Section 194IA – The limit of Rs. 50 lakh in section 194-IA(2) is qua the transferee and not qua the amount as per sale deed. Each transferee is a separate income-tax entity and the law has to be applied with reference to each transferee as an individual transferee/person.

26.  [2018] 101 taxmann.com 190 (Delhi-Trib.) Pradeep Kumar Soni vs. ITO (TDS) (Delhi) ITA No.: 2739/Del./2015 A.Y.: 2014-15.Dated: 10^th December, 2018

Section 194IA –  The limit of Rs. 50 lakh in section 194-IA(2) is qua the transferee and not qua the amount as per sale deed.  Each transferee is a separate income-tax entity and the law has to be applied with reference to each transferee as an individual transferee/person.

FACTS

The Assessing Officer (AO) received information from the Sub-registrar that vide an agreement registered on 3^rd July, 2013, the assessee along with 3 other persons has purchased an immovable property for a consideration of Rs. 1.50 crore. 

The AO observed that the assessee was required to deduct tax u/s. 194-IA @ 1% and deposit the same to the credit of the Central Government. He, accordingly, called for information u/s. 133(6) of the Act. In response, the assessee submitted that each of the four transferees have jointly purchased the property and the share of every co-owner is Rs. 37.50 lakh which is less than Rs. 50 lakh and therefore, the provisions of section 194-IA are not applicable. The AO held that since the consideration for the transfer of immovable property is Rs. 1.50 crore, i.e. more than Rs. 50 lakh, and the same is executed through a single deed and registered the provisions of section 194-IA are applicable. He passed an order u/s. 201(1) and 201(1A) of the Act holding the assessee and three other transferees to be jointly and severally responsible for payment of taxes. 

Aggrieved, the assessee preferred an appeal to the CIT(A) who upheld the action of the AO.

Aggrieved, the assessee preferred an appeal to the Tribunal.

HELD

The Tribunal noted that the sale deed inter alia provided that “the Vendees have become the absolute and undisputed owner of the above said plot in equal share.” It also noted that section 194-IA(2) provides that section 194-IA(1) will not apply where the consideration for transfer of immovable property is less than Rs. 50 lakh. It observed that section 194-IA(1) is application to any person being a transferee, so section 194-IA(2) is also, obviously, applicable only with respect to the amount related to each transferee and not with reference to the amount as per sale deed. It noted that in the instant case, there are four separate transferees and the sale consideration w.r.t. each transferee is Rs. 37.50 lakh, hence, less than Rs. 50 lakh each.

It held that each transferee is a separate income-tax entity therefore, the law has to be applied with reference to each transferee as an individual transferee/person. The law cannot be interpreted and applied differently for the same transaction, if carried out in different ways. The point to be made is that, the law cannot be read as that in case of four separate purchase deed for four persons separately, section 194-IA was not applicable, and in case of a single purchase deed for four persons section 194-IA will be applicable.

The Tribunal noted that AO has passed a common order for all four transferees u/s. 201(1). The Tribunal stated that this was to justify his action since in case of separate orders for each transferee separately, apparently, provisions of section 194-IA could not have been made applicable since in each case purchase consideration is only Rs. 37.50 lakh. This action of the AO shows that he was clear in his mind that with reference to each transferee, section 194-IA was not applicable.

The Tribunal held that the addition made by the AO and confirmed by CIT(A) to be not sustainable in the eyes of law and deleted the same.

The appeal filed by the assessee was allowed.