JAYANTHI BHARATH KUMAR,,VISAKHAPATNAM vs. THE DIRECTOR OF INCOME TAX,, VISAKHAPATNAM

आदेश / O R D E R

PER D.S. Sunder Singh, Accountant Member:

This appeal filed by the assessee is directed against order of the

Commissioner of Income Tax (Appeals)-10, {CIT(A)}, Hyderabad vide

ITA No.0087/CIT(A)-10/2016-17 dated 1.11.2016 for the assessment

year 2007-08.

ITA No.272 /Vizag/2017 Jayanthi Bharath Kumar, VSKP 2. The assessee has raised following grounds of appeal:

adjudication.

gains. The assessee is a non-resident and resident of USA. Mr.B Chitti

Babu is the representative assessee in this case. During the previous

year relevant to the Assessment year (A.Y.) the assessee sold

immovable property admeasuring 994 sq.yds. along with old structures

located at D.No.25-41-1, Godevari Street, Visakhapatnam to M/s.

Essemm Logistics, Visakhapatnam vide document No.3727, registered 2

ITA No.272 /Vizag/2017 Jayanthi Bharath Kumar, VSKP before the Sub Registrar, Visakhapatnam. The sale consideration of the

document was stated to be ` 15.00 lakhs and for stamp duty purpose,

the registering authority (hereinafter called the SRO) assessed the

market value at ` 54,03,500/-. The assessee did not file return of

income declaring the resultant capital gains, hence the A.O. issued

notice u/s 148 of the Act and taken up the case for scrutiny. In the

return of income, the assessee admitted the sale consideration of `

15.00 lakhs against the market value determined by SRO at `

54,03,500/-. The assessee objected for adopting the SRO value and the

A.O. referred the issue to the Departmental Valuation Officer (DVO) who

has valued the property at ` 89,03,000/-. The A.O. completed the

assessment adopting the sale consideration at ` 45,72,000/- for 994

sq.yds of the land, ` 2,88,000/- for 70 years old sheds and ` 5,42,720/-

for 10 years old sheds as assessed by the SRO. Accordingly, the A.O.

computed the capital gains at ` 40,56,514/- for the land, ` 23,244/- for

10 years old sheds and loss of `29,628/- for 70 years old sheds and the

total long term capital gain was worked out to ` 40,50,130/- which was

brought to tax.

before the CIT(A) and the Ld. CIT(A) confirmed the addition made by

ITA No.272 /Vizag/2017 Jayanthi Bharath Kumar, VSKP the A.O. Against the order of the CIT(A), the assessee filed appeal

before the Tribunal.

adopted by the sub registrar office was originally fixed in 1976 and there

was no revision in Visakhapatnam area till 1982. The Ld. AR further

submitted that guideline value as on 1981 was very low compared to the

market value of the property in 1981, hence requested for working out

the Fair market Value (FMV) as in 1981, by making the reverse working

taking the basis from the revised rates of 1982. The Ld. A.R argued that

the market value was revised in 1982 to Rs.250/- per sq.yard, and

contended that the cost of land fixed at ` 100/- per sq.yd as on

1.4.1981 was related back to 1976 and therefore, requested to arrive at

the FMV of 1981 @ ` 200/- by reverse working on the basis of guideline

value of 1982. The Ld. A.R. further submitted that there were certain

drawbacks in the property such as occupation by tenant and lack of

proper approach roads etc. and because of the said drawbacks, the

property could not get reasonable rate as expected, and hence, the A.O.

is not justified in arriving at the long term capital gain at ` 40,50,130/-.

The Ld. A.R. argued that considering the drawbacks in the property,

value adopted by the SRO should be scaled down and the value of the

land as on 1.4.1981 should be enhanced to ` 200/- instead of ` 100/- 4

ITA No.272 /Vizag/2017 Jayanthi Bharath Kumar, VSKP considering the revised rates in 1982 by the Government of Andhra

Pradesh.

authorities.

on record and gone through the orders of the authorities below. In this

case, the assessee has sold the property for a consideration of ` 15.00

lakhs against the value assessed by the SRO at ` 54,03,500/-. On the

objections raised by the assessee, the A.O. referred the valuation of the

property to the DVO and the DVO valued the property at ` 89,03,000/-.

The breakup of the value fixed by the DVO and SRO, itemwise are as

under:

Sl.No. Description DVO (Rs.) SRO (Rs.) Market value of land @ ` 84,00 1. 83,49,600 45,72,400 per sq.yd. 2. Market value of building which is 84,754 2,88,000 70 years old 3. Market value of which is 12 3,29,361 5,42,720 years old 4. Market value of which is 20 1,38,821 years old Total value of the property 89,03,000 54,03,120

DVO exceeds the value adopted by SRO, the value assessed by SRO

should be taken as full value of the consideration received or accruing as 5

ITA No.272 /Vizag/2017 Jayanthi Bharath Kumar, VSKP a result of transfer. For ready reference, we reproduce relevant

provision of IT Act, sub section 3 of section 50C of the Act, which reads

as under:

(3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.]

valued the property for more value than the value assessed by the SRO,

hence, the A.O. adopted the value of SRO as per section 50C(3) of IT

act and computed the capital gains. The DVO has valued the property

after considering all the objections raised by the assessee before the

DVO and the A.O. and valued the property at higher rate. Since the

objections were considered by the technical expert and made the

valuation of the property at higher rate no separate deduction is

required to be allowed on account of the deficiencies canvassed by the

Ld. A.R. Therefore, we hold that the A.O. has rightly adopted the value

assessed by the SRO u/s 50C of the Act and accordingly, we uphold the

order of the Ld.CIT(A) and dismiss the assessee’s appeal on this ground.

9.0 In the appeal, the assessee has requested for revision of cost of

land i.e. Fair Market Value(FMV) as on 01/04/1981 at ` 200/- per sq.yd.

ITA No.272 /Vizag/2017 Jayanthi Bharath Kumar, VSKP against FMV as on 1.4.1981 @ ` 100/- per sq.yd. as per the guideline

value. The assessee did not bring any evidence to establish that the

FMV of land as on 1.4.1981 was ` 200/- per sq yard, with market

information from approved channels, wealth tax returns of the assessee

etc. Though the assessee submitted that the guide line value was

revised in 1982 and requested for backward working of the FMV, it is

incorrect method to arrive at the FMV. For arriving the FMV as on 1981

the correct method is guideline value, or the sale value of the lands in

the area, or the authentic market information and the value declared by

the assessee in her wealth tax return. The assessee has not furnished

any information to substantiate that the guideline value was incorrect.

The A.O. has adopted the SRO value in the case of the sale

consideration as well as for cost of land (FMV) and the decision taken by

the A.O. is consistent. In the absence of any evidence to establish that

the land rate of the area was at ` 200/- as on 01/04/1981 and the

market rate was more than Rs.100/-, we hold that the FMV arrived by

the AO is reasonable and do not find any reason to interfere with the

order of the CIT(A) and the same is upheld.

term capital loss in respect of super structures. During the appeal

hearing, the Ld. A.R. did not make any argument on this ground. 7

ITA No.272 /Vizag/2017 Jayanthi Bharath Kumar, VSKP However, on going through the assessment order, the A.O. has adopted

the value of sale consideration as adopted by the SRO. No other

evidence produced by the assessee during the appeal hearing to

controvert the finding given by the A.O., therefore, we do not find any

infirmity in the order of the Ld. CIT(A) and the same is dismissed.

the Act. During the appeal hearing, Ld. A.R. argued that the assessee is

a non-resident and required to deduct tax at source at the time of

purchase of property from the non-resident as required u/s 195 of the

Act. Therefore, the assessee is not obliged to pay advance tax and

relied on the decision of Hon’ble Delhi High Court in the case of Director

of Income Tax Vs. 1. Jacabs Civil Incorporated, 2. Mitsubishi Corporation

(2011) 330 ITR 578 (Delhi).

on record and gone through the orders of the authorities below. There is

no dispute that the assessee is non-resident and resident of US and sold

the property to the resident. The vendee required to deduct the tax at

source as per section 195 of the Act. The assessee relied on the decision

of Hon’ble Delhi High Court in the case of Jacabs Civil Incorporated and

another cited (supra) wherein the Hon’ble High court held as under:

ITA No.272 /Vizag/2017 Jayanthi Bharath Kumar, VSKP “This clause categorically uses the expression “deductible or collectible at source” and it is this clause which is incorporated by the Uttaranchal High court in the said judgement (supra) in the manner already pointed above. The scheme of the Act in respect of non-residents is clear. Section 195 of the Act puts an obligation on the payer, i.e., any person responsible for paying to a non-resident, to deduct income-tax at source at the rates in force from such payments excluding those incomes which are chargeable under the head “Salaries”. Therefore, the entire tax is to be deducted at source which is payable on such payments made by the payee to the non-resident. Section 201 of the Act lays down the consequences of failure to deduct or pay. These consequences include not only the liability to pay the amount which such a person was required to deduct at source from the payments made to a non-resident but also penalties etc. Once it is found that the liability was that of the payer and the said payer has defaulted in deducting the tax at source, the Department is not remedy less and therefore can take action against the payer under the provisions of section 201 of the Income-tax Act and compute the amount accordingly. No doubt, If the person (payer) who had to make payments to the non-resident had defaulted in deducting the tax at source from such payments, the non-resident is not absolved from payment of taxes thereupon. However, in such a case, the non-resident is liable to pay tax and the question of payment of advance tax would not arise. This would be clear from the reading of section 191 of the Act along with section 209(1)(d) of the Act. For this reason, it would not be permissible for the Revenue to charge any interest under section 234B of the Act.”

12.1 The coordinate bench of Kolkata ITAT-’C’ Bench in the case of Additional Director of Income-tax, (International Taxation)- 3(1), Kolkata v. White Industries Australia Ltd., [2017] 81 taxmann.com 33 (Kolkata - Trib.)has considered the same issue and held as under: 22. As far as this appeal by the revenue is concerned the person making payment to the Assessee was duty bound to deduct tax at source u/s.195 of the Act on payment made to the Assessee, as the Assessee was a non-resident. In estimating the advance tax payable, the Assessee was bound to take note (give credit to) tax deductible at source (whether actually deducted or not). If such credit is given then there would be no liability to pay advance tax of the Assessee would be less than Rs.5000 and therefore no interest u/s.234B of the Act could be levied. In this regard reference may be made to the decision of the ITAT Delhi in the case of Sedco Forex International Drilling Inc. v. Dy. CIT [2000] 72 ITD 415 (Delhi). In this regard reliance may also placed on the decision in the case of Motorala Inc. v. Dy. CIT [2005] 95 ITD 269 (Delhi) (SB), wherein the Hon'ble Tribunal has held that no interest is payable by a taxpayer if his entire tax was deductible at source, and this is true even if the tax was not actually deducted. The relevant extracts of the said decision is produced below:— "All the payments made to the assessee are tax deductible at source (even assuming that they are taxable) as rightly held by the CIT(A) and also contended before us. In that 9

ITA No.272 /Vizag/2017 Jayanthi Bharath Kumar, VSKP case, having regard to the provisions of section 201(1) & 201(1A) to which our attention was drawn on behalf of the assessees. the assessees cannot be held to have committed default in paying the advance- tax. They are entitled to take into account the tax which is deductible by the payer. though not actually deducted. Consequently, there is no liability to pay interest. The decision of the CIT(A) to cancel the interest U/S 234B is upheld on merits. " 23. The issue was confirmed by the Delhi HC in the case of DIT v. Ericsson AB [2011] 16 taxmann.com 371/204 Taxman 192/343 ITR 470. Reliance was also placed on the decision in the case of DIT v. Jacobs Civil Incorporated/Mitsubishi Corpn [2010] 194 Taxman 495/330 ITR 578 (Delhi) (Page 726 to 742), wherein the Hon'ble Delhi High Court has held as under: "No doubt, if the person (payer) who had to make payments to the non-resident had defaulted in deducting the tax at source from such payments. the non - resident is not absolved from payment of taxes thereupon. However, in such a case, the non-resident is liable to pay tax and the question of payment of advance tax would not arise. This would be clear from the reading of Section 191 of the Act along with Section 209 (1) (d) of the Act. For this reason. it would not be permissible for the Revenue to charge any interest under Section 234B of the Act." 24. Reliance may also be placed on following decisions laying down identical proposition as set out above. DIT (International Taxation) v. Maersk Co. Ltd. [2011] 198 Taxman 518/10 taxmann.com 269/334 ITR 79 (Uttarakhand) (FB). Sedco Forex International Drilling (supra); Rheinbraun Engg. & Wasser Gmibh v. Dy. CIT [IT Appeal No. 1915 Bom./1996, dated 3 October 1997 (Bom.)]; M.M. Rathan v. ITO [1997] 62 ITD 21 (Mum.) (TM); Asia Satellite Tele Communications Co. Ltd. v. Dy. CIT [2003] 85 ITD 478 (Delhi); DIT v. NGC Network Asia LLC [2009] 313 ITR 187 (Bom.); CIT v. Tide Water Marine International Inc. [2009] 309 ITR 85/177 Taxman 150 (Uttarakhand) and CIT v. Ranchi Club Ltd. [2001] 247 ITR 209/114 Taxman 414 (SC). Therefore, the provisions of section 234B & 234C are not applicable to the Assessee. 25. Under Section 209(1)(a)to (d) lays down four situations under which advance tax payable by the assessee is to be computed. In the present case we are not concerned with clauses (a) to (c). Clause (d) of sub-Section (1) of Sec.209 is relevant for the present case and it reads thus:- "(d) The income-tax calculated under clause (a) or clause (b) or clause(c) shall, in each case, be reduced by the amount of income-tax which would be deductible or collectible at source during the said financial year under any provision of this Act from any income (as computed before allowing any deductions admissible under this Act) which has been taken into account in computing the current income or, as the case may be, the total income aforesaid; and the amount of income-tax as so reduced shall be the advance tax payable." 26. A reading of the above clause shows that the clause categorically uses the expression "deductable or collectable at source". Under Sec.195 of the Act, there is an obligation on the payer, i.e. any person responsible for paying to a non-resident, to deduct income tax at source at the rates in force from such payments excluding those incomes which are chargeable under the head 'Salaries'. Therefore, the entire tax is to be deducted at source which is payable on such payments made by the payee to the non- resident. Sec.201 of the Act lays down the consequences of failure to deduct or pay. These consequences include not only the liability to pay the amount which such a person was required to deduct at source from the payments made to a non-resident but also penalties etc. Once it is found that the liability was that of the payer and the said payer has defaulted in deducting the tax at source, the Department is not 10

ITA No.272 /Vizag/2017 Jayanthi Bharath Kumar, VSKP remedy-less and therefore can take action against the payer under the provisions of Sec.201 of the Income Tax Act and compute the amount accordingly. No doubt, if the person (payer) who had to make payments to the non-resident had defaulted in deducting the tax at source from such payments, the non- resident is not absolved from payment of taxes thereupon. However, in such a case, the non-resident is liable to pay tax and the question of payment of advance tax would not arise. The provisions of Sec.209(1)(d) have been amended by the Finance Act, 2012 but those amendments are not relevant for the present case which relates to AY 1992-92. We therefore hold that the assessee was not liable to pay any interest under sec.234-B of the Act following the judgments referred to earlier. In the instant case, the facts of this case are similar, therefore,

respectfully following the decision of Hon’ble High court of Delhi in the

case cited (supra) and the decision of the coordinate bench of Kolkata,

we hold that the assessee is not liable for interest u/s 234 of the Act to

the extent of TDS to be made from the assessee. Accordingly, we direct

the A.O. not to levy the interest u/s 234B of the Act to the extent of tax

required to be deducted from the assessee by the purchaser.

Accordingly, the appeal of the assessee on this ground is partly allowed.

The above order was pronounced in the open court on 13th Jul’18.

Sd/- Sd/- (वी. दुगा�राव) ( ड.एस. . . . सु�दर "संह) (V. DURGA RAO) (D.S. SUNDER SINGH) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER #वशाखापटणम /Visakhapatnam: 'दनांक /Dated : 13.07.2018 VG/SPS

ITA No.272 /Vizag/2017 Jayanthi Bharath Kumar, VSKP

आदेश क� ��त)ल#प अ*े#षत/Copy of the order forwarded to:-