2025 (1) TMI 877 - HC - Income Tax

Petitioner liability to pay interest and late filing fee for the belated remittance of TDS under the Income Tax Act, 1961 - petitioner has vehemently contended that the information available in the website of the Income Tax Department denotes BDA as an exempted institution - HELD THAT - The petitioner has paid the entire balance sale consideration to the BDA without deducting any TDS on the ground that the BDA was an exempted institution. However, subsequently, the BDA has sought Form 16B and Form 26QB to complete the registration process and the petitioner has paid the TDS amount to the tax authorities, resulting in the tax authorities issuing the demand dated claiming interest and late filing fee. Hence, it is clear that the petitioner himself having done various acts i.e., non deducting of TDS while making the balance sale consideration and thereafter, belatedly remitting the TDS, the question of favourably considering the reliefs sought for in the present petition does not arise. Question framed for consideration is answered in the negative.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the petitioner is liable to pay interest and late filing fee for the belated remittance of Tax Deducted at Source (TDS) under the Income Tax Act, 1961.
Whether the Bengaluru Development Authority (BDA) is exempt from TDS under Section 12A of the Income Tax Act, and if so, whether the petitioner was justified in not deducting TDS initially.
Whether the petitioner is entitled to relief from the demand notice issued by the tax authorities for late fees and interest.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Liability for Interest and Late Filing Fee

Relevant legal framework and precedents: Section 194-IA of the IT Act mandates TDS deduction on immovable property transactions. Rule 30(2A) and Section 203(1) of the IT Act outline the timelines and requirements for TDS remittance and certification. Section 201(1A) imposes interest for delayed TDS payment, and Section 234E mandates late filing fees.
Court's interpretation and reasoning: The court emphasized the mandatory nature of TDS deduction and timely remittance. The petitioner's failure to comply with these requirements resulted in the imposition of interest and late fees.
Key evidence and findings: The petitioner paid the full consideration without TDS deduction, later remitting TDS after being advised of potential allotment cancellation. The tax authorities issued a demand for interest and late fees due to the delay.
Application of law to facts: The petitioner's actions-delayed TDS payment and subsequent compliance-triggered the statutory penalties under Sections 201 and 234E.
Treatment of competing arguments: The petitioner argued that BDA's claimed exemption justified the initial non-deduction of TDS. However, the court found no evidence of BDA's exemption status at the relevant time.
Conclusions: The court concluded that the petitioner was liable for interest and late fees due to non-compliance with TDS provisions.

Issue 2: Exemption Status of BDA

Relevant legal framework and precedents: Section 12A of the IT Act provides tax exemption for certain charitable institutions. The definition of "charitable purpose" and conditions for exemption are outlined in Sections 2(15) and 10(46).
Court's interpretation and reasoning: The court noted the absence of evidence supporting BDA's exemption under Section 12A. BDA itself stated it was not registered under Section 12A.
Key evidence and findings: The petitioner relied on website information suggesting BDA's exemption, but this was not substantiated by official records or BDA's statements.
Application of law to facts: Given the lack of exemption status confirmation, the court found the petitioner's initial non-deduction of TDS unjustified.
Treatment of competing arguments: The petitioner's reliance on alleged exemption was countered by BDA's admission of non-registration under Section 12A.
Conclusions: The court found no basis for treating BDA as exempt, thereby upholding the requirement for TDS deduction.

Issue 3: Entitlement to Relief from Demand Notice

Relevant legal framework and precedents: The IT Act provisions on TDS, interest, and late fees govern the petitioner's obligations and potential relief.
Court's interpretation and reasoning: The court emphasized compliance with statutory requirements and found no grounds for quashing the demand notice.
Key evidence and findings: The petitioner's belated compliance with TDS obligations led to the demand notice for penalties.
Application of law to facts: The court applied the IT Act provisions, finding the petitioner's non-compliance justified the penalties imposed.
Treatment of competing arguments: The petitioner's plea for relief was unsupported by evidence of BDA's exemption or procedural errors by tax authorities.
Conclusions: The court denied relief, affirming the petitioner's liability for interest and late fees.

3. SIGNIFICANT HOLDINGS

Verbatim quotes of crucial legal reasoning: "The petitioner himself having done various acts i.e., non deducting of TDS while making the balance sale consideration and thereafter, belatedly remitting the TDS, the question of favourably considering the reliefs sought for in the present petition does not arise."
Core principles established: Compliance with TDS provisions is mandatory, and exemptions must be substantiated by evidence. Delayed compliance results in statutory penalties.
Final determinations on each issue: The court dismissed the writ petition, finding the petitioner liable for interest and late fees due to non-compliance with TDS obligations and lack of evidence supporting BDA's exemption status.

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