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Income-tax Officer, TDS Ward 2 (2) , [Intl. Taxn.] , New Delhi Versus M/s Santur Developers P. Ltd., New Delhi

2015 (7) TMI 911 - ITAT DELHI

Liability to deduct tax u/s 195 - AO had levied interest u/s 201(1A) in respect of capital gain accrued to assessee on 8-6-2005 till the date on which capital gain tax was deposited i.e. 28-9-2007 - CIT(A) upheld the assessee’s contention that in view of non-discriminating clause in Article 26 of the DTAA between India and USA, the assessee was not obliged to deduct tax at source u/s 195 - Held that:- CIT(A) rightly held that in view of Article 26 of DTAA between USA and India, since no TDS is r .....

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For the Petitioner : Shri P. Dam. Kanunjna Sr. DR For the Respondent : Shri Salil Agarwal Adv. ORDER PER S.V. MEHROTRA, A.M..: This appeal, preferred by the revenue, is directed against CIT(A) s order dated 9-12-2010 in appeal no. 39/09-10, relating to A.Y. 2006-07. 2. The AO had levied interest u/s 201(1A) in respect of capital gain accrued to assessee on 8-6-2005 till the date on which capital gain tax of ₹ 3,46,61,146/- was deposited i.e. 28-9-2007. Thus, interest @ 1% for 27 months was .....

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st money of ₹ 1 crore was paid with signing of first agreement. AO has observed that the assessee made payments in respect of such agreements to the Non-resident without deduction of tax thereon. Proceedings U/S 201 were initiated against the assessee. The AO after considering the assessee s submissions, inter alia, observed as under: (i) The assessee was required to deduct tax u/s 195 on the date when the income accrued to the payee Shri Jasbir Singh Sarkari. In regard to the assessee s s .....

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ee s plea that assessee had no knowledge of the fact that one of the seller was non-resident, because the agreement was entered into only with Indian residents, one of which viz. Shri Karanbir Singh Sarkaria was general power of attorney holder of Shri Jasbir Singh Sarkaria, AO observed that the same could not be considered reasonable in the facts and circumstances of the case. (iii) As regards the assessee s plea that in the case of Coca Cola Beverages 293 ITR 226 the Hon ble Supreme Court has .....

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ers of the land had already deposited the tax due on the income from capital gains, arising to them, therefore, the assessee could not be treated as an assessee in default and, therefore, no order u/s 201(1) had been passed against the assessee. Therefore, there was no justification in charging interest u/s 201(1A). (ii) The provisions of section 195 were not applicable in the instant case for the following reasons: (a) The assessee had not entered into agreement directly with non-resident but w .....

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said land. (b) The consideration was paid in India through a/c payee cheques drawn in Indian rupees and the payment was collected in India through Indian banks and no remittance to any foreign country was involved in the instant case. The provisions of section 195 apply only when any remittance is required to be made to any foreign country. (c) As per provisions of section 195(6) the person responsible for making any payment to a non-resident is to furnish the information relating to such paymen .....

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hargeable under the provisions of this Act. The submission is that section 195 is applicable only when income in the nature of interest or any other sum chargeable under the provisions of this Act, is required to be paid by a resident Indian to a non-resident. However, in the present case no income was paid by assessee but only the entire sale consideration was paid. (iii) The provisions of section 192 to 196D in Chapter XVII relating to deduction of tax do not provide any deduction of tax at so .....

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he other contracting state to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which nationals in that other state in the same circumstances are or may be subjected. (iv) The assessee s submission was that when a property is purchased by a resident Indian from any other resident Indian and sale proceeds are paid, then in such circumstances there is no requirement of deduction of any TDS in any of the provisions .....

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ssee also gave detailed calculation in para 7 of its written submissions that, in any view of the matter, total interest which could be charged was ₹ 32,75,899/- as reproduced by ld. CIT(A) in para 12 of his order. 5. Ld. CIT(A) upheld the assessee s contention that it was not liable to deduct tax u/s 195 and further upheld the contention of assessee that in view of non-discriminating clause in Article 26 of the DTAA between India and USA, the assessee was not obliged to deduct tax at sour .....

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taxable in those years. He observed that deposit of tax of ₹ 3.46 crores on 28-9-2007 entailed the payment of interest due u/s 234A, 234B & 234C of the Act. 6. Being aggrieved with the order of ld. CIT(A), the department has raised following two grounds: 1. On the facts and circumstances of the case, Ld. CIT(A) has erred in giving relief to the assessee on the basis that interest had been paid by Sh. J.S. Sarkaria, without even calling for a remand report from the Assessing Officer on .....

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ce as per the directions of authorities for Advance Ruling, Shri Jasbir Singh Sarkaria had paid the tax, therefore, the AO did not pass any order u/s 201(1), treating the assessee as assessee in default and only levied interest u/s 201(1A), which liability was on assessee as person responsible for deduction of tax u/s 195. He pointed out that the interest u/s 234A, 234B & 234C, as referred to by ld. CIT(A), was payable by Shri Jasbir Singh Sarkaria as per operations of law and even that inte .....

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are perusal of the grounds of appeal, it is evident that the department has not assailed the findings of ld. CIT(A) in holding that the provisions of section 195 are not applicable on the reasoning that provisions of section 195 of the Act are applicable only when some remittance is required to be made from India to an outside country as there is a possibility that the Indian authorities would not be able to recover the tax due on such remittances. He pointed out that ld. CIT(A) has referred to .....

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sel further submitted that ld. CIT(A) rightly held that in view of Article 26 of DTAA between USA and India, since no TDS is required to be made in case of sale of immovable properties within India, therefore, an assessee could not be burdened while making the payment to a non-resident for deducting tax at source. 9. We have considered the rival submissions and perused the record of the case. Facts are not disputed. Admittedly, assessee made the payment to Shri Karanbir Singh Sarkaria, the gener .....

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