2025 (6) TMI 2003 - AT - Income Tax

TDS u/s 194IA - assessee in default u/s 201(1)/ 201(1A) - non deduction of TDS on payment to four persons towards acquisition of immovable property- scope of amended provision of Section 194IA(2) - HELD THAT - The undisputed facts of the case are that the total consideration paid by the assessee for the purchase of immovable property was Rs. 1, 61, 00, 000/-. However the payment made to four co-owners was Rs. 40, 25, 000/- each which was less than Rs. 50 Lakhs. The Co-ordinate Bench of this Tribunal in the case of Bhikhabhai Hirabhai Patel 2020 (2) TMI 1032 - ITAT AHMEDABAD has held that where share of consideration paid by the assessee to each transferor for acquisition of immovable property was less than Rs. 50 Lakhs the assessee was not under obligation under Section 194IA to deduct TDS on such consideration on behalf of the transferor/seller. An identical view was taken in the case of Archanaben Rajendrasingh Deval 2025 (4) TMI 215 - ITAT AHMEDABAD . Proviso to Section 194IA(2) of the Act was introduced w.e.f. 01.10.2024 vide Finance (No.2) Act 2024 which stipulates that where there is more than one transferor or transferee in respect of any immovable property then the aggregate amount of consideration paid by the transferee to all the transferors is required to be considered for the purpose of Section 194IA(2) of the Act. However this amended clause is applicable w.e.f. 01.10.2024 only. In the present case the payment was made by the assessee much earlier on 30.01.2018 and therefore this amended provision cannot be applied to these transactions. Thus we are of the considered opinion that the assessee was not required to deduct TDS u/s 194IA of the Act in the current year where the consideration paid to each of the transferor was less than Rs. 50 Lakhs. Accordingly the demand raised by the AO u/s 201(1)/201(1A) of the Act in respect of the payment of Rs. 40, 25, 000/- to the four co-owners for purchase of property is deleted. The ground of the assessee is allowed. Demand raised u/s 201(1)/201(1A) in respect of purchase of another property - AR submitted that since the total payment made in this case was less than Rs. 50 lakhs provision of Section 194IA of the Act was not applicable at all - HELD THAT - No deduction was required to be made under Section 194IA(1) of the Act in the case where the consideration for transfer of immovable property and the stamp duty value of the property both was less than Rs. 50 lakhs. Prior to 01.04.2022 there was no requirement to take into account the stamp duty value of the property for applicability of provision of Section 194IA of the Act. In the present case the transaction was made by the assessee much earlier on 30.08.2017 when there was no requirement to take into account the stamp duty value of the property. Therefore the AO was not correct in considering the stamp duty value of the property to invoke the provisions of Section 194IA of the Act. Since the consideration paid by the assessee for this property was less than Rs. 50 Lakhs there was no requirement to deduct TDS under Section 194IA of the Act. Accordingly the demand raised by the AO under Section 201(1)/201(1A) of the Act in respect of this transaction is cancelled. This ground of the assessee is allowed. Non-deduction of TDS u/s 194J - audit fee and consequent liability under Section 201(1)/201(1A) - AR submitted that as per the 4th proviso to Section 201(1A) of the Act the interest was to be computed from the date on which the tax was deducted to the date of furnishing return of income by the payee - HELD THAT - Since there was default of non-deduction of TDS under Section 194J in respect of audit fee payment the assessee was rightly treated as assessee in default under Section 201(1) of the Act. As regards interest u/s 201(1A) of the Act the AO is directed to verify the payment of tax on this amount by the recipient and thereafter restrict the interest chargeable for the period from date on which tax was deductible under Section 194J of the Act to the date of furnishing of return of income by the recipient. The matter is set aside to the file of the jurisdictional TDS AO for this limited purpose. The assessee is also directed to produce the relevant evidences in this respect before the AO in the course of set aside proceeding.

The core legal issues considered by the Tribunal in this appeal under Sections 201(1) and 201(1A) of the Income Tax Act, 1961, relate primarily to the applicability and interpretation of provisions concerning deduction of tax at source (TDS) under Sections 194IA and 194J of the Act. The issues specifically addressed include:

1. Whether the assessee was obligated to deduct TDS under Section 194IA on payments made to multiple co-owners for the purchase of immovable property, considering the aggregate amount paid and the individual amounts paid to each co-owner.

2. Whether the provisions of Section 194IA were applicable in respect of another property purchase where the payment was below the threshold limit but the stamp duty value exceeded Rs. 50 lakhs.

3. Whether the assessee was liable to deduct TDS under Section 194J on audit fees paid and the consequent calculation of interest under Section 201(1A).

4. The correctness of the imposition of interest under Section 201(1A) concerning delayed deduction and payment of TDS.

Issue-wise Detailed Analysis

1. Applicability of Section 194IA on payments to multiple co-owners for immovable property purchase

Legal Framework and Precedents: Section 194IA mandates deduction of TDS at 1% on payments made for transfer of immovable property exceeding Rs. 50 lakhs. The relevant provision at the time of the transaction (January 2018) did not aggregate payments made to multiple transferors for determining the threshold limit. The proviso to Section 194IA(2), introduced w.e.f. 01.10.2024, mandates aggregation of consideration paid to multiple transferors for the same property, but this amendment is prospective.

Coordinate Bench decisions in Bhikhabhai Hirabhai Patel vs. DCIT and Archanaben Rajendrasingh Deval vs. ITO TDS held that where payments made to individual co-owners were each below Rs. 50 lakhs, no TDS deduction under Section 194IA was required.

Court's Interpretation and Reasoning: The Tribunal noted that the total consideration for the property was Rs. 1,61,00,000/-, but payments to each co-owner were Rs. 40,25,000/-, below the Rs. 50 lakh threshold. The Tribunal held that the proviso introduced in 2024 is not applicable retrospectively to transactions in 2018. Therefore, the assessee was not obligated to deduct TDS under Section 194IA for these payments.

Application of Law to Facts: Since the payments to each co-owner were individually below Rs. 50 lakhs at the time of payment and the aggregation proviso was not yet in effect, the Tribunal deleted the demand raised under Sections 201(1)/201(1A) related to this transaction.

Treatment of Competing Arguments: The Revenue contended that the aggregate consideration should be considered, but the Tribunal rejected this argument based on the law applicable at the time and binding precedents.

Conclusion: The assessee was not liable to deduct TDS under Section 194IA on payments made to multiple co-owners individually below Rs. 50 lakhs prior to the amendment effective from 01.10.2024.

2. Applicability of Section 194IA on purchase of property with payment below threshold but stamp duty value above Rs. 50 lakhs

Legal Framework and Precedents: Section 194IA was amended w.e.f. 01.04.2022 to require TDS deduction if either the consideration or the stamp duty value of the property exceeds Rs. 50 lakhs. Prior to this amendment, only the consideration amount was relevant.

Court's Interpretation and Reasoning: The transaction in question occurred on 30.08.2017, before the amendment. The payment made was Rs. 22,66,133/-, below Rs. 50 lakhs, but the stamp duty value was Rs. 67,98,400/-. The Tribunal held that since the amended provision was not applicable retrospectively, the stamp duty value could not be considered for TDS applicability for this transaction.

Application of Law to Facts: The Tribunal concluded that no TDS was required under Section 194IA for this transaction as the consideration was below the threshold and the amendment was prospective.

Treatment of Competing Arguments: The Revenue argued for considering the stamp duty value, but the Tribunal rejected this for lack of retrospective application.

Conclusion: The demand under Sections 201(1)/201(1A) for non-deduction of TDS on this payment was cancelled.

3. Liability for TDS deduction under Section 194J on audit fees and interest calculation under Section 201(1A)

Legal Framework: Section 194J requires deduction of TDS at 10% on fees for professional or technical services, including audit fees. Section 201(1) treats failure to deduct or pay TDS as default, attracting tax liability and interest under Section 201(1A).

Court's Interpretation and Reasoning: The assessee admitted non-deduction of TDS on audit fees of Rs. 39,000/- paid on 31.03.2018. The Tribunal held that the assessee was rightly treated as "assessee in default" under Section 201(1). Regarding interest, the assessee relied on the 4th proviso to Section 201(1A), which allows computation of interest from the date tax was deductible to the date of furnishing of the payee's return if the payee has disclosed the income on a payment basis.

Application of Law to Facts: The Tribunal remanded the matter to the Assessing Officer to verify the payee's return filing and income declaration, and to recompute interest accordingly. The assessee was directed to produce relevant evidence during the remand proceedings.

Treatment of Competing Arguments: The Revenue supported the original interest calculation, but the Tribunal allowed the assessee's plea for interest recalculation based on payee's compliance.

Conclusion: The default was confirmed, but interest calculation was set aside for reassessment, partly allowing the ground.

4. Interest charged under Section 201(1A) on delayed TDS deduction

Legal Framework: Section 201(1A) prescribes interest at 1% per month or part of a month on the amount of TDS not deducted or paid on time.

Court's Interpretation and Reasoning: Ground relating to deletion of interest charged was not pressed by the assessee and was accordingly dismissed.

Conclusion: Interest charge under Section 201(1A) was upheld where not contested.

Significant Holdings

"Where the consideration paid to each transferor for acquisition of immovable property was less than Rs. 50 Lakhs, the assessee was not under obligation under Section 194IA to deduct TDS on such consideration on behalf of the transferor/seller."

"The proviso to Section 194IA(2) of the Act introduced w.e.f. 01.10.2024, which mandates aggregation of consideration paid to multiple transferors, is prospective and cannot be applied retrospectively to transactions prior to its effective date."

"For transactions prior to 01.04.2022, the stamp duty value of the property is not relevant for determining applicability of Section 194IA; only the actual consideration paid is relevant."

"In cases of non-deduction of TDS under Section 194J, the assessee is rightly treated as 'assessee in default' under Section 201(1). However, interest under Section 201(1A) is to be computed considering the date of furnishing of return by the payee if the payee has disclosed the income on a payment basis."

The Tribunal finally determined that the demand for TDS non-deduction on payments to co-owners and on the property with payment below threshold but higher stamp duty value was not sustainable and was deleted. The demand relating to audit fees was confirmed, but interest calculation was remanded for reassessment. Other grounds not pressed were dismissed.

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