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2022 (5) TMI 1470 - AT - Income TaxTDS u/s 195 - assessee in default as per the provisions of section 201 1 - appellant has made payments to two non-residents and did not deduct TDS - As submitted that the payees i.e. the two sellers of the property have disclosed the consideration received from the appellant in their respective return of income filed by them before the tax authorities and appellant cannot be held as an assessee in default since as per the first proviso to section 201 1 though is applicable to the resident assessee as it stood on that particular date, the said beneficial relaxations allowed to the resident payees should also be considered and be applied to the non-residents as well, which is discriminatory in nature and should be equally applied to the non-residents - HELD THAT - Admittedly, it is not disputed that the appellant has made payments to two non-residents and did not deduct TDS as per the provisions of section 195 - Counsel submitted that the payees i.e. the two sellers of the property have disclosed the consideration received from the appellant in their respective return of income filed by them before the tax authorities; and since the said two sellers of the property having declared the sale consideration received from the appellant in their respective return of income, the appellant cannot be held as an assessee in default as per the first proviso to section 201 1 although is applicable to the resident assessee as it stood on that particular date, the said beneficial relaxations allowed to the resident payees should also be considered and be applied to the non-residents as well, which is discriminatory in nature and should be equally applied to the non-residents. As seen that the payees in the instant case having filed their return of income and disclosed the consideration in their respective returns and have duly complied with the amended provisions of section 201 1 which has been inserted in Finance No. 2 Act, 2019. We are of the considered view that the said proviso to section 201 1 wherein the benefit has also been extended to the payments made to non-residents are meant for removal of anomaly, is required to be given with retrospective effect. In our view, the appellant assessee can not be held as an assessee in default as per proviso to section 201 1 of the Act, in view of the amended provisions of section 201 1 being inserted in Finance No. 2 Act, 2019. Accordingly, we delete the demand raised by the AO and confirmed by the CIT(A) under section 201 1 Interest levied u/s 201 1A - As noted that the said property was sold by the appellant on 17/09/2011 and the return of income by the two payees have been filed on 30/07/2012. Thus, interest amount u/s 201 1A has to be calculated for the period 07/10/2011 to 30/07/2012 being till the date of filing of the return by the two payees. The Counsel placed reliance on the parity of reasoning of the decision of the Hon ble Apex Court in the case of Hindustan Coca Cola Beverages (P) Ltd v. CIT 2007 (8) TMI 12 - SUPREME COURT and also the Memorandum to Finance (No.2) Bill, 2019 which is placed at page 21 of compilation. The contents of which is reproduced below Consequent to this amendment, it is also proposed to amend the proviso to sub-section (1A) of section 201 to provide for levy of interest till the date of filing of return by the non-resident payee. Accordingly, we direct the AO, to recompute the interest Tax liability u/s 201(1A) for the period 07/10/2011 to 30/07/2012 till the date of filing of the return by the two payees. Thus, this ground of appeal on the issue of interest Tax liability u/s 201(1A) is partly allowed.
Issues Involved:
1. Applicability of Section 195 of the Income Tax Act. 2. Applicability of Section 201(1) and 201(1A) of the Income Tax Act. 3. Principles of Natural Justice. 4. Non-discrimination under Article 26 of the DTAA between India and the United Kingdom. 5. Retrospective application of amendments to Section 201(1) of the Income Tax Act. Detailed Analysis: 1. Applicability of Section 195 of the Income Tax Act: The appellant purchased an immovable property from non-residents but did not deduct tax as required under Section 195. The Assessing Officer (AO) held the appellant in default and levied tax and interest under Sections 201(1) and 201(1A). The appellant contended that they were under a bona fide belief that the sellers were residents. The CIT(A) rejected this argument, noting that the sellers identified themselves as British nationals in the deed of sale. The Tribunal upheld this finding, emphasizing that the appellant had an obligation to deduct tax under Section 195. 2. Applicability of Section 201(1) and 201(1A) of the Income Tax Act: The appellant argued that since the payees had filed their returns and paid taxes on the consideration received, they should not be held as an assessee in default. The CIT(A) and the Tribunal both noted that the proviso to Section 201(1), which exempts the deductor from being deemed in default if the payee has paid the tax, applies only to resident payees. The Tribunal, however, considered the amendment in the Finance Act (No. 2) of 2019, which extended this benefit to non-residents, and held that this amendment should be applied retrospectively to remove the anomaly. Consequently, the Tribunal deleted the demand raised under Section 201(1). 3. Principles of Natural Justice: The appellant claimed that they were not afforded a reasonable opportunity of hearing, violating principles of natural justice. The Tribunal did not find merit in this argument, noting that sufficient opportunity had been provided, and the matter was decided on merits based on available documents. 4. Non-discrimination under Article 26 of the DTAA between India and the United Kingdom: The appellant argued that the provisions of Section 195 should not apply due to the non-discrimination clause in Article 26 of the DTAA. The CIT(A) and the Tribunal rejected this argument, stating that the non-discrimination clause can only be invoked by non-residents and that the conditions for residents and non-residents under Section 195 are not the same. Therefore, the appellant, being a resident, could not claim this benefit. 5. Retrospective application of amendments to Section 201(1) of the Income Tax Act: The Tribunal considered various judicial precedents and the legislative intent behind the amendment to Section 201(1) in the Finance Act (No. 2) of 2019, which extended the benefit to non-residents. The Tribunal held that this amendment should be given retrospective effect to remove the anomaly. Consequently, the appellant was not held as an assessee in default under Section 201(1). Interest Liability under Section 201(1A): The Tribunal directed the AO to recompute the interest liability under Section 201(1A) from the date the tax was deductible until the date the payees filed their returns, aligning with the principles laid down in the case of Hindustan Coca Cola Beverages (P) Ltd v. CIT. Conclusion: The Tribunal allowed the appeal, deleting the demand under Section 201(1) and directing a recomputation of interest under Section 201(1A) for the specified period. The judgment emphasized the retrospective application of the amendment to Section 201(1) to ensure equitable treatment of non-residents.
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