2018 (6) TMI 1853 - AT - Income Tax

Levy of interest and late fees u/s 234E - assessee deposited a sum towards TDS on property purchases jointly - As argued merely because the assessee has deducted TDS by mistake, the same cannot be basis for levy of interest and late fee u/s 234E of the Act - AR submitted that as per section 194IA, the liability to deduct TDS is applicable if the consideration for transfer of any immovable property is equal to or greater than Rs. 50,000,00/-. It was submitted in the instant case, the assessee has paid a sum of Rs. 37,50,000/- to co-owners. HELD THAT - It is an undisputed fact that the assessee has acquired an immoveable property which was jointly owned. It is also an undisputed fact that though the total consideration was agreed at Rs 75,00,000, the assessee has paid Rs 37,50,000/- each to the two individual and joint owners of the said immoveable property. Section 194-IA provides that any person responsible for paying to a resident transferor any sum by way of consideration for transfer of any immovable property exceeding Rs 50 lacs, shall be liable for deduction of tax at source at the rate of one percent of such sum. In the instant case, even though the total consideration for the immovable property has been agreed at Rs 75,00,000, the assessee is responsible for paying consideration of Rs 37,50,000 each to Smt. Rashi Harneja and Smt. Ravindra Harneja individually. In fact, the assessee has actually paid Rs 37,50,000 individually to these two individuals as demonstrated by its filings in Form 27Q which has been accepted by the Revenue authorities and subsequently processed and intimation issued under section 200A of the Act. In light of the same, in our view, the provisions of section 194-IA are not applicable in the instant case. Given that the provisions of section 194-IA are not attracted, there is no basis for levy of interest and late fee under section 234E of the Act and the demand so raised is hereby directed to be deleted. TDS already deposited shall not be refunded to the assessee as the transferor would be entitled to claim credit of the same in their respective return of income. Decided in favour of assessee.

Summary

Issues:
Challenge to levy of interest and late fees under section 234E of the Act.

Analysis:
The appeals were filed against the order of the ld. CIT(A)-3, Jaipur for Assessment Year 2014-15, challenging the levy of interest and late fees under section 234E. The facts revealed that the assessee entered into an agreement for the purchase of a residential house jointly owned by two individuals. The assessee deposited TDS amounts for the payments made to the owners. The intimation received by the assessee regarding the levy of interest and late fees under section 234E was contested in the appeal.

During the hearing, the argument presented was that the provisions of section 194IA were not applicable as the consideration paid to the property owners was less than the prescribed limit. It was further contended that the TDS deduction was a mistake and should not be the basis for the levy of interest and late fees under section 234E.

The issue of the applicability of late fee under section 234E before 01.06.2015 was raised, citing a prospective effect of the amendment made under section 200A. A reference was made to a decision of the Hon'ble Karnataka High Court to support this argument. The Revenue, on the other hand, relied on the transfer value of the property and a Rajasthan High Court decision to support the imposition of fees under section 234E.

The Tribunal analyzed the provisions of section 194-IA, which require the deduction of tax at source for consideration exceeding a specified limit. Despite the total consideration being agreed at a higher amount, the assessee paid individual sums to the property owners, which did not exceed the limit. Consequently, the Tribunal concluded that section 194-IA was not applicable in this case. Therefore, the basis for the levy of interest and late fees under section 234E was deemed invalid, and the demand was directed to be deleted. It was clarified that the TDS already deposited would not be refunded to the assessee.

In conclusion, both appeals of the assessee were allowed, and the order was pronounced in the open court on 08/06/2018.