TMI Blog2018 (8) TMI 678X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 201(1) of the Act - Decided against the assessee. Since the assessees have filed the returns of income, the assessments must be completed u/s 143(3) or have been accepted u/s 143(1) and determined the tax liability. Therefore, we direct the AO/ITO international Taxation to treat the assessee in default to the extent of actual tax liability instead of estimation. Accordingly, the appeal of the assessee is partly allowed. - I.T.A.No.151/Viz/2017 - - - Dated:- 10-8-2018 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER For The Appellant : Shri I.Kama Sastry, AR For The Respondent : Shri V.Appala Raju, DR ORDER PER D.S. SUNDER SINGH, Accountant Member: This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]-10, Hyderabad vide I.T.A.No.0459/CIT(A)-10/2015-16 dated 30.09.2016 for the assessment year 2012-13. 2. The assessee raised six grounds in this appeal as under: 1. The Ld. AR is not at all correct and the Ld. CIT (Appeals) is not correct in treating the assessee as an assessee in default for non deduction of tax at source under section 195 when it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sri Podila Murali Krishna Non Resident Rs.10, 00, 000/- 3. Ms. Podila Mrudula Non Resident Rs.10, 00, 000/- 4. Smt.G.Venkata Ramalakshmi Resident Rs.5, 00, 000/- 5. Smt.Podila Sarada Resident Rs.5, 00, 000/- Total Sale Consideration Rs.65, 12, 000/- The assessee is required to deduct the tax at source and remit to Government account on the payments made to the non-residents and the assessee failed to deduct the tax at source as required u/s 195 of the Act. Therefore, the AO treated the assessee as assessee in default and accordingly raised the demand of ₹ 9, 83, 538/- u/s 201(1) of the Act and also levied the interest u/s 201(1A) of the Act at ₹ 5, 21, 275/-. 5. Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) partly allowed the appeal and directed the AO to ascertain the tax liability of the deductees as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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: Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident- (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed4: Provided further that no penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered the decision of Hon ble Gujarat High Court in the case of Commissioner of Income Tax Vs. Ranoli Investment Pvt. Ltd. and others reported in 235 ITR 433 and held that if no deduction is made and the deducted amount is not paid, the person whose duty it was to deduct the tax at source and to pay is to be treated as assessee in default in respect of the taxes and no penalty is to be charged u/s 221 on such person if the ITO is satisfied that such failure to deduct the tax had occurred due to good and sufficient reasons. The assessee relied on the decision of Hon ble High court of Calcutta in Jagran Prakashan Ltd. Vs. DCIT (supra) delivered in response to writ petition and the payment in respect of 194H and the writ petition is filed by the company for non deduction of tax at source u/s 194H of the Act. The deduction of tax at source is not in respect of the non residents and it was in respect of the residents. 194H deals with the deduction of tax at source in respect of residents in respect of payments made for commission or brokerage. In respect of the nonresidents, the deduction of tax at source is more stringent since the person who receives the payment would be leaving the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e : Provided that in the case of interest payable by the Government or a public sector bank within the meaning of clause (23D) of section 10 or a public financial institution within the meaning of that clause, deduction of tax shall be made only at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode : Provided further that no such deduction shall be made in respect of any dividends referred to in section 115-O. Explanation 1-For the purposes of this section, where any interest or other sum as aforesaid is credited to any account, whether called Interest payable account or Suspense account or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. Explanation 2.-For the removal of doubts, it is hereby clarified that the obligation to comply with sub-section (1) and to make deduction thereunder applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, resident or non-resi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as noted by the learned CIT (Appeals) in his order at page 6 thereof, we find the assessee failed to make an application under section 197 r.w.s. 195(2) of the Act to the Assessing Officer and therefore he should have deducted tax at the specified rates from the sale consideration to be paid. In coming to this view of the matter, we find support from the decision of the Hon'ble Apex Court in the case of Transmission Corpn. of A.P. Ltd. v. CIT [1999] 239 ITR 587/105 Taxman 742 wherein the Hon'ble Court has held - the purpose of sub-section(1) of section 195 is to see that on the sum which is chargeable under section 4 of the Act, for levy and collection of income tax, the payer should deduct income tax thereon at the rates in force, if the amount is to be paid to a non-resident. The said provision is for tentative deduction of income tax thereon subject to regular assessment and by the deduction of income tax, the rights of the parties are not, in any manner, adversely affected. Further, the rights of the payee or recipient are fully safeguarded under section 195(2), 195(3) and 197. The only thing which is required to be done is to file an application for determinati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irected the AO to compute correct tax liability of the non residents and treat the assessee in default for the tax liability of the non residents as per CBDT Instruction No.2/2014. The Instruction No.2/2014 was issued by CBDT for the benefit of the non residents who could not approach the AO for short deduction of tax at source or for the non-deduction of tax at source u/s 195(2) of the Act. In such cases, the Board has directed the AOs to compute the tax liability and make the deductor responsible only for the tax as per the actual liability and treat the assessee s in default u/s 201(1) to the extent of the tax liability in respect of assesses. In this case, the non-resident assessees have filed the returns of income with ITO International Taxation which was verified by the AO. Though the Ld.CIT(A) has directed the AO to verify the tax liability of the assessees and determine the assessees liability u/s 201(1), the AO determined the tax liability of the Non residents on estimation which is not correct. Since the assessees have filed the returns of income, the assessments must be completed u/s 143(3) or have been accepted u/s 143(1) and determined the tax liability. Therefore, we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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