2010 (3) TMI 1173 - HC - Income Tax

Summary

Issues involved:
The issue involves the interpretation of whether the contract between the assessee and Mr. Lakshman for the purchase of lands from sites attracts the provisions of Section 194C and 201(1) of the Income Tax Act, and whether interest under Section 201(1A) is leviable.

Judgment Details:

The High Court of Karnataka heard the appeal filed by the revenue challenging the orders passed by the Income Tax Appellate Tribunal Bangalore. The substantial question of law raised was whether the contract between the assessee and Mr. Lakshman for the purchase of lands from sites would attract the provisions of Section 194C and 201(1) of the Act, and whether interest under Section 201(1A) was leviable.

The court noted that the assessee had entered into an agreement with Mr. Lakshman to purchase sites from a layout formed by him. The key question was whether the assessee, as a purchaser, was required to deduct tax at source when paying the sale consideration on an installment basis. The court held that since the assessee was only a purchaser and not the seller of the sites, they were not obligated to deduct tax at source. The responsibility to pay capital gains tax rested with the seller, depending on the tax payable by them. Therefore, the court concluded that the question of law framed in the appeal should be answered against the revenue and in favor of the assessee.

In light of the above reasoning, the High Court dismissed the appeal, upholding the decision of the Income Tax Appellate Tribunal in favor of the assessee.