Non deduction of TDS-Liability to pay interest even if deductee paid taxes. Under section 201(1A) liability of the deductor is absolute – ITAT
ABCAUS Case Law Citation:
ABCAUS 2472 (2018) 08 ITAT
Important Case Laws Cited/referred:
DIT vs. Jacabs Civil Incorporate
In the instant appeal, the assessee had challenged the order of CIT(A) in upholding the assessee in default with respect to interest liability u/s 201(IA) of the Income Tax Act, 1961 (the Act).
The short issue involved in this case was whether or not the assessee was liable to deduct TDS when payment was made to a power of attorney holder even when the de-facto and as well as de-jure ownership lied with the NRI.
The assessee purchased property from a Non Resident Indian (NRI) but did not deduct TDS on the payments made towards consideration for the said purchase. Before the Assessing Officer (AO), the assessee submitted that he had entered into an agreement for purchase of property with NRI couple and the transaction was through Power of Attorney Holder (POA) who was a resident and hence the assessee was under the impression that as he was dealing with a resident person he was not required to deduct the TDS.
The AO observed that the property was finally sold by the seller through a registered deed which proved that the the POA was only an agent of the owner but not who was a de-facto owner by the virtue of having any in alienable right. The non-resident sellers have later declared the capital gain arising on the sale of the property in their returns and paid taxes thereof.
The Assessing Officer held that the assessee was liable to pay interest under section 201(1)(A) calculated @12% per Annum.
Before the Tribunal the assessee argued that since he had been dealing with an Indian resident and so no tax was to be deducted by the purchaser and since the seller had already paid the taxes the interest cannot be charged in the hands of the assessee.
The Tribunal observed that the provisions of 201(1) stipulates that the assessee is liable to deduct tax on the payment and section 201(1)(A) casts liability of the assessee to pay interest on the default.
The Tribunal opined that though the statutory provisions casts liability on the assessee, keeping in view the payment received by the exchequer, whether by the assessee(purchaser) or by the recipient(seller) leverage was given by the authorities not to burden the assessee with the strict liability of the TDS deduction when the recipient pays the due taxes vide Circular No. 275/201/95-IT dt. 29/01/1997. This doesn’t mean the assessee is absolved totally of the responsibility to deduct the taxes and also interest if any. This Circular absolves the assessee in the cases where the due payments of tax or interest has been duly paid by the recipient.
The Tribunal noted that on the identical issue, the Hon’ble High Court had held that that an authority or the assessee which is bound to make a deduction of tax at source as per statute, if does not deduct, or after deducting fails to pay the tax, than such a person or authority is liable to pay simple Interest on the amount of tax not deducted. Thus the Tribunal opined that the liability of the tax deductor is absolute.
Accordingly, it was held that the interest under section 201(1)(A) had been rightly confirmed by the CIT(A).