (DR. B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 08/08/2018 AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR