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January 2016

TDS – Payment to non-resident – Sections 195 and 201 – A. Y. 2002-03 – Transaction not resulting in liability to tax – Tax not deductible at source – Assessee not in default

By K. B. Bhujle Advocate
Reading Time 1 mins
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Anusha Investments Ltd. vs. ITO; 378 ITR 621 (Mad):

The assessee had purchased shares from a non-resident company which had resulted in capital loss to the nonresident company. Therefore, the assessee had not deducted tax at source. The Tribunal held that whether or not the non-resident company suffered a loss or gain on the sale of shares, a duty was cast on the assessee to deduct the tax whenever it made payment to the nonresident and that the assessee was not only liable to deduct the tax at source, but it also had to pay the tax so collected to the exchequer.

In appeal by the assessee, the Madras High Court reversed the decision of the Tribunal and held as under:

“In the present transaction, admittedly, there was no liability to tax. As a result, the question of deducting tax at source and the assessee violating the provisions of section 195 did not arise and, therefore, the assessee could not be treated as an assessee in default.”

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