TeDiouS provisions appear to be simple but are complex and
have been subject matter of litigation over the years. This is
especially true for section 195 because divergent views have been
expressed by various courts as to when the liability gets fastened
u/s 195 to deduct tax and when an assessee may not deduct tax at
source.
A plain reading of section 195 suggests that the section would
come into operation when the payment being made to the recipient
constitutes income in the hands of the recipient. The moot question
therefore is that who decides whether the payment constitutes
income in the hands of the recipient? Is it the payer or the
Assessing Officer?
Consider a case where you purchase a property from a
non-resident. The non-resident represents that the capital gain has
already been invested in another property by taking benefit of the
'one year before purchase' clause and accordingly there
shall be no capital gain accruing to the seller. As there is
