No TDS deductible by Builder on Refundable Amount paid to Home-Buyers, rules Bombay High Court [Read Order]

The Bombay High Court ruled that the no TDS is deductible by Builder on Refundable Amount paid to the Home-Buyers.

The petitioner, Sainath Rajkumar Sarode has sought the directions for the recovery of arrears due to the Petitioners under a Recovery Warrant passed by the Maharashtra Real Estate Regulatory Authority against Respondent. For the instalment due on 20th July 2021, Respondent deducted 10% of the amount, namely, Rs. 5,05,989/- from the total of Rs. 50,59,887/- payable towards the July instalment, as tax deductible at source (TDS) on the amount of interest under the Recovery Warrant and the Consent Terms. It is the case of the Petitioners that such amounts could not, in law, be deducted.

Mr. Subit Chakrabarti, the counsel for the petitioner contended that the amounts payable to the Petitioners under the Recovery Warrant and the Order dated 4th March 2021 and the Consent Terms is in the nature of a judgment debt, being compensatory amounts payable to the Petitioners under Orders of this Court and a Recovery Warrant owing to the failure of Respondent Nos. 4 to 7 to satisfactorily discharge their contractual and statutory obligations under the Real Estate (Regulation & Development Act), 2016 (RERA Act).

The division bench of Justice Milind N.Jadhav and Justice S.J.Kathawalla held that the amounts payable being in effect a refund of the amounts paid by the Petitioners to the Respondent, along with compensatory interest thereon, such a relationship does not spell out a debtor-creditor relationship nor is the payment made by the Respondent to the Petitioners one in discharge of any pre-existing obligation, so as to attract Section 2(28A) of the Income Tax Act.

“In such cases, the home-buyers should refer either to this judgement or, better, to annex a copy of this judgement and seek a refund of the TDS amount. If the builder still refuses to entertain the representation, home-buyers should directly approach the High Court. There is no need to go to a consumer commission or the Maharashtra Real Estate Regulatory Authority (MahaRERA) for speedy redressal. There is also no need to engage a lawyer in such types of cases,” the court said.

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