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TMI Blog2015 (12) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... mand unsustainable in law. In the instant case, we hold that the original authority having accepted "Nil" tax 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. X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 officer is reversed by a competent authority. In the result, the appeal of the appellant is partly allowed." Though the order in paragraph 24 as above appears to be misplaced, the effect of the order is that the Assessing Officer should first re-compute the liability of the assessee in terms of Sec. 201 (1) whereby the tax liability of the deductee should be determined and thereafter, if there is an element of tax liability, the provisions of Sec. 195 will come into effect; as a result, Section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .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 irrespective of the fact whether the Japan Company suffered a loss or gain on the sale of shares, a duty is cast on the assessee to deduct the tax whenever it made payment to the non-resident. It, further, went on to hold that not only is the assessee liable to deduct the tax at source, but it also has to pay the tax to the exchequer so collected. The Tribunal held that the assessee neither deducted the tax, nor paid the tax to the Government and therefore, the assessee is in default in respect of the tax not deducted or paid to the exchequer and once, it is found that the assessee is in default, the interest under Section 201 (1A) is mandatory. 6. Assailing the said order, the assessee has preferred this appeal which was admitted on the fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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 statement for each quarter in accordance with the provisions of sub-section (3) of section 200].] " 8. A reading of Section 195 of the I.T. Act makes it clear that any person responsible for paying to a non resident shall, at the time of credit of such income to the account of the payee or at the time of payment thereof, whichever is earlier, deduct income tax thereon at the rates in force. This provision came to be interpreted by the Supreme Court of India, in the case of GE India Technology Centre P. Ltd. vs. Comissioner of Income Tax and another, reported in 2010 (327) I.T.R. 456 (S.C.) in the following manner : - " Submissions and findings thereon 8. If the contention of the Department that the moment there is remittance the obligation to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 the machinery sections. The Act is to be read as an integrated code. Section 195 appears in Chapter XVII which deals with collection and recovery. As held in the case of CIT v. Eli Lilly and Co. (India) (P.) Ltd. [2009] 312 ITR 225 the provisions for deduction of TAS which are in Chapter XVII dealing with collection of taxes and the charging provisions of the Income-tax Act form one single integral, inseparable code and, therefore, the provisions relating to TDS apply only to those sums which are "chargeable to tax" under the Incometax Act. It is true that the judgment in Eli Lilly [2009] 312 ITR 225 was confined to section 192 of the Income-tax Act. However, there is some similarit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 these contentions. As stated hereinabove, section 195(1) uses the expression "sum chargeable under the provisions of the Act." We need to give weightage to those words. Further, section 195 uses the word "payer" and not the word "assessee". The payer is not an assessee. The payer becomes an assessee-in-default only when he fails to fulfil the statutory obligation under section 195(1). If the payment does not contain the element of income the payer cannot be made liable. He cannot be declared to be an assessee-in-default. The abovementioned contention of the Department is based on an apprehension which is ill-founded. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. 10. In such view of the matter, the liability to interest does not arise at all. Even otherwise, by virtue of the ratio of the decision of the Supreme Court rendered in the case of GE India Technology Centre P. L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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