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TMI Blog2018 (1) TMI 1448X X X X Extracts X X X X X X X X Extracts X X X X ..... n of provisions of Section 201(1) and Section 201(1A) of the Act. 4. In view of the Article 26 of Indo-US Double Taxation Avoidance Agreement, the appellant cannot be treated as an 'assessee-in-default'. 5. Without prejudice to the aforesaid facts, the learned CIT(A) erred in adopting the sale consideration u/s 50C of the IT Act, 1961 which is subject to conditions laid down therein and is not applicable to the provisions of sec.195 of the IT Act, 1961 as the deemed consideration is never paid by the appellant. 6. The Appellant denies to the tax liability u/s 201(1) & 201(1A) of the IT Act, 1961 and prays that the tax liability for Rs. 10,55,677/- kindly be deleted. 7. Any other ground/grounds that may be urged at the time of hearing of appeal". 2. In addition to the above, vide letter dated 11.3.2017, the assessee filed the following additional grounds of appeal: "1. The entire order passed u/s 201 is a device or scheme adopted by the Assessing officer (' A.O') to tax the income of the Non-Resident in the hands of an Appellant and therefore the order u/s 201 not being in accordance with the statutory provisions must be quashed. 2. The order passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claiming the indexed cost of acquisition of the property, the AO held that the assessee is liable to pay the tax on LTCG. He, thereafter, observed that the sale consideration should be taken u/s 50C of the Act at Rs. 58,11,100. He also proceeded to consider the cost of acquisition and observed that there is a mistake in the computation of LTCG as per the Instruction No.2/2014 dated 26.02.2014 and therefore, asked the assessee to state his objections, if any, to adopt the LTCG at Rs. 30,33,556. But the assessee did not make any submission. Therefore, the AO computed the LTCG at Rs. 30,33,556 and treated the assessee as an "assessee in default" for a sum of Rs. 6,06,711 which is the tax deductible at source at 20% of Rs. 30,33,556. Thereafter, he computed the interest payable u/s 201(1A) of the Act at Rs. 4,48,966. Thus, the total tax liability was computed at Rs. 10,55,677. 6. Aggrieved, the assessee preferred an appeal before the CIT (A) raising a ground that by virtue of Article 26 of the Indo-US Taxation Avoidance Agreement, the provisions of section 195 are not attracted to this transaction. He also raised grounds of appeal against treating the assessee as an assessee in defaul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly attracted and the liability of the assessee u/s 195 is clearly established as the vendors are required to file their returns of income and offer the capital gains to tax. Thus, the liability of the assessee precedes the liability of the vendors. Though the AO has brought on record that the vendors have not paid the tax on the LTCG arising out of the sale of the property, we find that the order under appeal before us is an order u/s 201(1) and it is not consequent to or to bring to tax the income of the vendors. Therefore, on this ground also, the additional grounds of appeal raised by the assessee are not admissible. 10. As regards the merits of the case is concerned, the learned Counsel for the assessee submitted that the sale deed has been executed in favour of the assessee by the GPA holder of the vendors who is a resident of India and since, the assessee has made the payment to the said GPA holder, the assessee was not required to make any TDS u/s 195 of the Act. The 2nd objection taken by the assessee is that under Article 26 of the DTAA between India and the USA, the non-residents are not liable to tax in India and therefore, there was no requirement of the assessee to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration to the GPA holder in India and therefore, is not required to make TDS is not acceptable because, at best, the GPA holder can be considered as only a conduit between the assessee and the owners of the property and therefore, in the true sense, the assessee has made the payment to the non-residents only. In such circumstances, the assessee is required to deduct the tax at source u/s 195 of the Act before making the payment. The assessee has clearly failed to do so and therefore, the AO has initiated the proceedings u/s 201(1) of the Act by issuance of a notice dated 19.6.2013. The contention that section 201(1) proceedings have been initiated only because the vendors have not paid the tax also is incorrect as in the case of the vendors, notices u/s 148 were issued on 14.2.2014 i.e. after initiation of the proceedings u/s 201(1) of the Act in the case of the assessee on 19.06.2013. Further, it is noticed that the order u/s 201(1) is dated 27.1.2016 i.e. after introduction of the proviso to section 201(1) of the Act, wherein it has been provided that an assessee shall not be treated as 'an assessee in default' if the recipient has filed the return of income and has offered th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r similar circumstances. The underlying principle of Article 26 is that the non-resident shall not be treated less favourably than the residents of the contracting state and the requirements connected with taxation shall not be more burdensome than they are for residents. But in the case before us, there is no discrimination against the NRI's. We are dealing with the liability of the assessee to deduct TDS and not about the liability of the non-residents. Therefore, clearly, the above decision is not applicable to the facts of the case before us. 19. Further, the assessee has already paid tax on the Long Term Capital Gain computed on the actual payment made by the assessee that has arisen to the vendors and there is no escapement of tax due to the Revenue to that extent. But, the AO has invoked the provision of section 50C to compute the LTCG. We are not dealing with the liability of the vendors to pay the taxes, but, we are dealing with the liability of the assessee to deduct taxes at sources. As rightly argued by the learned Counsel for the assessee, the assessee is required to make the TDS from credit or payments made by it and not on what the vendors are deemed to have receive ..... X X X X Extracts X X X X X X X X Extracts X X X X
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