Factory Land not Exempted from TDS u/s 194IA: ITAT upholds Income Tax Demand u/s 201 and 201(1A) [Read Order]
The Tribunal observed that while the assessee claimed part of the consideration was for machinery, no such reference was found in the registered sale deed. Accordingly, rejecting the contention and held that tax deduction at source u/s 194IA was applicable.
Tax - deducted - Source - Taxscan
Tax - deducted - Source - Taxscan
The Income Tax Appellate Tribunal ( ITAT ), Visakhapatnam, while upholding the demand under Section 201(1) and 201(1A) of the Income Tax Act, 1961 for failing to deduct 1% TDS (Tax Deducted at Source). It ruled that the factory land is exempted from TDS under Section 194IA.
The appellant, Kushalava Spinners & Ginners Private Limited, Guntur, had purchased property measuring 56,005.5 square yards at Marripalem Village, Guntur District, vide registered document dated 25 November 2015, for a consideration of ₹9.90 crore. Payments were made to vendors Sri Chinnaya Gounder Subramaniam, Shri R. Duraisamy, and M/s Mehala Carona Ginners & Spinners.
The Assessing Officer noted that the company had failed to deduct tax at source at one percent under Section 194IA of the Income Tax Act, 1961, and raised a demand of ₹17,04,430 under Sections 201(1) and 201(1A). The first appellate authority, Commissioner of Income-tax (Appeals) [CIT(A)] dismissed the appeal ex parte and upheld the assessment.
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Smt. Hema Latha K., Chartered Accountant, representing the assessee, argued that the delay in filing the appeal was due to its counsel’s ill health and disruptions caused by COVID-19. It was contended that the land purchased was agricultural land falling within the meaning of Section 2(14) of the Act, thus outside the ambit of Section 194IA.
It was further submitted that part of the consideration related to machinery, which was not subject to TDS provisions, and therefore the assessee should not be treated as an assessee in default for such payments. The appellant also moved an application for admission of additional evidence under Rule 29 of the Income Tax Appellate Tribunal Rules, 1963.
On the other hand, Dr. Aparna Villuri, Senior Departmental Representative, opposed both the condonation of delay and the admission of additional documents. She relied upon the findings of the lower authorities and maintained that the assessee was rightly treated as being in default for non-deduction of tax at source.
The Tribunal bench comprising Ravish Sood, Judicial Member and Balakrishnan S, Accountant Member condoned the delay, holding that it had arisen on account of lapses by the assessee’s earlier counsel. The Tribunal also admitted the additional documents, which included the Land Sale Deed, a Tripartite Agreement, and an Original Purchase Document.
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However, upon examination, the Tribunal concluded that the property purchased was factory land and not agricultural land, and thus the exception carved out in Section 194IA of the Act would not apply.
With regard to the claim that a portion of the purchase consideration was towards machinery, the Tribunal observed that there was no evidence of this in the registered sale deed and, therefore, rejected the contention. The concession made by the assessee regarding liability on the consideration paid for the constructed building was also taken on record.
Therefore, the Tribunal dismissed the appeal and upheld the demand raised under Sections 201(1) and 201(1A) of the Income Tax Act, 1961, confirming that Kushalava Spinners & Ginners Private Limited had defaulted in deducting tax at source on the property transaction.
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