TMI Blog2012 (10) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... moment an assessee liable to deduct tax under the Act fails to either deduct or pay the same at source - As decided in CIT Versus Samsung Electronics Co. Ltd. [2009 (9) TMI 526 - KARNATAKA HIGH COURT] the Assessing Officer is competent to quantify and raise demand under section 201 and issue notice of demand under section 156 the moment the assessee failed to deduct tax at source at the specified rate from the sale consideration before making payment of the same to the seller who is an NRI in the relevant period. The action of the AO in charging the assessee, interest under section 201(1A) is consequent to the quantification of tax demand under section 201(1) r.w.s. 195 and is chargeable in respect of any person who has failed to deduct the whole or part of any tax at the rates and period specified therein. Therefore, uphold the Assessing Officer's action of charging of interest under section 201(1A). The CIT (Appeals) has already addressed issue of quantification of interest in which he has directed the Assessing Officer to verify the assessee's claim of payment of taxes to the extent of ₹ 2,61,764 on 24.10.2009 out of demand of ₹ 13,82,820 and rework the intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee in his various replies stated that he was under the impression the seller was based in Pune and was a resident of India and had made adequate arrangements for payment of taxes and filing returns, that he was not made aware of the provisions of section 195 of the Act by the professional who guided him in the matter at Bangalore; that he had ascertained the capital gains to the seller (vendor) of the property he bought was ₹ 9,29,793 and the total tax to be paid by the vendor was ₹ 2,61,764 which he has made payment. The Assessing Officer did not accept the explanations put forth by the assessee and held that since the assessee had failed to discharge his obligations to deduct tax at source from the payment of ₹ 61,62,500 as stipulated by section 195 of the Act while making payment to an NRI and in accordance with section201(1), the assessee was held to be an assessee in default and consequently was charged interest under section 201(1A). 2.2 Aggrieved by the orders of the Assessing Officer under section 201(1) and 201(1A) of the Act, the assessee went in appeal before the CIT (Appeals). The CIT (Appeals) in his order dt.15.9.2010 has upheld the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming the action of the LAO. 5. The LAO erred in levying interest under section 201(1A) and LAA erred in confirming the action of the LAO. 6. The LAO erred, after being aware of the fact that the appellant was guided by professional chartered accountant, in not appreciating the fact that the appellant was not advised to deduct tax at source under section 195. The LAA erred in confirming the action of the LAO. On the above and such other grounds as may be urged at the time of hearing your appellant prays your Honour to consider the facts and circumstances of the case and render justice. 5.0 The ground of appeal at S.No1 is general in nature and therefore no adjudication is called for thereon. 6.1 In the grounds of appeal at S.Nos.2 and 3, it was submitted by the learned counsel for the assessee that the assessee was under the genuine belief that the provisions of section 195 of the Act would not be attracted to the transaction of purchase of the flat by him at Chalet, Aga Abbas Ali Road, Ulsoor, Bangalore from Smt. Geetanjali Bhagwan Melwani on 11.8.2006 for ₹ 61,62,500. The learned counsel for the assessee reiterated the submissions made be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the relevant period on 11.8.2006, purchased a residential flat from one Smt.Geetanjali Bhagwan Melwani at 'Chalet', Aga Abbas Ali Road, Ulsoor, Bangalore-560 008 for a consideration of ₹ 61,62,500. The Deed of Absolute Sale dt.11.8.2006, at page 1 thereof, records that the seller Smt. Geetanjali Bhagwan Malwani, W/o Mr.B.M. Bhagwan Melwani aged about 48 years resides at No.22B, Golden Lodge, Bonham Road, HongKong. The address given clearly establishes that the seller was an NRI as she was residing abroad. We also find that the learned CIT (Appeals) has recorded that the seller in the instant case has not filed her return of income for the relevant period or paid capital gains tax on sale of the said flat/apartment to the assessee. It is for this very reason that the legislature incorporated provisions like section 195, etc under the Act to prevent NRI's from taking away the entire money abroad without paying due taxes thereon and over which money the Indian tax authorities will have no control once this sum of money is ferretted abroad. The claim of the assessee that he was unaware of the provisions of section 195; though that the seller was in Pune, etc do no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordance with the provisions of section 195 of the Act. The learned Departmental Representative drew our attention to paras 6 and 7 on pages 4 to 6 of the learned CIT (Appeals)'s order wherein this issue has been considered by the learned CIT (Appeals) both in the light of the provisions of section 195 and also judicial decisions on this issue. It was prayed that these submissions of the assessee not being based on the correct appreciation of the provisions of section 195 of the Act be dismissed. 7.3 We have heard both parties and carefully perused and considered the material on record and the relevant judicial decisions. The assessee's case is that the Assessing Officer should have quantified the tax to be deducted at source at the rates specified on the capital gains arising out of this transaction and not on the amount of sale consideration of ₹ 61,62,500 for a better appreciation of the issue the provisions of section 195 are extracted here below : 195.(1) 18Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest referred to in section 194LB or section 194LC) or any other sum c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der subsection (1) may make an application in the prescribed form to the Assessing Officer for the grant of a certificate authorising him to receive such interest or other sum without deduction of tax under that sub-section, and where any such certificate is granted, every person responsible for paying such interest or other sum to the person to whom such certificate is granted shall, so long as the certificate is in force, make payment of such interest or other sum without deducting tax thereon under sub-section (1). 7.3.1 From a plain reading of section 195(1) and as held by us in para 6.4 of this order (supra), it is clear that the assessee was liable to deduct tax at source at the specified rates (i.e. 20% plus surcharge 10% and education cess 2%) from out of the sale consideration paid by him to the seller of the said flat purchased by him as she was an NRI. If the assessee (i.e. the person responsible for paying such sum to the NRI seller) was of the view that the whole or part of such sum viz. the sale consideration, would not be income chargeable in the hands of the recipient (i.e. in this case the seller, an NRI), Section 195(2) of the Act required him to make an ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and it is the statutory obligation of the person responsible for making such payment of such 'sum' to deduct tax thereon before making payment. In the instant case of the assessee, the legal position is clear in as much as not having made the application under section 197 r.w.s. 195 of the Act to the Assessing Officer for lower or no deduction of tax, he was statutorily duty bound to have deducted tax at the specified rate on the 'sum' i.e. the sale consideration, before making payment to the seller who was an NRI. Consequently, the assessee's claim that TDS was to have been made by him on the Long Term Capital Gains which he worked out at 20% of ₹ 9,29,793 does not hold any water. In this view of the matter, we are of the considered opinion that the quantification of the TDS deductible by the assessee under section 195 of the Act was correctly made by the Assessing Officer under section 201(1) of the Act and rightly upheld by the learned CIT (Appeals) at ₹ 13,82,870 being 20.4% of the sale consideration of ₹ 61,62,500 and consequently dismiss this ground of the assessee. 8.1 In the ground raised at S.No.5, the assessee had contended th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s failed to deduct and pay such tax.] [(1A) Without prejudice to the provisions of sub-section (1), if any such person, principal officer or company as is referred to in that sub-section does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest,- (i) at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and (ii) at one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid, and such interest shall be paid before furnishing the statement in accordance with the provisions of sub-section (3) of section 200: A plain reading of the provisions of section 201 of the Act clearly indicate that it is consequential and gets activated the moment an assessee liable to deduct tax under the Act fails to either deduct or pay the same at source. The learned CIT (Appeals) has examined this issue at length and found that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. As already held by us, the Assessing Officer has rightly raised the demand under section 201(1) of the Act as soon as the assessee defaulted in making tax deduction under section 195 of the Act from out of the 'sum' i.e. the sale consideration. A perusal of section 201 of the Act will clarify that the reference to section 221 of the Act therein is in regard to the charging of penalty there under only if the Assessing Officer is satisfied that such person has failed to deduct tax without good and sufficient reasons. Section 221 of the Act is only in respect of penalty payable when tax is in default and does not mandate that tax demand for defaults be raised under this section. We, therefore, dismiss this ground of the assessee. 9. In the result, the assessee's appeal in ITA No.1313/Bang/2010 is dismissed. ITA No.1076/Bang/2012 10. The grounds raised by the assessee in this appeal are as under : 1. The orders of the LAO and LAA are bad in law. 2. The LAA erred in confirming the action of the LAO in levying interest under section 201(1A). 3. The LAA erred in confirming the interest levy under section 201(1A) of ₹ 5, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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