Applicability of TDS on property u/s 194-IA is transferor/transferee-wise & not property-wise

Applicability of TDS on property u/s 194IA to be determined transferor or transferee-wise and not property-wise

ABCAUS Case Law Citation:
ABCAUS 3714 (2023) (04) ITAT

Important Case Laws relied upon :
Indumukhi Vs Distt Collector
Oxcia Enterprises (P) Ltd vs Deputy Commissioner Income Tax
Vinod Soni Vs Income Tax Officer (2019) 197 TTJ (Del) 352

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the order passed by the Assessing Officer (AO) TDS under Section 201(1)/201(1A) of the Income Tax Act, 1961 (the Act).

The assessee along with three family members purchased an immovable property for a total consideration which was more than Rs. 50 lakhs. These assesses did not deducted tax at source u/s 194IA of the Act.

According to the AO, the assessee was required to deduct TDS u/s. 1941A in respect of this transfer which, they have failed to deduct.

The AO treated these assessees as “assessee in default” u/s 201(1) of the Act for not deducting TDS on the amount paid as consideration for purchase of above said immovable property and raised demand.

Before the CIT(A), the appellant contended that the provisions of section 194-IA were not applicable in his case as there were four buyers and four sellers, share of each buyer was less than Rs. 50 lakhs. Hence, they were not required to deduct TDS under section 194-IA of the Act.

The CIT(A) observed that for applicability of Section 194-IA the following conditions need to be satisfied:

(i) The payee must be a resident transferor of any immovable property (other than agricultural land).

(ii) The payment must be by way of consideration for transfer of any immovable property (other than agricultural land).

(iii) The quantum of payment must be Rs. 50 lakhs or more

The CIT(A) went on to adjudicate the question whether in case of joint owners, the threshold limit of Rs 50,00,000/- is to be determined property-wise or transferor or transferee-wise?

The CIT(A) opined that the value of property should be more than Rs 50,00,000/- for applicability of deduction of tax u/s 1941A of the Act and the number of buyers or sellers would not matter at all.

The CIT(A) stated that the section 1941A refers to an immovable property which means that individual shares have no relevance.

Thus, the CIT(A) held that if the value of immovable property is more than Rs. 50 lakhs, provisions of section 194-IA will come into play irrespective of shares of individuals, i.e., even if the individual share is less than Rs. 50 lakhs.

The Tribunal observed that the assessee had relied upon the judgments of the Coordinate Benches wherein it had been held that where consideration due to each transferor is below the prescribed limit, the provisions of Section 194-IA are not applicable. Section 194-IA(2) is applicable only  to the amount related to each transferee and not with reference to the amount as per the sale deed.

Accordingly, following the decisions of the coordinate benches, the ITAT held that assessees were not liable to deduct tax at source u/s 194IA of the Act from the payments made by each of them.  

As a result, the orders passed by CIT(A) was set aside and the AO was directed to delete the demand raised u/s 201(1) and also interest levied u/s 201(1A) of the Act. 

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