Our Lady Of Miracles (Milagres Church), Mangaluru V. The Assistant Commissioner of Income Tax(International Taxation), Mangaluru

ITA 935/BANG/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2342 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 02-02-2018
• Assessment Year: misc
• Appeal Filed On: 25-04-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR P V PRADEEP KUMAR
• Assessee Lawyers: BHARADWAJ SESHADRI
• Section: 54F; 201(1); 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER IT (IT) A NO. 885 /BANG/201 7 ASSESSMENT YEAR : 2014 - 15 THE DEPUTY COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION, MANGALORE. VS. M/S. OUR LADY OF MIRACLES, (MILAGRES CHURCH), HAMPANKATTA, MANGALORE 575 001. TAN: BLRM00188G APPELLANT RESPONDENT IT(IT)A NO. 935/BANG/2017 ASSESSMENT YEAR : 2014 - 15 M/S. OUR LADY OF MIRACLES, (MILAGRES CHURCH), HAMPANKATTA, MANGALORE 575 001. TAN: BLRM00188G VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION, MANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI BHARADWAJ SESHADRI, CA RE VENUE BY : DR. P.V. PRADEEP KUMAR, ADDL. CIT (DR) DATE OF HEARING : 23 . 0 7 .2018 DATE OF PRONOUNCEMENT : 31 . 0 8 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND R EVENUE AND THESE ARE DIRECTED AGAINST THE ORDER OF LD. CIT (A)-12,BANGAL ORE DATED 14.02.2017 FOR ASSESSMENT YEAR 2014-15. 2. THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL ARE AS UNDER. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS)- 12, BENGALURU IS CONTRARY TO THE LAW AND FACTS OF T HE CASE. IT(IT)A NOS. 885 & 935/BANG/2017 PAGE 2 OF 10 2. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS-1 2), BENGALURU HAS ERRED IN TREATING THE ASSESSEE NOT TO BE AN ASS ESSEE IN DEFAULT AS MR. NORBERT J. SALDHANA AND MR. VITUS GERALD SALDHA NA HAVE FILED THEIR RETURNS OF INCOME AND ADMITTED THE CAPITAL GA INS AND PAID THE TAXES DUE THEREON. 3. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS-1 2), BENGALURU HAS ERRED IN NOT CONSIDERING THE FACT THAT PROVISO TO SEC. 201(1) IS APPLICABLE ONLY FOR RESIDENTS AND NOT NON-RESIDENTS . 4. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS-1 2), BENGALURU ALSO DID NOT CONSIDER THE LEGAL POSITION THAT THE D EDUCTION OF TAX IS NOT THE FINAL ASSESSMENT OF THE INCOME OF THE ASSESSEE. THE HONOURABLE SUPREME COURT IN THE CASE OF TRANSMISSION CORPORATI ON OF A.P. LTD AND ANR. VS CIT REPORTED IN [1999] 239 ITR I-87 HAS HELD THAT TDS PROVISIONS ARE MEANT FOR TENTATIVE DEDUCTION AND SU BJECT TO REGULAR ASSESSMENT. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) -12, BENGALURU HAS ERRED IN HOLDING THAT THE ASSESSEE IS NOT LIABL E FOR DEDUCTING THE TAX U/S 201(1). 6. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-12, BENGALURU MAY BE CANCELLED AND THAT OF THE A.O. MAY BE RESTORED. 3. THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL ARE AS UNDER. 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE LEVY OF INTEREST UNDER SECTION 201(1 A) OF THE INCOME TAX ACT, 1961. 2. THE ORDER OF THE LEARNED RESPONDENT-OFFICER, AS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), DESER VES TO BE QUASHED AS IT SEEKS TO LEVY INTEREST FOR AN ASSESSM ENT YEAR IN WHICH THE TRANSACTIONS ON WHICH THE ORDER IS BASED DID NO T TAKE PLACE. 3. WITHOUT PREJUDICE, LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE LEVY OF INTEREST UNDER SECTION 201(1A) CANNOT S URVIVE IN THE ABSENCE OF A FINDING THAT THE ASSESSEE IS AN ASSESS EE IN DEFAULT UNDER SECTION 201(1) WHICH VIEW IS SUPPORTED BY A CATENA OF DECISIONS. 4. IN CASES WHERE THE PAYEE HAS PAID THE TAX EITHER ON TIME OR WITH INTEREST DUE, THE LEVY OF INTEREST UNDER SECTION 20 1(1 A), BEING COMPENSATORY IN NATURE, WOULD RESULT IN THE UNJUST ENRICHMENT OF THE REVENUE AND THUS OUGHT TO BE STRUCK DOWN. 5. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF IT(IT)A NOS. 885 & 935/BANG/2017 PAGE 3 OF 10 ARGUMENTS, THE APPELLANT MOST HUMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED BY DELETING THE INTEREST UNDER S.201(1A) OF THE ACT. 4. THE LD. AR OF ASSESSEE HAS ALSO RAISED TWO ADDIT IONAL GROUNDS OF APPEAL WHICH ARE AS UNDER. 1. WITHOUT PREJUDICE, THE CIT(A) OUGHT TO HAVE APPR ECIATED THAT EVEN IF THE INTEREST UNDER S.201(1A) OF THE ACT WAS CHAR GEABLE, THEN THE SAME AS COMPUTED BY THE AO WHICH WAS UPHELD BY THE CIT(A) WAS EXORBITANT, BEING COMPUTED ON THE AMOUNT OF TAX FAR IN EXCESS OF THE ACTUAL LIABILITY WHICH WAS NOT AS PER THE STATUTE. 2. THE CIT(A) OUGHT TO HAVE DIRECTED THE AO TO RE-C OMPUTE THE INTEREST CHARGEABLE UNDER S.201(1A) AFTER GRANTING DUE CREDIT FOR EXEMPTION CLAIMED BY THE PAYEE AS PER THE BOARD CIR CULAR RELIED UPON BY THE APPELLANT, IN THE INTEREST OF JUSTICE & EQUI TY. 5. BRIEF FACTS TILL THE STAGE OF PASSING OF THE ORD ER BY THE AO U/S. 201(1) AND 201(1A) OF IT ACT ARE NOTED BY CIT(A) IN PARA 4 OF HIS ORDER WHICH IS REPRODUCED HEREINBELOW FOR READY REFERENCE. 4. THE FACTS OF THE CASE MAY BE NOTED IN BRIEF. THE APPELLANT PURCHASED IMMOVABLE PROPERTY HELD BY TWO NON-RESIDE NT BROTHERS, NAMELY, MR. NORBERT JEROME SALDANA AND MR. VITUS HU BERT SALDANA ON 26.03.2013 FOR A CONSIDERATION OF RS. 2,50,00,00 0/-. THE ASSESSING OFFICER FOUND OUT THAT TAX DEDUCTED AT SOURCE WAS N OT DONE ON THE PAYMENT TO NON-RESIDENTS IN ACCORDANCE WITH SECTION 195(1) OF THE ACT. THE ASSESSING OFFICER HAD NOTED THAT THE PAYEE S HAD FILED A RETURN OF INCOME FOR THE ASSESSMENT YEAR 201314 AS PER THE DETAILS BELOW: SI. NO. NAME OF THE NON- RESIDENT SELLER PAN DT OF FILING OF RETURN INCOME FROM LONG TERM CAPITAL GAINS BEFORE CLAIMING DEDUCTIONS U/S 54F, 54EC ETC. IN RS. NET INCOME SHOWN FROM CAPITAL GAINS IN RESPECT OF PROPERTY IN QUESTION AFTER CLAIM OF DEDUCTIONS U/S 54EC ETC. IN RS. 1 MR. NORBERT J SALDANHA CXNPS7053M 26.07.2013 56,99,883 6,99,883 2 MR. VITUS GERALD SALDANHA ERPPS0887D 17.07.2013 1,67,14,796 69,51,796 TOTAL CAPITAL GAINS OUT OF THE SALE CONSIDERATION PAID BY THE ASSESSEE 2,24,14,679 IT(IT)A NOS. 885 & 935/BANG/2017 PAGE 4 OF 10 THE ASSESSING OFFICER ISSUED A NOTICE UNDER SECTION 201 OF THE ACT. AFTER THE CONSIDERING THE EXPLANATION OF THE APPELL ANT TO BE UNSATISFACTORY, THE ASSESSING OFFICER HELD THE ASSE SSEE TO BE AN ASSESSEE IN DEFAULT. THE ASSESSING OFFICER PASSED A N ORDER UNDER SECTION 201(1) AND 201(1A)OF THE ACT ON 10.12.2014 WHICH HAS BEEN IMPUGNED IN THE APPEAL. 6. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE CIT(A) WHO HAS HELD THAT IN THE FACTS OF PRESENT CASE, THE ASS ESSEE CANNOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT BECAUSE THE PAYEES HAD CO NSIDERED THE PAYMENT RECEIVED, PAID TAXES ON IT AND FILED RETURN IN INDI A. REGARDING DEMAND RAISED BY THE AO U/S. 201(1A) OF IT ACT ON ACCOUNT OF INTERES T, IT WAS HELD BY CIT(A) THAT THE SAME IS COMPENSATORY IN NATURE AND THIS DEMAND RAISED BY THE AO WAS CONFIRMED BY CIT(A). NOW THE REVENUE IS IN APPEAL IN RESPECT OF THE RELIEF ALLOWED BY CIT(A) IN RESPECT OF DEMAND RAISED BY TH E AO U/S. 201(1) OF IT ACT AND THE ASSESSEE IS IN APPEAL FOR THE DEMAND APPROV ED BY CIT(A) IN RESPECT OF INTEREST U/S. 201(1A) OF IT ACT. 7. THE LD. DR OF REVENUE SUPPORTED THE ORDERS PASSE D BY THE AO AND HE ALSO SUBMITTED THAT COPY OF CBDT INSTRUCTION NO. 2/2014 DATED 26.02.2014 IS AVAILABLE ON PAGES 121 AND 122 OF PAPER BOOK FILED BY THE ASSESSEE WHEREIN IT IS PRESCRIBED THAT WHERE THE ASSESSEE FAILS TO DEDU CT TAX UNDER SECTION 195 OF IT ACT, THE AO SHALL DETERMINE THE APPROPRIATE PROP ORTION OF THE SUM CHARGEABLE TO TAX AS MENTIONED IN SUBSECTION (1) OF SECTION 195 TO ASCERTAIN THE TAX LIABILITY ON WHICH THE DEDUCTOR SHALL BE DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER SECTION 201 OF IT ACT. HE SUBMITTED THAT IN THE PRESENT CASE ALSO, THE TAX WAS TO BE DEDUCTED BY ASSESSEE U/S. 195 OF IT ACT A ND THEREFORE, THE ASSESSEE SHALL BE DEEMED TO BE AN ASSESSEE IN DEFAULT. AS A GAINST THIS, LD. AR OF ASSESSEE SUPPORTED THE ORDER OF CIT(A) IN RESPECT O F REVENUES APPEAL. IN RESPECT OF ASSESSEES APPEAL, HE REITERATED THE SAM E SUBMISSIONS WHICH WERE MADE BEFORE LD. CIT(A). HE ALSO PLACED RELIANCE ON A JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF HINDUSTAN COCA C OLA BEVERAGE P. LTD. VS. CIT AS REPORTED IN [2007] 293 ITR 226 (SC). HE ALS O PLACED RELIANCE ON THE PROVISIONS OF SECTION 191 OF IT ACT. REGARDING THE ISSUE IN RESPECT OF LIABILITY OF INTEREST RAISED BY THE ASSESSEE IN ITS APPEAL, HE P LACED RELIANCE ON A TRIBUNAL IT(IT)A NOS. 885 & 935/BANG/2017 PAGE 5 OF 10 ORDER RENDERED IN THE CASE OF RIGHT ADDRESS LTD. VS . ITO AS REPORTED IN [2017] 88 TAXMANN.COM 903 (KOLKATA TRIB.) AND HE SUBMITT ED A COPY OF THIS TRIBUNAL ORDER. RELIANCE WAS ALSO PLACED ON ANOTHER TRIBUNA L ORDER RENDERED IN THE CASE OF SRI A. MOHIUDDIN AND OTHERS VS. ADIT (INTER NATIONAL TAXATION) IN S.P. NO. 223/BANG/2014 ARISING OUT OF ITA NO. 971/BANG/2 014 DATED 14.11.2014. OUR ATTENTION WAS DRAWN TO PARAS 8 TO 10 OF THIS TR IBUNAL ORDER. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST WE DECIDE THE APPEAL OF THE REVENUE. IN THIS REGARD, WE FIND THAT THE DECISION OF LD. CIT(A) ON THIS ISSUE REGARDING DEMAND RAISED BY THE AO U/S. 201(1) OF IT ACT IS CONTAINED IN PARAS 6 AND 7 OF HIS ORDER AND THEREFORE, THESE TWO PARAS A RE REPRODUCED FROM THE ORDER OF CIT(A). THE SAME ARE AS UNDER. 6. THERE IS A CATENA OF JUDGMENTS WHICH HAVE HELD T HAT IF THE DEDUCTEE PAYS TAX ON INCOME PAID TO IT AND FILES RE TURN OF INCOME, THE DEDUCTOR COULD NOT BE DEEMED TO BE AN ASSESSEE IN D EFAULT. IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE PT. LTD . V CIT (SUPRA) IT HAS BEEN OBSERVED AS UNDER: BE THAT AS IT MAY, THE CIRCULAR NO. 275/201/95- 1T( B) DATED 29.1.1997 ISSUED BY THE CENTRAL BOARD OF DIRECT TAX ES, IN OUR CONSIDERED OPINION, SHOULD PUT AN END THE CONTROVER SY. THE CIRCULAR DECLARES 'NO DEMAND VISUALIZED UNDER SECTI ON 201 (1) OF THE INCOME- TAX ACT SHOULD BE ENFORCED AFTER THE TA X DEDUCTOR HAS SATISFIED THE OFFICER-IN-CHARGE OF TDS, THAT TAXES DUE HAVE BEEN PAID BY THE DEDUCTEE-ASSESSEE. HOWEVER, THIS WILL N OT ALTER THE LIABILITY TO CHARGE INTEREST UNDER SECTION 201 (1A) OF THE ACT TILL THE DATE OF PAYMENT OF TAXES BY THE DEDUCTEE-ASSESSEE O R THE LIABILITY FOR PENALTY UNDER SECTION 271C OF THE INCOME TAX AC T.' IN THE CASE OF MAHINDRA & MAHINDRA LIMITED V DCIT [ 2009] 313 ITR 263 (MUM), IT HAS BEEN HELD BY SPECIAL BENCH OF ITA T AS UNDER : THERE MAY BE ANOTHER SITUATION IN WHICH THE AMOUNT PAID OR CREDITED IS ADMITTEDLY CHARGEABLE TO TAX IN THE HAN DS OF THE PAYEE BUT THE PERSON RESPONSIBLE CANNOT BE SADDLED WITH L IABILITY U/S 201(1), BEING DEPOSIT OF TAX BY THE PAYEE IN HIS RE TURN OF INCOME. IN OTHER WORDS, WHERE THE OTHER PERSON I.E. THE PAYEE HAS PAID THE TAX ON HIS TOTAL INCOME, INCLUDING SUCH AMOUNT ON WHICH TAX WAS LIABLE TO BE DEDUCTED BUT HAS NOT BEEN DEDUCTED ETC., THEN NO LIABILITY U/S 201(1) CAN ARISE ON THE PERSON RESPONSIBLE FOR PAYI NG THE SUM AND HE CANNOT BE TREATED AS ASSESSEE IN DEFAULT. EXPLAN ATION TO SECTION 191 HAS BEEN SUBSTITUTED BY THE FINANCE ACT, 2008 W .R.E.F 1.6.2003, IT(IT)A NOS. 885 & 935/BANG/2017 PAGE 6 OF 10 WHICH RUNS AS UNDER:- 'FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED T HAT IF ANY PERSON, INCLUDING THE PRINCIPAL OFFICER OF A COMPANY,- (A) WHO IS REQUIRED TO DEDUCT ANY SUM IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT ; OR (B) REFERRED TO IN SUB-SECTION (1A) OF SECTION 192, BEING AN EMPLOYER, DOES NOT DEDUCT, OR AFTER SO DEDUCTING FAILS TO PAY , OR DOES NOT PAY, THE WHOLE OR ANY PART OF THE TAX, AS REQUIRED BY OR UND ER THIS ACT, AND WHERE THE ASSESSEE HAS ALSO FAILED TO PAY SUCH TAX DIRECTLY, THEN, SUCH PERSON SHALL, WITHOUT PREJUDICE TO ANY OTHER CONSEQ UENCES WHICH HE MAY INCUR, BE DEEMED TO BE AN ASSESSEE IN DEFAULT W ITHIN THE MEANING OF SUB-SECTION (1) OF SECTION 201, IN RESPECT OF SU CH TAX'. THE RELEVANT PORTION OF THE PRE-SUBSTITUTED EXPLANA TION FOR OUR PURPOSE ALSO CARRIED THE SAME LANGUAGE. THE EFFECT OF THIS EXPLANATION IS THAT THE PERSON RESPONSIBLE FOR PAYI NG SHALL BE CONSIDERED AS ASSESSEE IN DEFAULT WITHIN THE MEANIN G OF SECTION 201(1), IF HE HAS FAILED TO DEDUCT THE TAX AT SOURC E OR AFTER DEDUCTING FAILED TO PAY AND ALSO THE PAYEE HAS FAILED TO PAY SUCH TAX DIRECTLY. THE USE OF WORD 'AND' BETWEEN THE PERSON RESPONSIBL E FAILING TO PERFORM HIS OBLIGATION AND THE PAYEE ALSO RIOT PAYI NG THE TAX DIRECTLY, CLEARLY DEPICTS THAT BOTH THE CONDITIONS SHOULD BE CUMULATIVELY SATISFIED SO AS' TO TREAT THE PERSON RESPONSIBLE AS THE ASSESSEE IN DEFAULT. IF ONLY ONE OF THESE TWO IS SATISFIED WITH OUT THE OTHER, THAT IS, THE PERSON RESPONSIBLE HAS DEFAULTED IN HIS DUTY BU T THE PAYEE HAS PAID THE TAX OR THE VICE VERSA, THEN THE PERSON RESPONSI BLE CANNOT BE TREATED AS ASSESSEE IN DEFAULT. BY THE EXPLANATION, THE RIGOR OF SEC. 201(1) HAS BEEN SOFTENED. THUS EVER IF THE SUM IS C HARGEABLE TO TAX IN THE HANDS OF THE RECIPIENT AND THE PROVISION FOR DE DUCTION OF TAX AT SOURCE ALSO EXISTS ON SUCH PAYMENT, STILL THE PAYER CANNOT HE TREATED AS ASSESSEE IN DEFAULT IF THE PAYEE HAS PAID THE DU E TAX. IT IS DILUTION OF THE PROVISIONS OF SECTION 201(1). LOGICALLY ALSO WE FIND IT A CORRECT PROPOSITION FOR THE OBVIOUS REASON, THAT THE PURPOS E OF TREATING THE PERSON RESPONSIBLE FAILING IN HIS DUTY AS ASSESSEE IN DEFAULT IS TO ENSURE THAT THE TAX IS ADEQUATELY RECOVERED. BUT IF THE PAYEE HAS HIMSELF PAID THE TAX, THEN THERE CANNOT BE ANY POIN T IN AGAIN TREATING THE PAYER AS ASSESSEE IN DEFAULT AND REPEATEDLY REC OVERING THE TAX IT IS AUSTERE THAT THE AMOUNT OF TAX DEDUCTED AT SO URCE HAS TO BE ULTIMATELY ADJUSTED AGAINST THE TAX LIABILITY OF TH E PAYEE ON THE SUM, WHICH IS RECEIVED BY HIM AS HIS INCOME CHARGEABLE T O TAX. IF THE PAYEE HAS ALREADY PAID THE TAX AND ONCE AGAIN THE TAX IS RECOVERED FROM THE PERSON RESPONSIBLE FOR PAYING THE INCOME, IT WILL N OT MAKE ANY SENSE AS THE AMOUNT OF DUE TAX ALREADY FINDS ITS PLACE IN THE COFFERS OF THE TAXING AUTHORITIES BY WAY OF DIRECT PAYMENT BY THE PAYEE. IT IS WITH THIS IT(IT)A NOS. 885 & 935/BANG/2017 PAGE 7 OF 10 INTENTION THAT THE LEGISLATURE ENSHRINED EXPLANATIO N TO SECTION 191 BY NOT TREATING THE PERSON RESPONSIBLE FOR PAYING ANY SUM CHARGEABLE TO TAX AS THE ASSESSEE IN DEFAULT, WHEN THE PAYEE HAS PAID THE TAX DIRECTLY. IN THE CASE OF JAGRANPRAKASHAN LTD VS DCIT (2012) 2 1 TAXRNANN.COM 489(ALL), HON'BLE ALLAHABAD HIGH COURT, HAS, INTER ALIA, OBSERVED AS FOLLOWS: '... IT IS CLEAR THAT DEDUCTOR CANNOT BE TREATED AN ASSESSEE IN DEFAULT TILL IT IS FOUND THAT ASSESSEE HAS ALSO FAILED TO P AY SUCH TAX DIRECTLY. IN THE PRESENT CASE, THE INCOME TAX AUTHORITIES HAD NOT ADVERTED TO THE EXPLANATION TO SECTION 191 NOR HAD APPLIED THEI R MIND AS TO WHETHER THE ASSESSEE HAS ALSO FAILED TO PAY SUCH TA X DIRECTLY. THUS, TO DECLARE A DEDUCTOR, WHO FAILED TO DEDUCT THE TAX AT SOURCE AS AN ASSESSEE IN DEFAULT, CONDITION PRECEDENT IS THAT AS SESSEE HAS ALSO FAILED TO PAY TAX DIRECTLY. THE FACT THAT ASSESSEE HAS FILED TO PAY TAX DIRECTLY IS THUS, FOUNDATIONAL AND JURISDICTIONAL F ACT AND ONLY AFTER FINDING THAT ASSESSEE HAS FAILED TO PAY TAX DIRECTL Y, DEDUCTOR CAN BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF S UCH TAX...' 7. THEREFORE, IN LIGHT OF THE CBDT LETTER NO. 275/2 01/95-IT(B) DATED JANUARY 29,1997 AND THE SUPREME COURT DECISION IN H INDUSTAN COCA COLA BEVERAGES PVT. LTD 293 ITR 226 AND OTHER JUDGM ENTS REFERRED TO ABOVE, IT IS HELD THAT THE ASSESSEE CANNOT BE DEEME D TO BE AN ASSESSEE IN DEFAULT AFTER THE PAYEES HAD CONSIDERED THE PAYM ENT RECEIVED ,PAID TAXES ON IT AND FILED RETURN IN INDIA. GROUND NOS. 1, 2 AND 3 RELATING TO HOLDING THE APPELLANT TO BE AN ASSESSEE IN DEFAU LT AND RECOVERY OF DEMAND UNDER 201(1) IS ALLOWED IN FAVOUR OF THE APP ELLANT IN THE ABOVE TERMS. 9. FROM THE ABOVE PARAS REPRODUCED FROM THE ORDER O F CIT(A), IT IS SEEN THAT LD. CIT(A) HAS CONSIDERED THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF MAHINDRA & MAHINDRA LIMITED VS. DCIT AS REPORTED IN [2009] 313 ITR 263 (MUM) AND THE RELEVANT PORTION OF THIS TRIB UNAL ORDER HAS BEEN REPRODUCED BY CIT(A) IN PARA 6 OF HIS ORDER WHICH I S REPRODUCED HEREINABOVE AND AS PER THE SAME, THE SPECIAL BENCH OF THE TRIBU NAL HAS REFERRED TO THE EXPLANATION TO SECTION 191 OF IT ACT WHICH SAYS THA T WHERE A PERSON RESPONSIBLE TO DEDUCT TAX HAS FAILED TO DEDUCT TAX OR FAILED TO MAKE THE PAYMENT OF SUCH TDS AFTER DEDUCTING THE SAME AND THE ASSESS EE HAS ALSO FAILED TO PAY SUCH TAXES DIRECTLY THEN SUCH PERSON CAN BE DEEMED TO BE AN ASSESSEE IN DEFAULT WITHIN THE MEANING OF SECTION 201(1) OF IT ACT IN RESPECT OF SUCH TAX. IN THE GROUNDS RAISED BY THE REVENUE, IT HAS BEEN STAT ED THAT THE PROVISO TO IT(IT)A NOS. 885 & 935/BANG/2017 PAGE 8 OF 10 SECTION 201(1) OF IT ACT IS APPLICABLE ONLY FOR RES IDENTS AND NOT FOR NON- RESIDENTS. THIS IS TRUE THAT PROVISO TO SECTION 20 1(1) OF IT ACT IS APPLICABLE ONLY TO RESIDENTS AND NOT FOR NON-RESIDENTS BUT THE PROV ISIONS OF EXPLANATION TO SECTION 191 IS APPLICABLE TO ALL AND THEREFORE, WE FIND NO MERIT IN THIS CLAIM OF THE REVENUE THAT THERE IS SOME INFIRMITY IN THE ORD ER OF CIT(A) ON THIS ISSUE. THE HONBLE APEX COURT HAS ALSO REFERRED TO CBDT CI RCULAR IN PARA 10 OF THIS JUDGEMENT AS PER WHICH IT WAS STATED THAT NO DEMAND VISUALIZED UNDER SECTION 201(1) OF THE IT ACT SHOULD BE ENFORCED AFTER THE T AX DEDUCTOR HAS SATISFIED THE OFFICER-IN-CHARGE OF TDS THAT TAXES DUE HAVE BEEN P AID BY THE DEDUCTEE- ASSESSEE. REGARDING THE CBDT INSTRUCTION NO. 02/20 14 DATED 26.02.2014 ON WHICH RELIANCE HAS BEEN PLACED BY LD. DR OF REVENUE , WE FIND THAT IN THIS INSTRUCTION, IT HAS BEEN STATED THAT THE AO SHALL D ETERMINE THE APPROPRIATE PROPORTION OF THE SUM CHARGEABLE TO TAX AS MENTIONE D IN SUBSECTION (1) OF SECTION 195 TO ASCERTAIN THE TAX LIABILITY ON WHICH THE DEDUCTOR SHALL BE DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER SECTION 201 OF I T ACT. THIS INSTRUCTION DOES NOT SAY THAT IF THE PAYEE HAS PAID THE TAX THEN ALS O THE DEDUCTOR CAN BE DEEMED TO BE AN ASSESSEE IN DEFAULT. IN THE PRESEN T CASE, THIS IS NOT THE CASE OF THE ASSESSEE THAT NO TAX IS PAYABLE BY THE PAYEE . IN FACT, PAYEES HAD PAID TAX ON A PORTION OF THE INCOME ARISING OUT OF THE I MPUGNED PAYMENT AND THEREFORE, THIS INSTRUCTION OF THE BOARD HAS NO APP LICABILITY IN THE PRESENT CASE. IT IS THEREFORE, HELD THAT THERE IS NO INFIRMITY IN THE ORDER OF CIT(A) IN RESPECT OF THE ISSUE U/S. 201(1) OF IT ACT WHICH HAS BEEN DECI DED BY CIT(A) IN FAVOUR OF THE ASSESSEE. ACCORDINGLY WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 11. NOW WE TAKE UP THE APPEAL OF THE ASSESSEE. WE FIND THAT THE PAYMENT OF INTEREST U/S. 201(1A) OF IT ACT HAS BEEN UPHELD BY HONBLE APEX COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE P. LTD. VS. CI T (SUPRA) AND LD. CIT(A) HAS DECIDED THIS ISSUE AGAINST THE ASSESSEE IN LINE WITH THIS JUDGMENT OF HONBLE APEX COURT. BEFORE US, THE ASSESSEE HAS PL ACED RELIANCE ON TWO TRIBUNAL ORDERS. IT(IT)A NOS. 885 & 935/BANG/2017 PAGE 9 OF 10 12. THE FIRST TRIBUNAL ORDER ON WHICH RELIANCE HAS BEEN PLACED BY LD. AR OF ASSESSEE IS THE TRIBUNAL ORDER RENDERED IN THE CASE OF RIGHT ADDRESS LTD. VS. ITO (SUPRA). IN THIS CASE, IT IS NOTED BY THE TRIB UNAL IN PARA 22 OF THIS TRIBUNAL ORDER THAT THE RECIPIENT OF INTEREST I.E. THE PARTN ERSHIP FIRMS HAVE DECLARED LOSSES EVEN AFTER ACCOUNTING FOR THE INTEREST PAID BY THE ASSESSEE AND UNDER THESE FACTS, IT WAS HELD THAT EVEN IF THE ASSESSEE DEDUCT AND REMIT THE TDS AMOUNT ON THE INTEREST PAID TO THE PARTNERSHIP FIRM S, THE SAME IS LIABLE TO BE REFUNDED TO THE SAID PARTNERSHIP FIRMS AS THERE IS NO TAX LIABILITY IN THEIR RESPECTIVE HANDS. THE TRIBUNAL HAS HELD THAT UNDER THIS SITUATION, IT CANNOT BE SAID THAT THE GOVERNMENT IS DEPRIVED OF THE FUNDS D UE TO IT OR ANY LOSS IS CAUSED TO THE GOVERNMENT. IN THE PRESENT CASE, THE FACTS ARE DIFFERENT BECAUSE IN THE PRESENT CASE, IT IS NOTED ON PAGE NO. 15 OF THE ORDER PASSED BY THE AO U/S. 201(1) THAT EVEN AFTER CONSIDERING THE DEDUCTI ON U/S. 54 ETC., THERE WAS NET TAXABLE INCOME UNDER THE HEAD INCOME FROM CAPITAL G AINS IN RESPECT OF THE PROPERTY IN QUESTION OF RS. 6,99,883/- IN THE HANDS OF MR. NORBERT J SALDANHA AND RS. 69,51,796/- IN THE HANDS OF MR. VITUS GERAL D SALDANHA. HENCE THIS IS NOT THE CASE WHERE NO INCOME WAS TAXABLE IN THE HAN DS OF THE PAYEE AND THEREFORE, IN OUR CONSIDERED OPINION, THIS TRIBUNAL ORDER IS NOT APPLICABLE IN THE PRESENT CASE. 13. THE SECOND TRIBUNAL ORDER ON WHICH RELIANCE HAS BEEN PLACED BY LD. AR OF ASSESSEE IS THE TRIBUNAL ORDER RENDERED IN THE CASE OF SRI A. MOHIUDDIN AND OTHERS VS. ADIT (INTERNATIONAL TAXATION) (SUPRA). IN THIS CASE ALSO, IT IS NOTED BY THE TRIBUNAL IN PARA 9 OF ITS ORDER THAT AS PER THE ASSESSMENT ORDER PASSED IN THE CASE OF SMT. ZOHRA MOIDIN U/S. 143(3), THIS ASS ESSEE WAS HAVING 2/ 3 RD SHARES OF TOTAL LTCG WHICH AMOUNTED TO RS. 1,50,36, 977/- AND THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S. 54 AND 54F TO THE E XTENT OF ENTIRE SUCH LTCG BECAUSE THE COST OF ELIGIBLE NEW ASSET BOUGHT WAS R S. 1,62,30,475/- AND AS A RESULT, THE LONG TERM CAPITAL GAIN WAS ASSESSED AT NIL WHEREAS IN THE PRESENT CASE, EVEN AFTER CONSIDERING THE DEDUCTION ALLOWABL E TO ASSESSEE U/S. 54 ETC., THERE IS TAXABLE INCOME IN THE HANDS OF BOTH THE PA YEES AND THEREFORE, IN OUR CONSIDERED OPINION, THIS TRIBUNAL ORDER IS ALSO NOT APPLICABLE IN THE FACTS OF PRESENT CASE. IT(IT)A NOS. 885 & 935/BANG/2017 PAGE 10 OF 10 14. WE HAVE SEEN THAT NONE OF THE TRIBUNAL ORDERS C ITED BY LD. AR OF ASSESSEE IS APPLICABLE IN THE FACTS OF PRESENT CASE AND THE LIA BILITY TO PAY INTEREST U/S. 201(1A) OF IT ACT UPHELD BY CIT (A) IS IN LINE WITH THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF HINDUSTAN COCA COLA B EVERAGE P. LTD. VS. CIT (SUPRA) AND THEREFORE, RESPECTFULLY FOLLOWING THIS JUDGEMENT OF HONBLE APEX COURT, WE DECLINE TO INTERFERE IN THE ORDER OF CIT( A) ON THIS ISSUE ALSO. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. 16. IN THE COMBINED RESULT, BOTH THE APPEALS OF THE ASSESSEE AND REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (SUNIL KUMAR YADAV) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 31 ST AUGUST, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.