2002 (9) TMI 292 - Commission - Income Tax

Summary

Issues Involved:
1. Legality of TDS deduction by GDA on interest payable to the complainant.
2. Deficiency in service by GDA in providing promised facilities and possession of the flat.

Summary:

1. Legality of TDS Deduction by GDA:
The Ghaziabad Development Authority (GDA) challenged the U.P. State Consumer Disputes Redressal Commission's order which held that GDA wrongly deducted TDS from the interest payable to the complainant. GDA argued that u/s 194A of the Income-tax Act, 1961, it was a statutory duty to deduct tax on interest payments. They cited the case of Rama Bai v. CIT [1990] 181 ITR 400 (SC) to support their stance. However, the Commission noted that the interest in Rama Bai's case was related to enhanced compensation under the Land Acquisition Act, which was not applicable here. The interest payable by GDA was not on borrowed money or deposits but was compensation for delay in providing the flat, thus not falling under the definition of "interest" u/s 2(28A) of the Income-tax Act. The Commission upheld the State Commission's order, stating that TDS deduction was not applicable and directed GDA to refund the deducted amount with interest.

2. Deficiency in Service by GDA:
The complainant applied for a plot in the "Kaushambi Housing Scheme" and later had to opt for a flat due to unilateral changes by GDA. Despite paying the required amounts, the complainant faced delays and the flat lacked promised facilities such as lifts, electricity, and other infrastructural amenities. The State Commission found GDA's failure to provide these facilities as a deficiency in service. It ruled that the complainant was justified in refusing additional payments and possession of the flat. Consequently, the State Commission ordered GDA to refund the amounts paid by the complainant with 18% interest per annum and awarded costs of Rs. 2,000. The Commission's order achieved finality, and GDA's deduction of TDS from the interest led to the present controversy.

The Commission concluded that the interest awarded was in the nature of compensation for delay and not taxable as "interest" u/s 2(28A) of the Income-tax Act. Therefore, GDA's action of deducting TDS was incorrect, and the revision petition was dismissed.