2016 (2) TMI 271 - HC - Income Tax

TDS u/s 194-IA - Payment on transfer of certain immovable property other than agricultural land - Held that - If the provision contained in Section 194-IA as extracted noticed, the obligation on the transferee to deduct 1% of the sale consideration towards TDS had come into effect only on 01.06.2013. If that be the position, as on 02.03.2012 when the petitioner in the instant case as the transferee had paid the amount to the transferor, there was no obligation in law on the petitioner to deduct the said amount. If this aspect of the matter is kept in view, even though the provision had come into force as on the date of presentation of the sale certificate for registration, the petitioner having parted with the sale consideration much earlier, was not expected to deduct the amount and produce proof in that regard to the Sub-Registrar. It is no doubt true that in respect of the said amount the third respondent would have the right to recover the taxes due. But, in the instant case, the communication as addressed from the third respondent to the first respondent could not have been held against the petitioner in the circumstance stated above. In the peculiar circumstances of the instant case, where the petitioner being an auction purchaser had paid the entire sale consideration much earlier to the provision coming into force, the endorsement dated 04.12.2013 requiring the petitioner to deduct the income tax and indicating that the registration would be made thereafter cannot be sustained.

Summary

Issues:
Challenge to endorsement dated 04.12.2013 requiring TDS for registration of sale certificate under Section 194-IA of Income Tax Act.

Analysis:
The petitioner contested an endorsement dated 04.12.2013, seeking direction for registration of a sale certificate without TDS deposit. Section 194-IA of Income Tax Act mandates 1% TDS deduction by transferee for immovable property transfer. Income Tax Department instructed Sub-Registrars to enforce this provision. The petitioner, an auction purchaser, paid the sale consideration pre-01.06.2013 enactment, thus no TDS obligation existed then. Despite the provision being in force during registration application, the petitioner's early payment exempted them from TDS deduction. The court quashed the 04.12.2013 endorsement, directing registration without TDS, emphasizing peculiar circumstances. The third respondent retains right to recover taxes if not paid by the assessee. Registration must occur within four weeks, ensuring compliance.

This judgment clarifies the application of Section 194-IA of the Income Tax Act concerning TDS on immovable property transfers. It highlights the importance of timing in TDS obligations, exempting early payers pre-enactment. The court's decision balances legal requirements with practical considerations, safeguarding the petitioner's rights while upholding tax compliance. The ruling sets a precedent for similar cases, ensuring fair treatment based on legislative intent and factual context.