The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the provisions of section 194IA of the Income Tax Act, 1961 will not be applicable if the consideration paid by each co-owner is below the threshold of Rs. 50 lakhs rupees.
The assessee, Mr. Shamim Irshad, an individual,joint transferees for purchase of property for a total consideration of Rs.55 lakh which is more than the threshold limit as prescribed under Section 194IA of the Act.The assessee contended that in the instant case, being a joint owner claims that she is a joint holder to the extent of 75% in the property. The assessee has paid a sum of Rs.40 lakhs only as a joint transferee of the property.
The question before the Tribunal consisting of Shri Challa Nagendra Prasad, Judicial Member & Shri Pradip Kumar Kedia, Accountant Member was whether any legal obligation arises under Section 194IA of the Act where the consideration paid by each transferee is below threshold limit prescribed under Section 194IA of the Act.
The bench observed that section 194IA seeks to provide that every transferee, at the time of payment or crediting any sum as consideration for transfer of immovable property (other than agriculture land) to a resident transferor shall deduct @ 1% of such sum.
“From the text and tenor of provisions of Section 194IA, it is evident that the obligation under Section 194IA relates to a transferee responsible for paying to a resident transferor any sum by way of consideration for transfer of immovable property. Secondly, obligation to deduct tax arises at the time of credit of such sum to the account of the transferor or at the time of payment of such sum to the transferor. Thus two factors co-exist for applicability of Section 194IA. The first factor, as noted above, relates to the obligation of the transferee and the second factor fixes obligation to deduct tax at the time of credit or payment. When read combinedly; while the first limb of Section 194IA refers to a singular expression, i.e., ‘transferee’ (in distinction to transferee(s) combined), second limb provides for time of discharge of obligation which in turn, depends on the action of each transferee (in exclusion to other transferee) i.e., either credit in its accounts or actual payment. Thus, when the provision is read as a whole, it gives an infallible impression that obligation cast under Section 194IA is qua each transferee and not qua the aggregate consideration,” the Tribunal observed.
“The reasons are not far to seek. It will not be practicable to achieve the requirement of second limb if the case of the Revenue is accepted that it is qua total consideration involved and not each transferee. The obligation cast under Section 194IA arises to a particular transferee at the time of payment of consideration or at the time of credit in its own accounts,” the Tribunal added.
Holding in favour of the assessee, the Tribunal concluded that “the law cannot be read to expect one transferee to deduct TDS on behalf of other transferee at the time action taken by him towards payment or credit. If the contentions of the Revenue are acceptedthat vicarious liability imposed under Section 194IA is linked to the value of the property, an anomalous and unintended situation will arise for deduction of TDS. The contention of the assessee that Section 194IA operates qua each transferee and not qua total consideration is in absolute congruence with the schematic interpretation of Section 194IA of the Act.”
Shri Irshad Haneef, Advocate appeared for the assessee.
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