2018 (8) TMI 2108 - AT - Income Tax

TDS u/s 195 - TDS when payment is made to a power of attorney holder even when the de-facto and as well as de-jure ownership lies with the NRI - assessee purchased property from NRI without deducting TDS on the payments made as consideration for the said purchase - AR argued that since the assessee has been dealing with an Indian resident and so no tax was to be deducted by the purchaser and since the seller has already paid the taxes the interest cannot be charged in the hands of the assessee - HELD THAT - The provisions of 201(1) stipulates that the assessee is liable to deduct tax on the payment and section 201(1)(A) casts liability of the assessee to pay interest on the default. Though the statutory provisions casts liability on the assessee, keeping in view the payment received by the exchequer, whether by the assessee(purchaser) or by the recipient(seller) leverage was given by the authorities not to burden the assessee with the strict liability of the TDS deduction when the recipient pays the due taxes vide Circular No. 275/201/95-IT dt. 29/01/1997. This doesn t mean the assessee is absolved totally of the responsibility to deduct the taxes and also interest if any. This Circular absolves the assessee in the cases where the due payments of tax or interest has been duly paid by the recipient. Hon'ble Delhi High Court in the case of DIT vs. Jacabs Civil Incorporate 2010 (8) TMI 37 - DELHI HIGH COURT which says that an authority which is bound to make a deduction of tax at source as per statute, if does not deduct, or after deducting fails to pay the tax, than such a person or authority is liable to pay simple Interest on the amount of tax not deducted. This shows that, liability of the tax deductor is absolute. The assessee who should be the deductor as per statute failed to deduct taxes and is seeking to benefit itself by claiming the benefits which are available to the deductee. AR has also referred to the decision of the ITAT, Hyderabad in the case of Tecumseh Products(I) Ltd. 2006 (7) TMI 529 - ITAT HYDERABAD - On perusal we find the facts of the case are not applicable to the issue before us. Hence, keeping in view the provisions of the Act and facts of the case we hold that the interest under section 201(1)(A) has been rightly confirmed by the Ld.CIT(A). Assessee appeal is dismissed.

Summary

Issues:

1. Whether the assessee is liable to deduct TDS when payment is made to a power of attorney holder.
2. Whether interest under section 201(1)(A) has been rightly confirmed by the Ld. CIT(A).

Issue 1:

The case involves the question of whether the assessee is liable to deduct TDS when making payments to a power of attorney holder, even if the ownership lies with a non-resident individual. The assessee purchased property from non-residents without deducting TDS, believing that as the transaction was through a resident power of attorney holder, TDS deduction was not required. However, it was established that the power of attorney holder was merely an agent and not the de-facto owner. The Assessing Officer held the assessee liable for interest under section 201(1)(A) for not deducting TDS. The argument presented was that since the seller had paid taxes, the interest should not be charged to the assessee. The ITAT analyzed the statutory provisions and relevant case law, emphasizing that the liability to deduct TDS and pay interest remains with the assessee, even if the recipient has paid taxes. The Delhi High Court's ruling further clarified that the tax deductor is liable to pay interest for failing to deduct TDS, not the assessee. The ITAT concluded that the interest under section 201(1)(A) was rightly confirmed by the Ld. CIT(A), dismissing the appeal.

Issue 2:

The second issue pertains to the confirmation of interest under section 201(1)(A) by the Ld. CIT(A). The ITAT examined the arguments put forth by the assessee, referencing a decision by the ITAT, Hyderabad, which was deemed inapplicable to the current case. Considering the provisions of the Income Tax Act and the specific circumstances of this case, the ITAT upheld the decision of the Ld. CIT(A) in confirming the interest under section 201(1)(A). The ITAT highlighted that the liability of the tax deductor to deduct TDS is absolute, and seeking to benefit from the benefits available to the deductee is not justified. Consequently, the appeal was dismissed, and the interest under section 201(1)(A) was deemed to be rightly confirmed.

In conclusion, the judgment addresses the issues of TDS deduction when payments are made to a power of attorney holder and the confirmation of interest under section 201(1)(A). It underscores the statutory obligations of the assessee to deduct TDS and pay interest, regardless of the recipient's tax payments. The decision provides a comprehensive analysis of the legal provisions and relevant case law, ultimately upholding the liability of the assessee for TDS deduction and interest payment as per the Income Tax Act.