TMI Blog2021 (2) TMI 1008X X X X Extracts X X X X X X X X Extracts X X X X ..... ped the moment the bookings were cancelled and the relationship of debtor-creditor would commence. As rightly held by Ld. CIT(A), there was no other way this payment could be interpreted because the assessee was under no legal obligation to pay compensation for cancellation of flat, the proposal for which came from the purchaser. Therefore, the impugned order would not require any interference on our part, in this regard. The said adjudication is also supported by assessment order for AY 2017-18 as placed on record by Ld. DR the perusal of which would reveal that the assessee, itself, has deducted tax at source on such excess payments during that year. Assessee could escape the rigors of Sec.40(a)(ia) in terms of second proviso to Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee paid compensation of ₹ 56.61 Lacs to 5 parties against cancellation of flats. The details of the same have been tabulated in para 7.1 of the impugned order. The Ld.AO opined that compensation on cancellation of booking would partake the character of interest payment covered u/s 194A and therefore, the same would require deduction of tax at source. Since the assessee had not deducted tax at source on stated payments, the aforesaid amount was disallowed in terms of provisions of Sec. 40(a)(ia). 3.1 Before Ld. CIT(A), the assessee pleaded that the payments were in the form of compensation on cancellation of flats on the basis of mutual understanding between the clients and the assessee. The allotment letter did not contain any ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gation to pay any compensation. The assessee returned the booking amount along with additional amount which would be nothing but interest on the amount kept with him. There was no other way this payment could be interpreted because the assessee was under no legal obligation to pay compensation for cancellation of flat, the proposal for which came from the purchaser. The argument that there exists no debtor-creditor relationship was negated by observing that once the relationship ends due to cancellation of booking, the relationship of the buyer / seller ends and the debtor-creditor relationship commences. As the relationship of buyer-seller snapped, the assessee was liable to refund the amount to the purchasers and any mutually decided amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the assessee was under no legal obligation to pay compensation for cancellation of flat, the proposal for which came from the purchaser. Therefore, the impugned order would not require any interference on our part, in this regard. The said adjudication is also supported by assessment order for AY 2017-18 as placed on record by Ld. DR the perusal of which would reveal that the assessee, itself, has deducted tax atsource on such excess payments during that year. 5. Having said so, we find that the assessee could escape the rigors of Sec.40(a)(ia) in terms of second proviso to Section 40(a)(ia) read with first proviso to sub-section (1) of Section 201 by demonstrating that the payees have duly offered this income in their respective tax r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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