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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 ..... return of income and has offered the receipt to tax. Therefore, we are of the opinion that the AO’s recitals about the non-filing of the return and non-offering of the income by the vendors is only to demonstrate that the income of the vendors has escaped assessment. The second objection the assessee is that Article 26 of Indo-US DTAA is applicable - As regards Article 26 of Indo-US DTAA, we find that it is against discrimination of non-residents vis-à-vis the residents of the contracting States under 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. The income in the hands of the NRI’s is taxable under the head capital gains and the provisions of section 195 are attracted also because they are non-residents. As rightly argued by the assessee, the assessee is required to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961 and prays that the tax liability for ₹ 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 passed u/s 201 is nothing but an assessment made on the Non-Resident to tax their income in hands of Appellant without giving notice to the Appellant as an agent u/s 163 of the Income Tax Act 1961 . 3. Brief facts of the case are that the assessee, an individual, purchased a residential flat bearing flat No.414 with Municipal Property Assessment No.8-3-833/K/1 to 8/214 admeasuring 2750 sft on 31.12.2009 vide document No.38/2010 of SRO, Banjara Hills, from two persons i.e. Mrs. Aarthi S. Gadasalli and Mr. Suresh N. Gadasalli, who are both nonresidents residing at No.21, Santa Fe Place, O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the LTCG at ₹ 30,33,556 and treated the assessee as an assessee in default for a sum of ₹ 6,06,711 which is the tax deductible at source at 20% of ₹ 30,33,556. Thereafter, he computed the interest payable u/s 201(1A) of the Act at ₹ 4,48,966. Thus, the total tax liability was computed at ₹ 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 default u/s 201(1) and levying the interest u/s 201(1A) of the Act. The CIT (A) dismissed the ground of applicability of Article 26 of Indo-US DTAA to the facts of the case before him and also the computation of tax on LTCG and upheld the orders u/s 201(1) and 201(1A) of the Act. Thus, the CIT (A) dismissed the appeal of the assessee and the assessee is in second appeal before us. 7. The learned Counsel for the assessee, submitted that though the order is mentioned as an order passed u/s 201(1) of the I.T. Act, the AO has treated the assessee as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound 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 make TDS. The 3rd objection of the assessee is that even if the assessee is required to make the TDS, it can only be on the sum of ₹ 48.00 lakhs paid as sale consideration and not on the sale consideration to be adopted u/s 50C of the Act. Further, he also raised an objection that the assessee is required to make TDS on the gross sum paid, whereas the AO has treated the assessee as an assessee in default after computing the LTCG which is not permissible under law. 11. The learned DR, on the other hand, supported the orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /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 the receipt to tax. Therefore, we are of the opinion that the AO s recitals about the non-filing of the return and non-offering of the income by the vendors is only to demonstrate that the income of the vendors has escaped assessment. 14. The second objection the assessee is that Article 26 of Indo-US DTAA is applicable to the facts of the case before us. Article 26 of Indo-US DTAA, is a non-discrimination article to protect the non-residents from tax discrimination on the basis of (1) Nationality, (2) Location (PE), (3) De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts 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 received from the sale of their property. Therefore, as far as the liability of the assessee is concerned, we have no hesitation to hold that it shall only be on the actual consideration credited or paid by the assessee, whichever is earlier. Further, as seen from the assessment order, the assessee has already paid taxes on the LTCG accruing to the vendors on the actual payment made by him. Therefore, we are of the opinion that the assessee cannot be treated as an assessee in default u/s 201(1) of the Act, but is only liab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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