2022 (11) TMI 571 - AT - Income Tax

TDS u/s 194C - Default u/s. 201(1) and levying interest u/s. 201(1A) - payment to works contract - AO held that the payment made by assessee was towards works contract on which TDS was liable to be made and the MoU between assessee and M/s. Shree Sai Associates is in the nature of contract - HELD THAT - Clause (16) of the agreement mentions that the developer / contractor would be liable to pay sales tax on the works contract, VAT / service tax or any other applicable taxes leviable on or during the course of the development of the project land. The clause (17) further refers to the name that shall be adopted for the entire project that would be decided by the assessee alone. The obligation clause no. (22) of the MoU reveals that the work carried out by the developer / contractor was as per the requirements of the assessee. Assessee could have approached various government officials for necessary permission and therefore approach the developer/contractor to carry out the development of residential layout in all respects over the project land. We do not hesitate to agree with the view taken by the revenue authorities that, the agreement between assessee and M/s.Shree Sai Associates is in the nature of works contract. Before us, assessee alternatively argued that, the amount made towards the cost of the land and expenditure towards various permission, should be kept outside the purview of TDS provision as these are expenses, which does not fall within the ambit of works contract. In any event, purchase of immovable property, by an assessee from a developer, was otherwise for TDS at 1%. We therefore agree CIT(A) that the assessee was liable to deduct TDS. Assessee therefore cannot be exonerated from the charge of being assessee in default . The alternative argument advanced by the assessee deserves to be accepted as the cost of the land cannot be considered to be liable for TDS along with the expenses incurred towards various permissions from the State Government. Therefore the levy of interest u/s. 201(1A) of the Act, computed by the Ld.AO for A.Ys. 2013-14 and 2014-15 should exclude the payment made towards cost of the land and various approvals. We therefore do not find any infirmity in the view taken by Ld.CIT(A) in the appeals filed before us. Appeals filed by the assessee stands dismissed.

Summary

Issues:
Assessee held to be in default u/s. 201(1) and interest levied u/s. 201(1A) for A.Ys. 2011-12 to 2014-15.

Analysis:

Issue 1: Default u/s. 201(1) and interest u/s. 201(1A) for A.Ys. 2011-12 to 2014-15

The case involved a cooperative housing society entering into an agreement with a developer for the procurement and development of sites. The Revenue treated the assessee as 'assessee in default' for not deducting TDS on payments made to the developer. The Assessing Officer (AO) made additions in the hands of the assessee for various assessment years. The CIT(A) upheld the order of the AO, holding the assessee liable to deduct TDS. The Tribunal analyzed the MoU between the parties and noted clauses indicating a works contract relationship. The Tribunal agreed with the revenue authorities that the agreement was indeed a works contract. The Tribunal also considered the argument that certain payments should be excluded from TDS provisions, ultimately agreeing with the CIT(A) that the assessee was liable to deduct TDS. The Tribunal dismissed all appeals filed by the assessee, upholding the decisions of the lower authorities.

Conclusion:
The Tribunal affirmed the default status of the assessee under section 201(1) and the levy of interest under section 201(1A) for the relevant assessment years, based on the nature of the agreement with the developer and the obligations therein. The Tribunal's decision was based on a thorough analysis of the agreement and the applicable provisions of the Income Tax Act.