The Ahmedabad bench of Income Tax Appellate Tribunal recently held Tax Deduction at Source could not be denied to developer following percentage completion method if buyer deducted Tax at the time of execution of sale deed.
These appeals filed by the assessee Neelkanth Developers are against the order of National Faceless Appeal Centre (NFAC). Assessee was a builder and developer and has offered income on the basis of percentage completion method, whereas the TDS has been deducted by the purchaser of the property under section 194-IA of the Income Tax Act 1961 at the time of execution of sale deeds. Therefore, the case of the assessee is that it is not possible at all times to correlate a specific amount of TDS with the specific amount of income earned by the assessee in a particular year. But the Assessing officer issued notice under section 139(2) of the Act for the reason that credit of TDS had been claimed, but the corresponding receipts/income had been omitted to be offered for taxation.
Section 194-IA of the Income Tax Act 1961 transferee is responsible for paying a sum by way of consideration for transfer of any immovable property and credit such sum to the account of the transferor it pay in mode of cash or cheque or draft and deduct an amount equal to one percent of such as income –tax thereon.
Hardik Vora counsel for the assessee submitted that the assessable income relating to TDS credit claimed in this year has already been offered to tax in the current year as well as earlier years, therefore there was no discrepancy in the TDS credit claimed while filing the return of income.
Further assessee contended that when a particular income was received by the assessee after deduction of TDS and the said TDS had been duly deposited with the Government and the assessee had received the requisite certificate to this effect, then on production of such certificate, assessee becomes entitled to credit of TDS, even if the assessee had not directly offered the said income to tax.
N.J. Vyas counsel for the revenue observed that assessee collects money on behalf of the landowners. Accordingly, assessee receives full consideration including the part belonging to the land owner and hence TDS is deducted and reflected in Form 26AS. Assessing officer had given credit for only part of TDS and raised the tax demand for the balance amount, along with interest under section 234 A and 234C of the Income Tax Act 1961, respectively.
After considering the contentions of the both parties The Division bench of ITAT Cuttack comprising Waseem Ahmed, Accountant Member, and Siddhartha Nautiyal, Judicial Member, allowed the appeal filed by the assessee and observed that if the assessee has offered income to tax in either in the current year or any earlier year and TDS has been deducted on the same in the current year at the time of execution of sale deed, credit for the TDS is deducted should be allowed to the assessee in the current year, subject to the assessee producing the necessary supporting to show that corresponding income has been offered in tax either during the current year or any of the earlier previous years.
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