It is not in dispute that Mrs. Shyamala Vijai and Mrs. Poornima Shivaram were entitled to half share each over the property that was sold to the appellant. In fact, as we have already seen, the sale deed clearly acknowledges the receipt of sale consideration of Rs.1 .20 crore by both the vendors in equal shares. In law, Mrs. Shyamala Vijai and Mrs. Poornima Shivaram are entitled to half share each over the property. The share of each of the vendors would therefore be Rs. 60 lakhs. Mrs. Shyamala Vijai is, admittedly, a non-resident and to the extent of Rs. 60 lakhs paid to her, the provisions of section 195 are attracted and the assessee ought to have deducted tax at source while making payments to the non-resident through Mrs. Shyamala Vijai.
The ld. DR has, however, relied on the decision of the ITAT Bangalore Bench in the case of Syed Aslam Hashmi v. ITO in ITA No. 1313/Bang/2010 & 107 6/Bang/2012, dated 28.09.2012. The ld. DR pointed out before us that the Tribunal in the aforesaid decision has held that u/s. 195 of the Act, tax is to be deducted on the entire sale consideration. We have perused the aforesaid decision and are of the view that the same is not applicable to the facts of the present case. In the aforesaid case, the issue was as to whether u/s. 195 of the Act, tax is to be deducted at source on the capital gain arising out of the transfer of a capital asset or on the entire sale consideration for which the capital asset is transferred. In the aforesaid case, there was no dispute that the payment of the entire sale consideration was made to a non-resident. The Tribunal held that tax has to be deducted at source u/s. 195 of the Act on the entire sale consideration and not on the capital gain arising on transfer of the capital asset. As we have already seen, the facts of the present case are different and the issue is only with regard to whether the tax deduction at source is on the entire sale consideration of Rs. 1.20 crores or Rs. 60 lakhs which was the payment made to the non-resident out of Rs. 1.20 crores.
INCOME TAX APPELLATE TRIBUNAL “C” BENCH : BANGALORE
BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER
AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER
ITA No. 1097/Bang/2012 & IT(IT)A No.778/Bang/2013
Assessment year : 2009-10
Shri R. Prakash,
Vs.
The Income Tax Officer, International Taxation
Date of Pronouncement: 12.07.2013
O R D E R
Per N. V. Vasudevan, Judicial Member
These appeals are by the assessee against the order dated 25.06.2012 of the CIT(Appeals)-IV, Bangalore relating to assessment year 2009-10.
2. In these appeals, the assessee has challenged the order of the CIT(Appeals) whereby the CIT(A) held that the assessee is an ‘assessee in default’ for not deducting tax at source u/s.201(1) of Act, while making payment for purchase of a property.
3. The material facts giving rise to the present appeals are as follows. The appellant is an individual. He purchased residential property bearing No.696, WOC Road, 3rd Stage, 3rd Block Extension, Bangalore, under a registered sale deed dated 27.04.2008. The property in question originally belonged to one Cmdr. J.R. Vijai. Mr. Vijay died intestate on 21.09.2003 leaving behind him, his wife, Mrs. Shyamala Vijai and only daughter Mrs. Poornima Shivaram as Class-I legal heirs, entitled to succeed to his properties. The appellant purchased the aforesaid property for a total consideration of Rs.1 .20 crores. Mrs. Poornima Shivaram, one of the co-owners of the property was a non-resident. She had given a General Power of Attorney (GPA) to her mother, Mrs. Shyamala Vijai. Mrs. Shyamala Vijai executed the sale deed in favour of the appellant for herself and as GPA holder of Mrs. Poornima Shivaram. The sale consideration of Rs.1.20 crores was paid by one cheque for Rs.10 lakhs; 10 DDs for Rs.9,50,000 and 2 DDs for Rs.9 lakhs & Rs.6 lakhs respectively. The DDs were issued in the name of Mrs. Shyamala Vijai. The sale deed acknowledges the receipt of Rs.1 .20 crores in the following manner:-
“In pursuance of the covenants contained herein and the Purchaser having paid the entire sale consideration of Rs.1,20,00,000/- (Rupees One Crore Twenty Lakhs Only), the receipt of which sum the Vendors hereby acknowledge and also confirm the full and final settlement of the entire sale price of the schedule property.”
4. As already stated, Mrs. Poornima Shivaram, one of the co-owners was a non-resident. Under the provisions of section 195 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”], any person responsible for paying to a non-resident any interest nor being interest referred to in section 1 94LB or section 1 94LC or any other sum chargeable under the provisions of the Act, shall at the time of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income tax thereon at the rates in force.
5. Admittedly, the appellant did not deduct tax at source while making the payment. The ITO, International Taxation, Ward 2(1) issued a show cause notice u/s. 201(1) of the Act calling upon the assessee to show cause as to why he should not be treated as an ‘assessee in default’ in respect of tax not deducted at source as mandated by the provisions of section 195 of the Act. The assessee did not give any reply to the show cause notice. The Assessing Officer therefore proceeded to pass an order u/s. 201(1) of the Act as follows:-
“As stated above, during the financial year 2008-09, the assessee purchased the property at West of Chord Road, Bangalore, from Smt. Purnima Shivaram for a consideration of Rs.1,20,00,000/-. This amount was paid by the assessee to the seller on 04.04.2008 amid 19.04.2008 by Demand Drafts. The payee, Smt.Purnima Shivaram, was a non-resident. The assessee has not deducted any tax at source at the time of making this payment.
Here it may be noted that in the registered Sale Deed dated 21.04.2008, the seller has given her residential address as No.8, Allen Drive, Kinnelon, NJ 07405, U.S.A.
Thus, the assessee, at the time of making payment of Rs. 1,20,00,000/- to the non-resident seller, has not deducted any tax a source as per the provisions of Sec.195 of the Income Tax Act. As the payment of sale consideration of Rs. 1,20,00,000/- to Smt. Purnima Shivaram, a non-resident, is chargeable to tax in India, and as the assessee has failed to discharge its obligation to deduct tax at source as stipulated u/s. 195 of the Income Tax Act, 1961, as per the provisions of Sec.201(1) of the Income Tax Act, 1961, for the asst. year 2009-10, 1 am holding the assessee, Sri.R.Prakash, as deemed to be an assessee in default in respect of tax not deducted at source in respect of payment of Rs.1,20,00,000/-. He is liable to pay the tax deductible in this regard along with the interest u/s. 201(1A).
The tax liability of the assessee, Sri.R.Prakash, u/s.201(1) for asst. year 2009-10 is worked out as under:
