A. MOHIUDDIN Vs. ADDITIONAL DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)
INCOME TAX APPELLATE TRIBUNAL
Additional Director Of Income Tax (International Taxation)
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(1.) THE present stay applications are directed at the instance of the appellants for grant of ad interim stay of the outstanding demand during the pendency of appeals. However, while going through the record, we deem it appropriate to hear the appeals itself, because the issue involved in all the three appeals is common and covered by the decision of the Hon'ble Supreme Court in the case of GE India Technology vs. CIT reported in : 327 ITR 156 and : 193 Taxman 234 r.w. instruction No. 2/2014 dated 26.02.2014 issued by the Board. Therefore, with the consent of both the representatives, we heard the appeals itself.
(2.) THE common question involved in all the appeals is whether the appellants can be treated in default for not deducting the TDS while making payments to the non resident Mrs. Zohra Moidin, resulting the demand of tax against the assessees as well as interest u/s. 201(1A) of the Income Tax Act.
(3.) THE brief facts of the case are that Mr. Ahmed Mohiuddin and Mrs. Shahanaz Mohiuddin are the directors of the Company M/s. Sami Reality and Infrastructures (P) Ltd. They have jointly executed a purchase deed on 16.09.2011 with the vendors of the property at Mangalore which was jointly owned by Mrs. Zohra Moidin and Mrs. Sayeeda Amir Ali. The property was purchased for a consideration of Rs. 2,57,24,000. The dispute is that Mrs. Zohra Moidin is a non resident and before making payment to her, the TDS u/s. 195(1) ought to have been deducted by the assessee. Since they failed to deduct the TDS, therefore, they are "assessee in default" and a notice u/s. 201 was served upon the assessee. The contention of the assessees before the learned Asstt. Director of Income Tax (International Taxation) was that at the time of execution of sale deed and payments of consideration, it was represented by Mrs. Zohra Moidum that she had purchased a house property on 24.5.2011 which is within one year prior to the date of sale deed being executed 16.09.2011. She has represented that the consideration paid for acquisition of residential hosue was of Rs. 1.50 crores and the cost of stamp paper and registration charges was a sum of Rs. 12,30,475/ -. Thus, she had made investment in the new residential house at Rs. 1,62,30,475/ - which was eligible for exemption u/s. 54 of the Income Tax Act. Thus according to the assessee, in the payments made by them, the nature of income chargeable to tax ought to be embedded, only then they are required to deduct the TDS, since no such income was embedded upon which the taxes are to be levied. Therefore, they have not deducted the TDS.
The learned Assessing Officer has observed that section 195 contain in itself a procedure where an assessee feels necessity of any clarification on account of non deduction of taxes, he can move an application u/s. 195(2) or 195(3). Section 195(1) mandate the assessee to deduct the TDS while making payment to any non resident. With regard to assessee's contention that element of income ought to be involved in the payment is concerned, the learned Assessing Officer has observed that there is a perceptional difference between construction of this expression available in section 195(1) of the Act, the expression "sum chargeable to tax", is not dependent upon the ultimately payment of tax by the recipient . There can be so many reasons, where recipient can be exempted from payment of taxes like deduction, exemption etc., but the element of income in the payment is involved. The Assessing Officer has emphasized that on sale of the house property, capital gain tax would be chargeable in the hands of the recipient , therefore, the element of income is quite involved in the payment. It is a different matter that the recipient was entitle for exemption u/s. 54. In this way the Assessing Officer has held the assessees in default and raised a demand u/s. 201. He also charged interest u/s. 201(1A).;
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