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.