TDS u/s 194-IA relating to Transfer of Immovable Property(IP):
The above section requires the transferee (person who purchases the IP) to deduct TDS @1% u/s 194-IA on the sale consideration payable by him to the transferor (person who sells the IP) if the value exceeds Rs. 50,00,000. However, the above provision is not applicable in the case of agriculture land.
First, let us go through what is the purpose of deduction of TDS u/s 194-IA ..?
The purpose of deduction of TDS for transfer of an Immovable Property is to have a trace for transfer of Immovable property and to account it to tax. However, leniency is shown towards transferee who purchases IP for less than Rs. 50,00,000. Therefore, needing to avoid unnecessary compliances burdens for small players (hence threshold limit)
1. However, there is no mention of whether the above threshold limit is for a single transaction or in an aggregate value of transaction made during the year.
2. From a plain reading, we can say the limit is transaction specific and the threshold limit of Rs. 50,00,000 to be seen on each transaction basis.
Let's look at some of the important case laws relating to the above interpretation.
In the case of Pradeep Kr. Soni, New Delhi Vs ITO Dec 2018, there was a purchase of plot amounting to Rs. 1,50,00,000 by four different transferees. So, the share of each transferee comes to Rs. 37,50,000. According to sec 194-IA(2) where the consideration amount payable by the transferee does not exceed Rs. 50,00,000, TDS @1% need not be deducted. Now, AO issued a notice for non-deduction of TDS on the above transaction. Department gave the decision in favor of the assessee by citing the following reasons,
i) TDS provisions are for the purpose of compliance of Tax laws and there should not be unnecessary burdens to small players, and that is why the limit of Rs. 50,00,000.
ii) AO issued a single notice for the above default but whereas the issue of four different notices to each transferee amounting to Rs. 37,50,000 would not make the applicability of sec 194-IA. Hence, AO has bent the law according to his benefit by issuing a single notice to all the four transferees.
iii) However, TDS is income specific to Individuals and only to the extent of the amount paid by the transferee, TDS can be applied. The transferee cannot see how much others are paying and apply TDS on his transaction based on the aggregate amount.
Keeping the above points in mind Department upheld the view taken by the assessee.
The above decision makes sense because all the facts stated above does not override the underlying logic behind the deduction of TDS.
Let's look at another case,
In the case of Shiv Shakthi Builders, Meerut vs ITO dated 20.06.2019 assesses had purchased a plot of land worth Rs. 1,32,00,000 in piecemeal amounting to Rs. 44,00,000 for each plot and on three different dates. In this case, the purchase was made from the same person amounting to Rs. 1,32,00,000. But no TDS was deducted u/s 194-IA. And ITO has upheld the decision of the assessee by not treating the above transaction u/s 194-IA because of the fact that each transaction value does not exceed Rs. 50,00,000.
The whole point in making the transferee to deduct TDS u/s 194-IA is to monitor the high-value transaction and make him accountable for the tax liability. However, leniency is made when the transferee purchases the immovable property for less than Rs.50,00,000. In order not to put the unnecessary burden to small players with respect to compliances procedures threshold limits were inculcated. In the case of Shiv Shakthi Builders, Meerut vs ITO where the transferor and transferee is the same person though consideration for a single transaction does not exceed Rs. 50,00,000 but in aggregate the total consideration paid by the transferee during the year comes to Rs. 1,32,00,000 (for 3 plots). Though sec 194-IA puts the responsibility on the transferee to deduct TDS @1% if the consideration exceeds Rs. 50,00,000 but it has not clearly specified whether threshold limit applies for the transaction or for multiple transactions in a year. The ruling given in Shiv Shakthi Builders, Meerut vs ITO clearly not made the Transferee as assessee in default for non-deduction of TDS u/s 194-IA even though aggregate transaction made with the transferor exceeded Rs. 50,00,000 during the year. On giving consideration to the above ruling, then the overall point in making the transferee to deduct TDS for transfer of immovable property exceeding Rs. 50,00,000 would not make any impact on tracing the high-value transaction. As in this case even though the value of the transaction is Rs. 1,32,00,000 but still transferee gets into the agreement in three different dates and pays the consideration in piecemeal for the plot situated nearby. This nullifies the overall point in making the transferee to deduct TDS for the high-value transaction.
Hence the department should consider making the transferee liable to deduct TDS if the aggregate value of the transaction exceeds Rs. 50,00,000 made with a single transferor during the year.
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