Vinod Soni Vs. ITO (TDS) ITAT Delhi

TDS u/s 194-IA not applicable in case of joint buyers having individual share in property less than Rs. 50 Lakhs

Order pronounced by the court: - Section 194-IA will not be attracted in case of joint buyers of an immovable property where the share of each joint buyer is less than Rs. 50 Lakhs. For the purpose of applicability of TDS u/s 194-IA, each buyer is to be treated as a separate entity and therefore, the law is to be applied individually to each buyer.

Facts of the case: - The assessee along with 3 other persons, jointly acquired an immovable house property for a total value of Rs. 1.50 crores. Thus, the share of each buyer in the consideration was Rs. 37.50 Lakhs. Each buyer paid off the share of their purchase consideration from their individual bank accounts. However, TDS was not deducted by all the 4 joint buyers in the presumption that the purchase consideration in their hand individually is lower than Rs. 50 Lakhs. Therefore, there is no requirement to deduct TDS u/s 194-IA.

However, the A.O. had a different opinion. He opined that since the total consideration for the immovable property is Rs. 1.50 crore i.e. in excess of Rs. 50 Lakhs under a single sale deed, section 194-IA is applicable and TDS ought to be deducted u/s 194-IA. Rejecting the contention of the assessee, the A.O. invoked the provisions of section 201(1) and 201(1A) and thus, raised demand for tax along with penal interest. The order of A.O. was confirmed by CIT (Appeals) in further appeal. Aggrieved, the assessee opted for an appeal before Tribunal.

Issue before the Tribunal

Whether TDS u/s 194-IA is deductible in case the consideration for transfer of immovable property is Rs. 50 Lakhs or more in case of joint buyers but the individual share of each joint buyer is less than Rs. 50 Lakhs?

 Arguments by the assessee: - Ld. Counsel of the assessee submitted that the provisions of TDS @ 1% u/s 194-IA are not applicable qua assessee as the purchase consideration qua assessee is only Rs. 37,50,000/- being less than Rs. 50 Lakhs being 1/4^th undivided equal share of the property of which the total purchase consideration is Rs. 1.50 crores for 4 persons. Consequently, both the lower authorities erred in law as well as on merits in invoking provision of section 201(1) & 201(1A) and consequently calculating amount payable u/s 201(1) as Rs. 1,50,000/-; Rs. 37,500/- and interest u/s 201(1A) Rs. 27,000; and Rs. 6,750/-.

It was further submitted by the L’d counsel that the liabilities created u/s 201(1) & 201(1A) for the part of consideration paid before 01-06-2013 is unsustainable as provisions of section 194-IA are effective from 01-06-2013. It was further submitted that in view of 1^st proviso to section 201(1), no liability should have been created u/s 201(1).

It was further submitted that interest u/s 201(1A) have been wrongly charged @ 1.5% per month against correctly 1% as provided in the section. Further, the whole proceedings are vitiative in law and un-sustainable as single and common proceedings have been initiated in respect of 4 individual buyers namely Pradeep Soni, Babita Soni, Vinod Soni and Beena Soni and a common order has been passed treating all these 4 persons as a single unit/ single assessee.

Arguments of the department: - The L’d D/R relied upon the orders of the lower authorities.

Observations of Tribunal: -

• Section 194-IA is applicable on any person being a transferee, so section 194-IA(2) is also, obviously, applicable only with respect to the amount related to each transferee and not with reference to the amount as per sale deed.

• Each transferee is a separate legal entity; therefore, the law has to be applied with reference to each transferee as an individual transferee/ person.

• It is also noted that section 194-IA was introduced by Finance Act, 2013 effective from 01-06-2013. It is also noted from the Memorandum explaining the provisions brought out along with the Finance Bill wherein it was stated that “in order to reduce the compliance burden on the small taxpayers, it is further proposed that no deduction of tax under this provision shall be made where the total amount of consideration for the transfer of an immovable property is less than Rs. 50 Lakhs.

• The law cannot be interpreted and applied differently for the same transaction, if carried out in different ways. It cannot be said that in case of four separate purchase deed for four persons separately, section 194-IA was not applicable, and in case of a single purchase deed for four persons section 194-IA would be applicable.

• It is noted that A.O. has passed a common order u/s 201(1) for all the four transferees. In order to justify his action since in case of a separate order for each transferee separately, apparently, provisions of section 194-IA could not have been made applicable since in each case the purchase consideration is only Rs. 37,50,000/-. This action of A.O. shows that he was also clear in his mind that with reference to each transferee, section 194-IA was not applicable.

Decision of Tribunal: -

Held that in a case where an immovable property is purchased by joint buyers and individual share of each joint buyer is less than Rs. 50 Lakhs, the buyer is not liable to deduct TDS u/s 194-IA of the Income Tax Act, 1961.