Manne Rajesh Kumar, Hyderabad V. The Deputy Director of Income Tax (IT & TP), Visakhapatnam

ITA 40/VIZ/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6728 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 30-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S RAVI SHANKAR NARAYAN
• Assessee Lawyers: D BALAJI

Judgement Text

ITA NO.40/VIZAG/2017 MANNE RAJESH KUMAR, VIZIANAGARAM 1 , , 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.40/VIZAG/2017 ( / ASSESSMENT YEAR: 2012-13) MANNE RAJESH KUMAR VIZIANAGARAM THE DEPUTY DIRECTOR OF INCOME TAX (IT & TP) VISAKHAPATNAM [PAN NO. ANLPK1705C ] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI D. BALAJI, AR / RESPONDENT BY : SHRI S. RAVI SHANKAR NARAYAN, DR / DATE OF HEARING : 30.08.2017 / DATE OF PRONOUNCEMENT : 06.09.2017 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-10 {CIT(A)}, H YDERABAD VIDE ITA NO.0008/CIT(A)-10/2014-15 DATED 24.3.2016 FOR T HE ASSESSMENT YEAR 2012-13. ITA NO.40/VIZAG/2017 MANNE RAJESH KUMAR, VIZIANAGARAM 2 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL: 1. THE APPELLATE ORDER PASSED BY THE LEARNED COMMISSIO NER OF INCOME TAX APPEALS - X, HYDERABAD, IN ITA NO. 008/CI T(A)-10114- 15 IS CONTRARY TO THE LAW AND FACTS OF THE CASE, IN SOFAR AS IT IS AGAINST THE ASSESSEE. 2. THE LEARNED CIT (APPEALS) OUGHT TO HAVE SEEN THAT I NTEREST U/S 201(1A), IS CHARGEABLE ON THE TAX WHICH IS NOT PAID, WHICH IS ALSO IN LINE WITH THE CBDT INSTRUCTION NO. 2/2014, AND IN THE CASE OF THE ASSESSEE SUCH INTEREST IS NI L AS THERE WAS NO TAX PAYABLE BY THE SELLER. 3. WITHOUT PREJUDICE TO GROUND NO. 2, THE LEARNED CIT (APPEALS) OUGHT TO HAVE ALLOWED THE CONTENTION OF T HE ASSESSEE DISCUSSED IN PARAGRAPH 4.9 OF THE ORDER PA SSED BY THE LEARNED CIT (APPEALS) AS THE GROUND TAKEN BY TH E ASSESSEE IS A LEGAL GROUND. 4. THE LEARNED CIT (APPEALS) OUGHT TO HAVE SEEN THAT T HE PROVISIONS OF SECTION 195 ARE APPLICABLE TO PAYMENT S MADE TO NON-RESIDENT OR ITS AGENT, AND NOT TO A BANK WHI CH PROVIDED A LOAN AND TO A GPA HOLDER. 5. THE LEARNED CIT (APPEALS) OUGHT NOT TO HAVE USED 20 .6% AS THE RATE OF TDS THAT REQUIRES TO BE DEDUCTED. 6. THE LEARNED CIT (APPEALS) OUGHT TO HAVE SEEN THAT T HE ASSESSING OFFICER IN HIS REMAND REPORT HAS ADMITTED THAT NO INTEREST MAY BE LEVIED, THAT THE ASSESSING OFFICER WAS ALREADY AWARE DURING THE PROCEEDINGS U/S 201(1A) TH AT THE SELLER HAS FILED HIS RETURN ON 14-12-2012 AFTER DEC LARING LONG TERM CAPITAL LOSS. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE GROUNDS. 2. GROUND NOS.1 & 7 ARE GENERAL IN NATURE AND DO NO T REQUIRE SPECIFIC ADJUDICATION. GROUND NO.4 IS RELATED TO THE CONTEN TION OF THE ASSESSEE THAT THE PAYMENT MADE TO THE GPA HOLDER WHO IS AN A GENT OF NON- ITA NO.40/VIZAG/2017 MANNE RAJESH KUMAR, VIZIANAGARAM 3 RESIDENT AND THE PAYMENTS MADE TO THE DEWAN HOUSING , IS NOT LIABLE FOR DEDUCTION OF TDS AS PER THE PROVISIONS OF SECTION 1 95 OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT'). IN TH E ASSESSEES CASE, THE ASSESSEE PURCHASED THE PROPERTY FROM MR. G. SATISH KUMAR, RESIDENT OF THE USA VIDE DOCUMENT NO.1492 ON 11.4.2011 AND REGI STERED BEFORE THE SRO, VIZIANAGARAM FOR A SUM OF ` 34 LAKHS. AS PER THE PROVISIONS OF SECTION 195 OF THE ACT, TAX IS TO BE DEDUCTED ON AN Y SUM PAYABLE TO NON-RESIDENT WHICH IS CHARGEABLE TO TAX. THE ASSES SEE CONTENDED THAT THE ASSESSEE HAS GIVEN A GENERAL POWER OF ATTORNEY TO SMT. ALLAM BABY AND THE SALE CONSIDERATION WAS PAID PARTLY TO DEWAN HOUSING FINANCE LTD. AND THE GPA HOLDER ON BEHALF OF SELLER. THE P URCHASER HAD PAID A SUM OF ` 28,14,000/- TO M/S. DEWAN HOUSING PRIVATE LIMITED TOWARDS THE ADJUSTMENT OF LOAN TAKEN BY THE SELLER AND THE BALANCE AMOUNT OF ` 5,86,000/- WAS PAID TO THE GPA HOLDER. SINCE THE P AYMENT WAS MADE TO THE GPA HOLDER AND THE DEWAN HOUSING FINANCE LTD. A ND IT WAS NOT PAID TO NRI DIRECTLY, THE PROVISIONS OF SECTION 195 OF T HE ACT ARE NOT ATTRACTED. 3. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ASSESSEE HAS PURCHASED THE PROPERTY BELONGING TO SH RI SATISH KUMAR, WHO IS A RESIDENT OF USA AND WHO HAPPENS TO BE NRI. SMT. ALLAM BABY ITA NO.40/VIZAG/2017 MANNE RAJESH KUMAR, VIZIANAGARAM 4 IS A GPA HOLDER FOR THE PURPOSE OF FACILITATING THE TRANSACTION IN INDIA. SIMILARLY, THE HOUSING LOAN WAS TAKEN BY THE SELLER FROM DEWAN HOUSING LIMITED, HENCE, THE PAYMENTS MADE TO DEWAN HOUSING LIMITED AS WELL AS WITH SMT. ALLAM BABY CONSTITUTES THE PAYMENTS MA DE TO THE NON- RESIDENT AND THE TDS IS DEDUCTIBLE AS PER THE PROVI SIONS OF SECTION 195 OF THE ACT AND THIS GROUND OF APPEAL OF THE ASSESSE E IS DISMISSED. 4. GROUND NOS.2, 3, 5 & 6 ARE RELATED TO THE CHARGI NG OF INTEREST U/S 201(1A) OF THE ACT ON THE PAYMENT MADE TO NRI. THE ASSESSEE HAS PURCHASED THE PROPERTY FROM SHRI SATISH KUMAR AN NR I. AS PER THE PROVISION OF I.T. ACT, THE ASSESSEE REQUIRED TO DED UCT THE TAX AT SOURCE U/S 195 OF THE ACT ON THE PAYMENT MADE TO NON-RESID ENT BUT NOT DEDUCTED THE TAX. HOWEVER, THE NON-RESIDENT WHO SO LD THE LAND TO THE ASSESSEE HAS FILED THE RETURN OF INCOME DISCLOSING THE LONG TERM CAPITAL GAINS ON 14.12.2012. THE A.O. CHARGED THE INTERES T U/S 201(1A) OF THE ACT FROM THE DATE OF PAYMENT MADE TO NRI TO THE DAT E OF FILING OF THE RETURN OF INCOME BY THE NON-RESIDENT. ACCORDINGLY, LEVIED THE INTEREST @ 1% AMOUNTING TO ` 1,52,938/- ON THE ASSESSEE. AGGRIEVED BY THE ORDE R OF THE A.O., THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) AND THE CIT(A) CONFIRMED THE ORDER OF THE A.O. AGGRIEVED B Y THE ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.40/VIZAG/2017 MANNE RAJESH KUMAR, VIZIANAGARAM 5 5. APPEARING FOR THE ASSESSEE, THE LD. A.R. ARGUED THAT THE DEDUCTEE MR. SATISH KUMAR HAS FILED THE RETURN OF INCOME DEC LARING LONG TERM CAPITAL GAINS WHICH RESULTED IN LONG TERM CAPITAL L OSS. CONSEQUENTLY, THERE WAS NO DEMAND OR TAX PAYABLE BY THE SELLER FO R SALE OF THE PROPERTY TO THE ASSESSEE. THE SELLER HAD FILED THE RETURN OF INCOME AND THE SAME WAS ADMITTED BY THE A.O. IN THE REMAND REP ORT FILED BEFORE THE LD. CIT(A). THE LD. A.O. ALSO ACCEPTED THAT THERE WAS NO SUM CHARGEABLE TO TAX AS PER THE RETURN OF INCOME FILED BY THE NON-RESIDENT. SINCE THERE IS NO TAX PAYABLE BY THE NON-RESIDENT A ND THE SALE OF THE PROPERTY DOES NOT RESULT INTO ANY TAX LIABILITY, TH ERE IS NO CASE FOR CHARGING INTEREST U/S 201 OR 201(1A) OF THE ACT. T HE FACT THAT THE DEDUCTEE HAS NO TAX LIABILITY WAS KNOWN TO THE ASSE SSING OFFICER AT THE TIME OF PASSING THE ORDER U/S 201(1A) OF THE ACT AN D THE SAME WAS BROUGHT TO THE NOTICE OF CIT(A) BUT THE CIT(A) DID NOT AGREE SINCE THERE WAS NO SUCH GROUND RAISED BY THE ASSESSEE. THE LD. A.R. ARGUED THAT THERE IS NO CASE FOR CHARGING INTEREST U/S 201(1A) OF THE ACT WHEN THERE IS NO TAX LIABILITY. THIS VIEW IS SUPPORTED BY INS TRUCTION NO.2 OF 2014 ISSUED BY THE CBDT DATED 26.2.2014. HENCE, THE LD. A.R. ARGUED THAT THE ORDERS OF THE LOWER AUTHORITIES BE SET ASIDE. 6. ON THE OTHER HAND, THE LD. D.R. RELIED ON THE OR DERS OF THE LOWER AUTHORITIES. ITA NO.40/VIZAG/2017 MANNE RAJESH KUMAR, VIZIANAGARAM 6 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. IN THE INSTANT CASE, THE ASSESSEE HAS PURCHASED THE PROPER TY FROM MR. G. SATISH KUMAR WHO IS A NON-RESIDENT. AS PER THE PRO VISIONS OF SECTION 195 OF THE ACT, THE ASSESSEE IS REQUIRED TO DEDUCT THE TAX AT SOURCE ON SUMS PAID TO THE NON-RESIDENT. HOWEVER, THE CENTRA L BOARD OF DIRECT TAXES HAS ISSUED AN INSTRUCTION NO.2 OF 2014 DATED 26.2.2014 CLARIFYING THAT THE INTEREST U/S 201(1A) OF THE ACT SHOULD BE RESTRICTED TO THE APPROPRIATE PORTION OF THE SUM CHARGEABLE TO TAX, E VEN IN CASES WHERE THERE IS NO APPLICATION MADE BY THE ASSESSEE UNDER SUB-SECTION (2) OF SECTION 195 OF THE ACT. FOR READY REFERENCE, WE RE PRODUCE HEREUNDER RELEVANT PARAGRAPH NO.3 OF THE CIRCULAR NO.2 OF 201 4 WHICH READS AS UNDER: THE MATTER HAS BEEN EXAMINED IN THE BOARD AND ACCOR DINGLY, IN EXERCISE OF POWERS VESTED UNDER SECTION 119 OF THE ACT, THE BOARD HEREBY DIRECTS THAT IN A CASE WHERE THE ASSESSEE FAILS TO DEDUCT TAX UNDER SECTION 195 OF THE ACT, THE ASSESSING OFFICER SHALL DETERMI NE THE APPROPRIATE PROPORTION OF THE SUM CHARGEABLE TO TAX AS MENTIONE D IN SUB SECTION (1) OF SECTION 195 TO ASCERTAIN THE TAX LIABILITY ON WH ICH THE DEDUCTOR SHALL BE DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER SECTION 2 01 OF THE ACT, AND THE APPROPRIATE PROPORTION OF THE SUM WILL DEPEND ON TH E FACTS AND CIRCUMSTANCES OF EACH CASE TAKING INTO ACCOUNT NATU RE OF REMITTANCES, INCOME COMPONENT THEREIN OR ANY OTHER FACT RELEVANT TO DETERMINE SUCH APPROPRIATE PROPORTION. 8. IN THE INSTANT CASE, THE DEDUCTEE HAS FILED THE RETURN OF INCOME ON 14.12.2012 AND THE LONG TERM CAPITAL GAINS RESULTED INTO CAPITAL LOSS WHICH RESULTED INTO NIL DEMAND. ACCORDING TO THE A SSESSEE, THERE WAS ITA NO.40/VIZAG/2017 MANNE RAJESH KUMAR, VIZIANAGARAM 7 NO TAX PAYABLE BY THE DEDUCTEE ON THE TRANSACTION O F SALE OF IMMOVABLE PROPERTY. WHEN THERE IS NO TAX PAYABLE BY THE DEDUC TEE ON SALE OF LAND, THERE IS NO QUESTION OF CHARGING INTEREST U/S 201(1 A) OF THE ACT, AS PER INSTRUCTION NO.2 OF 2014 DATED 26.2.2014 AND THE CI RCULARS ARE BINDING ON THE DEPARTMENTAL OFFICERS. THEREFORE, WE HOLD T HAT THERE IS NO CASE FOR CHARGING INTEREST U/S 201(1A) OF THE ACT AS PER INSTRUCTION NO.2 OF 2014 AND ACCORDINGLY, THE ORDERS OF THE LOWER AUTHO RITIES ARE SET ASIDE AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 6 TH SEPT17. SD/- SD/- ( . ) ( . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 06.09.2017 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT SHRI MANNE RAJESH KUMAR, MIG PLO T NO.23, BABAMETTA, VIZIANAGARAM-535001. 2. / THE RESPONDENT THE DY. DIRECTOR OF INCOME TAX ( IT & TP), VISAKHAPATNAM 3. + / THE CIT (IT&TP), HYDERABAD 4. + ( ) / THE CIT (A)-10, HYDERABAD ITA NO.40/VIZAG/2017 MANNE RAJESH KUMAR, VIZIANAGARAM 8 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM