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2017 (9) TMI 1150 - AT - Income TaxTDS u/s 195 - TDS liability on payment for purchase of land - Limitation in respect of deduction from non-residents - whether Shri Surinder Singh Chahal was resident of USA and the assessee was required to deduct TDS under section 195? - limitation period for passing an order under section 201(1)(a), when the deductee is a non-resident - Held that - High Court in the case of Bharti Airtel Ltd. vs. Union of India (2016 (12) TMI 1601 - DELHI HIGH COURT) has decided exactly similar issue wherein they have held that period of limitation prescribed under the amended Act is only applicable for the payments made to residents of India and the Parliament has not said anything or remained silent on payments made to nonresident while amending the said provision. The impugned proceedings under section 201 in the case of the assessee in respect of payment made to non-resident, which is admittedly after expiry of four years from the end of the relevant financial year, is barred by limitation and the provisions contained in section 201(1) and 201(3) prescribing time limit as relied upon by the Ld. CIT (A) is only for the residents and is not applicable for the non-residents. Thus, we hold that the proceedings under section 201 are barred by limitation and accordingly the same are quashed. - Decided in favour of assessee.
Issues Involved:
1. Limitation period for initiating proceedings under Section 201 of the Income-tax Act. 2. Applicability of Section 201 to non-residents. 3. Liability of the assessee for non-deduction of tax at source. 4. Interest charged under Section 201(1A) of the Act. Issue-wise Detailed Analysis: 1. Limitation Period for Initiating Proceedings under Section 201 of the Income-tax Act: The primary issue was whether the initiation of proceedings under Section 201 of the Income-tax Act was barred by limitation. The assessee argued that the proceedings were initiated beyond the period of four years from the end of the relevant financial year, citing the judgment of the Hon'ble Delhi High Court in CIT vs. NHK Japan Broadcasting Corpn., 305 ITR 137 (Del). The Assessing Officer and CIT(A) held that the time limit for initiating proceedings was six years, as per the amendment in Section 201(3) by the Finance Act, 2009, and later extended to seven years by the Finance Act, 2014. However, the Tribunal referred to the judgment in Bharti Airtel Ltd. vs. Union of India, 245 taxman 80 (Del), which reiterated that the initiation of proceedings under Section 201 after the expiry of four years is unjustified. The Tribunal concluded that the proceedings initiated after four years were barred by limitation. 2. Applicability of Section 201 to Non-residents: The Tribunal examined whether the amended provisions of Section 201(3) applied to non-residents. The CIT(A) had held that the time limit prescribed in Section 201(3) did not apply to non-residents. However, the Tribunal referred to the judgment in Bharti Airtel Ltd., where it was held that the limitation period prescribed under the amended Act is only applicable to payments made to residents of India. The Parliament had not prescribed any limitation for payments made to non-residents. The Tribunal found that the judgment of the Hon'ble Delhi High Court in Bharti Airtel Ltd. clearly stated that the period of limitation for initiating proceedings under Section 201 is applicable only to residents, and not to non-residents. 3. Liability of the Assessee for Non-deduction of Tax at Source: The assessee argued that it was not liable for non-deduction of tax at source as it believed the seller was an Indian national. The Assessing Officer treated the assessee as an assessee-in-default for not deducting tax under Section 195 while making payment to a non-resident. The Tribunal noted that the assessee had challenged the limitation for issuance of notice after four years. Since the Tribunal held that the proceedings were barred by limitation, the liability of the assessee for non-deduction of tax at source was not upheld. 4. Interest Charged under Section 201(1A) of the Act: The assessee contested the interest charged under Section 201(1A) of the Act. The Tribunal did not delve into the specifics of this issue, as it had already concluded that the proceedings under Section 201 were barred by limitation. Consequently, the interest charged under Section 201(1A) was also quashed. Conclusion: The Tribunal allowed the appeal of the assessee, holding that the initiation of proceedings under Section 201 was barred by limitation. The provisions of Section 201(3) prescribing a time limit were applicable only to residents and not to non-residents. Consequently, the assessee was not liable for non-deduction of tax at source, and the interest charged under Section 201(1A) was also quashed. The Tribunal's decision was based on the binding precedent of the Hon'ble Delhi High Court in Bharti Airtel Ltd. vs. Union of India.
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