TMI Blog2015 (12) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... x liability, the question of levy of interest would not arise. The C.I.T. (Appeals), in paragraph 24.1 of his order dated 30.01.2004, had held that there should be determination of interest under Section 201 (1A) contrary to his own findings in paragraph 24.2. The authority has accepted in the second limb that there exists '' no tax liability'' in terms of Section 201 (1) of the I.T.Act. By virtue of the ratio of the decision of the Supreme Court rendered in the case of GE India Technology Centre P. Ltd., [2010 (9) TMI 7 - SUPREME COURT OF INDIA ] the transaction in the present case will not fall within the para meters of Section 195 and 201 (1) of the I.T. Act. We, therefore, answer the questions of law raised in favour of the appellant and against the Department. - T. C. A. No: 398 of 2007 - - - Dated:- 14-7-2015 - R. Sudhakar And K. B. K. Vasuki, JJ. For the Appellant : Mr. R. Vijaya Raghavan for M/s. Subbaraya Aiyar Padamanabhan and Ramamani For the Respondent : M/s. Hema Muralikrishnan JUDGMENT ( Judgment of the Court was delivered by R. Sudhakar, J.) The assessment year in question is 2002-2003. The cause of action for the present appeal is purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 195 of the Income Tax Act, and, therefore, the first assessment order was passed by the Assessing Authority on 25.04.2003. This was objected to by the assessee by way of appeal before the Commissioner of Income Tax (Appeals), who passed the following order on 30.01.2004 : 24. Taking into consideration of the facts, I am of the considered opinion that the orders passed by the assessing officer under sec. 201 (1) and 201 (1A) be set aside and be restored to the assessing officer with the following directions : i) The assessing officer should re-compute the liability of the appellant under Sec. 201 (1A) by treating ₹ 9,00,00,000/- as the amount on which the appellant was required to deduct tax at source at the rate of 20%. The interest under Sec. 201 (1A) would be charged from the date the appellant was required to deduct tax at source to the date the assessing officer would be giving effect to this order. ii) The assessing officer should re-compute the liability of the appellant under sec. 201 (1) by computing tax liability of the deductee and ignoring the return of income filed on behalf of the deductee unless the decision of the concerned assessing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;' It is seen that the capital gains in the hands of M/s.Suzuki Motor Corporation, Japan, is a loss in respect of the transaction of purchase of shares made by M/s. Anusha Investments at a consideration of ₹ 9 crores. Giving effect to the order of CIT (A), the order u/s. 154 dated 16.04.2004 is hereby rectified as under. 201 (1) 201 (1A) Demand vide order dt.16.04.2004 Rs.1,80,00,000/- ₹ 60,30,000/- Demand as per this order Nil ₹ 60,30,000/- Reduction in demand Rs.1,80,00,000/- Nil 3. The reduction in demand as a result of this order is ₹ 1,80,00,000/-. The assessee is hereby directed to make payment of demand of ₹ 60,30,000/- which was levied u/s. 201 (1A), immediately. 5. Aggrieved against paragraph 24.1 of the Order of the Commissioner of Income Tax Appeals, the assessee approached the Tribunal by way of an appeal. The Tribunal, in its order dated 29.09.2005, took a stand that irre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in force : Consequences of failure to deduct or pay. 201. [(1) Where 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 does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of 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 43[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 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 actually paid 45[and such interest shall be paid before furnishing the quarterly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deducted at source to be paid to the Revenue by the payer who makes payment to a non-resident. Therefore, section 195 has to be read in conformity with the charging provisions, i.e., sections 4, 5 and 9. This reasoning flows from the words sum chargeable under the provisions of the Act in section 195(1). The fact that the Revenue has not obtained any information per se cannot be a ground to construe section 195 widely so as to require deduction of TAS even in a case where an amount paid is not chargeable to tax in India at all. We cannot read section 195, as suggested by the Department, namely, that the moment there is remittance the obligation to deduct TAS arises. If we were to accept such a contention it would mean that on mere payment income would be said to arise or accrue in India. Therefore, as stated earlier, if the contention of the Department was accepted it would mean obliteration of the expression sum chargeable under the provisions of the Act from section 195(1). While interpreting a section one has to give weightage to every word used in that section. While interpreting the provisions of the Income-tax Act one cannot read the charging sections of that Act de hors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a situation where even when the income has no territorial nexus with India or is not chargeable in India, the Government would nonetheless collect tax. In our view, section 195(2) provides a remedy by which a person may seek a determination of the appropriate proportion of such sum so chargeable where a proportion of the sum so chargeable is liable to tax. The entire basis of the Department's contention is based on administrative convenience in support of its interpretation. According to the Department, huge seepage of revenue can take place if persons making payments to non-residents are free to deduct TAS or not to deduct TAS. It is the case of the Department that section 195(2), as interpreted by the High Court, would plug the loophole as the said interpretation requires the payer to make a declaration before the Incometax Officer (TDS) of payments made to non-residents. In other words, according to the Department, section 195(2) is a provision by which the payer is required to inform the Department of the remittances he makes to non-residents by which the Department is able to keep track of the remittances being made to non-residents outside India. We find no merit in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplied ) 9. The Order of the Income Tax Officer dated 12.08.2004, giving effect to the order of the C.I.T. (Appeals) dated 30.01.2004, is in consonance with the decision of the Supreme Court. In the present transaction, admittedly there is no liability to tax. As a result, the question of deducting tax at source and the assessee violating the provisions of Section 195 does not arise and therefore, the assessee cannot be treated as an assessee in default. The Supreme Court has clearly held that the provisions relating to TDS would apply only to those sums which are chargeable to tax under the Income Tax Act and also has clearly held that in a transaction of this nature, the assessee was entitled to take a plea that there arises no tax liability and therefore, the provisions of Sec. 195 do not get attracted. Once we hold that there is no tax liability, the question of deduction of tax at source, terming the assessee as ''assessee in default will not also arise and the resultant question of levy of interest becomes purely academic and the demand unsustainable in law. In the instant case, we hold that the original authority having accepted Nil tax liability, the questi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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