Interesting Issue : Applicability of TDS on Purchase of agricultural land on piece-meal basis Combined value of three properties exceeding Rs. 50 lakhs but the seller and khasra number are the same

short overview :  Assessee in instant case had purchased three properties on three different dates. This indicated that assessee had purchased the land on piece meal basis. Since value mentioned in each sale deed was less than Rs. 50 lakhs, therefore, section 194-IA would not be applicable to assessee merely because the seller and Khasra number of the three properties was same.

Assessee purchased three plots measuring 190.15 sq. mt., 230.45 sq. mt. and 230.45 sq. mt. during financial year 2015-16 which were registered on 5-8-2015, 16-6-2015 and 15-6-2015 respectively. The value of each plot was Rs. 44 lakhs. AO held that since all these plots bore the same address and all these have been purchased from the same person by assessee, therefore, assessee was liable to deduct TDS @ 1% from such payment as per section 194-IA since, combined value of properties exceeded Rs. 50 lakhs.

it is held that  Assessee in instant case had purchased three properties on three different dates. This indicated that assessee had purchased the land on piece-meal basis. Since value mentioned in each sale deed was less than Rs. 50 lakhs, therefore, section 194-IA would not be applicable to assessee merely because the seller and Khasra number of the three properties was same.

Decision: In assessee’s favour.

IN THE ITAT, DELHI BENCH

R.K. PANDA, A.M.

Shiv Shakti Builders & Developers v. ITO

ITA Nos. 3920 & 3921/Del/2018

20 June, 2019

Assessee by: V.K. Goel, Advocate

Revenue by: S.L. Anuragi, Sr. Departmental Representative

ITA No. 3920/Del/2018 filed by the assessee is directed against the Order, dated 16-4-2018 of the Commissioner (Appeals), Meerut relating to assessment year 2015-16. ITA No. 3921/Del/2018 filed by the assessee is directed against the Order, dated 13-3-2018 of the Commissioner (Appeals), Meerut relating to F.Y. 2015-16 i.e. assessment year 2016-17. Since, common issues are involved in both these appeals, therefore, these were heard together and are being disposed of by this common order.

ITA No. 3920/Del/2018 (FY 2014-15) :–

2. Facts of the case, in brief, are that the assessee is engaged in the business of purchase and sale of land, construction and sale of flats etc. During the course of TDS verification the assessing officer observed from the balance sheet as on 31-3-2015 that the assessee has made an advance payment of Rs. 61,00,000 to Shri Vijay Kumar Ghai for purchase of land. He observed that the assessee purchased 3 plots measuring 190.15 sq. mt., 230.45 sq mt. and 230.45 sq. mt. during FY 2015-16 that were registered on 5-8-2015, 16-6-2015 and 15-6-2015 respectively. As per the Registration deeds that have been executed, all these plots bear the same address i.e., vacant part of Property no. 98, Khasra number 1922 and 1924, Mohalla Punjabi Pura, Meerut. All these plots have been purchased from the same person viz., Shri Vijay Kumar Ghai, S/o shri Roshal Lal Ghai, 369, Kamla Nagar, Bagpat Road, Meerut. This shows that the registry of the entire property situated at Mu. No. 98, Khasra number 1922 and 1924, Mohalla Punjabi Pura, Meerut, was executed in three parts with the sole intention of evading payment of TDS on the total sale consideration of the land as per the provisions of section 194IA of the Act, as the total sale consideration would have exceeded Rs. 50,00,000 if the entire registry had been executed by one agreement.

3. According to the assessing officer, since, the advance payment of Rs. 61 lakhs was made in FY 2014-15, therefore, TDS @ 1% should have been deducted by the assessee under section 194IA of the Act from such payment. Since, the assessee did not deduct the same the assessing officer treated the assessee as an assessee in default.

4. In appeal, the learned Commissioner (Appeals) upheld the action of the assessing officer. While doing so, he held that the word used in the section is “a property” and, therefore, any number of registries will not save the deductor from his liability to deduct the TDS. He, accordingly, upheld the action of the assessing officer.

5. Aggrieved with such order of the Commissioner (Appeals), the assessee is in appeal before the Tribunal by raising the following grounds :–

1. “That the assessing officer is in error in holding that TDS is payable @ 1%, when sale deed is made below Rs. 50,00,000.

Hence, liability of TDS on purchase of land shall not be arises and Commissioner (Appeals) has not justified in confirming the same.

2. That the assessee has right to add, modify or delete any ground during the appeal proceedings.”

6. The learned Counsel for the assessee strongly challenged the order of the Commissioner (Appeals) in confirming the action of the assessing officer in treating the assessee as an assessee in default. He submitted that the assessee had purchased three plots on three different dates although from the same person. The value of none of the properties mentioned by the assessing officer exceeds Rs. 50 lakhs and, therefore, the assessee is not liable to deduct TDS as per the provisions of section 194IA of the Act. Referring to the decision of the Tribunal in the case of Vinod Soni, Babli Soni, Beena Soni and Pradeep Kumar Soni v. ITO(TDS), Faridabad he submitted that the Tribunal in the said decision had set aside the order of the Commissioner (Appeals), wherein the Commissioner (Appeals) had confirmed the action of the assessing officer in treating the four assessees as defaulter under section 201(1) of the Act on the ground that they jointly purchased a property the value of which was 1,50,00,000 although 1/4th share of each purchaser was less than 50 lakhs. He submitted that since the properties in the instant case were purchased on 3 different dates and the value of each property is less than 50 lakhs, therefore, assessee is not liable to deduct TDS under section 194IA of the Act.

7. The learned Departmental Representative, on the other hand, strongly supported the order of the Commissioner (Appeals). He submitted that the buyer and seller in the instant case are one and the property also bears the same Khasra number but the sale deeds are executed in three parts. He submitted that the assessee just to avoid the payment of TDS on the total sale consideration of the land as per the provisions of section 194IA had executed the sale deeds in three parts. He, accordingly submitted that the order of the Commissioner (Appeals) be upheld and the grounds raised by the assessee be dismissed.

8. I have considered the rival arguments made by both the sides and perused the orders of the authorities below. I find the assessee in the instant case purchased three plots measuring 190.15 sq. mt., 230.45 sq. mt. and 230.45 sq. mt. during FY 2015-16 which were registered on 5-8-2015, 16-6-2015 and 15-6-2015 respectively. The value of each plot was Rs. 44 lakhs.

I find the assessing officer held that since all these plots bear the same address and all these have been purchased from the same person by the assessee, therefore, the assessee is liable to deduct TDS @ 1% from such payment as per the provisions of section 194IA of the Act since, the combined value of the properties exceeds Rs. 50 lakhs. It is the submission of the learned Counsel for the assessee that since the properties are registered on three different dates and the area of each plot is different, therefore, assessee is not liable to deduct TDS @ 1% as per the provisions of section 194IA of the Act.

9. The provisions of section 194IA reads as under :–

“194IA. (1) Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any agricultural land), shall, at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax thereon.

(2) No deduction under sub-section (1) shall be made where the consideration for the transfer of an immovable property is less than fifty lakh rupees.

(3) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.

Explanation.–For the purposes of this section,–

(a) “agricultural land” means agricultural land in India, not being a land situate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2;

(b) “immovable property” means any land (other than agricultural land) or any building or part of a building.”

10. As per sub-section (2) of section 194IA no deduction under sub-section (1) shall be made where the consideration for the transfer of an immovable property is less than Rs. 50 lakhs. I find, the assessee in instant case had purchased three properties on three different dates, although, they bear the same Khasra number and the seller is the same. This indicates that the assessee had purchased the land on piece meal basis. In my opinion, since, the value mentioned in each sale deed is less than Rs. 50 lakhs, therefore, the provisions of section 194IA will not be applicable to the assessee. Merely because, the seller is the same and the Khasra number of the three properties purchased by the assessee are same, the same cannot be a ground to treat the assessee as an assessee in default when the value mentioned in each sale deed executed on 3 different dates is less than Rs. 50 lakhs. I, therefore, set aside the order of the Commissioner (Appeals) and direct the assessing officer not to treat the assessee as an assessee in default. The ground raised by the assessee is accordingly allowed.

ITA No. 3921/Del/2018 (FY 2015-16) :–

11. Ground No. 1 by the assessee reads as under :–

1. “That the assessing officer is in error on the issue of labour payment of Rs. 13,55,585 is subject to TDS, if payment made by the assessee to labour is below Rs. 20,000 and Commissioner (Appeals) has not justified in confirming the same.”

12. Facts of the case, in brief, are that the assessing officer during the course of TDS assessment observed that assessee failed to deduct TDS on labour payment to the tune of Rs. 13,55,585 during the FY 2015-16. On being questioned by the assessing officer, it was submitted that out of the total labour expenses of Rs. 27,07,195, TDS has been deducted on the amount of labour worth Rs. 13,51,610 under section 194C of the Act. On the balance amount, assessee is not liable to deduct TDS. However, the assessing officer was not satisfied with the explanation given by the assessee. Relying on the provisions of section 194C the assessing officer held that the assessee was liable to deduct TDS @ 2% from the labour payment of Rs. 13,55,585. He, accordingly, treated the assessee as an assessee in default for non deduction of tax.

13. In appeal, the learned Commissioner (Appeals) confirmed the action of the assessing officer in absence of filing of any details or copy of accounts to justify that assessee has not paid any amount exceeding Rs. 20,000 in a single day to any person.

14. Aggrieved with such order of the Commissioner (Appeals), the assessee is in appeal before the Tribunal.

15. I have considered the rival arguments made by both the sides and perused the orders of the authorities below. I find out of the total labour payment of Rs. 27,07,195 the assessee had not deducted TDS on an amount of Rs. 13,55,585 for which the assessing officer held the assessee as an assessee in default. Since, the assessee could not substantiate with evidence before the Commissioner (Appeals) that no payment has been made exceeding Rs. 20,000 to any person in a single day, he upheld the action of the assessing officer. It is the submission of the learned Counsel for the assessee that given an opportunity he will produce the details either before the assessing officer or before the Commissioner (Appeals) as the case may be to substantiate that no payment exceeding Rs. 20,000 has been paid to any person in a single day and that the assessee is not liable to deduct TDS from such labour payment.

16. Considering the totality of the facts of the case and in the interest of justice, I deem it proper to restore the issue to the file of the assessing officer with a direction to give one more opportunity to the assessee to substantiate with evidence to his satisfaction that assessee is not liable to deduct tax @ 2% on the amount of Rs. 13,55,585 being the labour payment. The assessing officer shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. I hold and direct accordingly. The ground raised by the assessee is accordingly allowed for statistical purposes.

17. Ground No. 2 reads as under :–

“2. The the assessing officer is in error in holding that TDS is payable @ 1%, when sale deed is made below Rs. 50 lakhs. Hence, liability of TDS on purchase of land shall not be arises and Commissioner (Appeals) has not justified in confirming the same.”

18. After hearing both the sides, I find the above ground is identical to ground no. 1 in ITA No. 3920/Del/2018. I have already decided the issue and the ground raised by the assessee has been being allowed. Following similar reasoning, the above ground raised by the assessee is allowed.

19. In the result, ITA No. 3920/Del/2018 is allowed and ITA No. 3921/Del/2018 is allowed for statistical purposes.