LIABLITY TO PAY INTEREST AND LATE FEE FOR THE BELATED REMITTANCE OF TDS

[DR.MARIAPPAN GOVINDARAJAN]

Section 194-IA of the Income Tax Act, 1961 (‘Act’ for short) requires a transferee, at the time of the payment of consideration to the transferor for transfer of any immovable properties, to deduct a certain percentage as income tax. Rule 30 (2A) of the income Tax Rules,1962 stipulates that any sum deducted under Section 194-IA shall be paid to the credit of the Central Government within a period of 30 days from the end of the month in which the deduction has made and shall be accompanied by a challan-cum- statement in Form No.26QB.   Section 203(1) of the Act provides that the person who has deducted TDS (transferee) shall furnish to the person to whose account the said amount was credited (transferor) a certificate to the effect that tax has been deducted and specifying the amount so deducted and the rate at which the tax has been deducted as also other particulars as may be described.  Section 201(1A) (i)(ii) of the Act stipulates that if a person does not deduct the whole or any part of TDS and pay a sum as required under the  Act, he shall be liable to pay interest in terms of the stipulation contained under Sub-section (1A)(i)(ii) of Section 201 of the Act.

In BASAVARAJ GURUSIDDAPPA SINDHUR VERSUS INCOME TAX OFFICER (TDS) , ASSISTANT COMMISSIONER OF INCOME TAX CENTRALIZED PROCESSING CELL-TDS, BENGALURU DEVELOPMENT AUTHORITY - 2025 (1) TMI 877 - KARNATAKA HIGH COURT, the Bangalore Development Authority (‘BDA’ for short) allotted a site to the petitioner, vide letter dated 07.12.2016.  The petitioner made an initial deposit of Rs.12.11 lakhs with BDA. The petitioner was allotted a site in the Nadaprabhu Kempegowda Layout of the BDA for a total sale consideration of Rs.96,87,510/-.    After deducting the initial deposit of Rs.12,11,000/-, the balance sale consideration that the petitioner was required to pay the BDA was Rs.84,76,510/- within 60 days of receipt of the allotment letter.

The petitioner requested the BDA to inform him as to whether there is any exemption to BDA under Section 12A of the Act and whether he required to deduct tax from the amount he was liable to pay to BDA.    The BDA insisted to pay the balance amount entirely without deducting any tax.  Therefore, the petitioner paid the balance amount Rs.84,76,510/- to BDA on 09.06.2017.

Since the petitioner was required to furnish Form-16B-TDS Certificate and 26QB-statement relating to the 1% TDS, the petitioner requested the BDA to make adjustment of the 1% TDS deduction of Rs.96,875/- out of the total consideration of Rs.96,87,510/-.  The petitioner came to know that the allotment was liable to be cancelled.  He got the legal advice. On the basis of the legal advice,  the petitioner paid a sum of Rs. 96,875/- on 29.09.2018 being 1% TDS amount.  The petitioner got generated Form-16B TDS Certificate and 26QB Statement and furnished the same to the BDA.

On 03.10.2018, the petitioner received intimation from the Department in which  a sum of Rs.1,23,010/- was demanded by charging a sum of Rs.26,136/- as interest under Section 201 of the Act and late filing fee of Rs.96,875/- under Section 234E of the Act for the period 24.04.2017 i.e., the date of payment of total consideration by the petitioner to the BDA till 29.09.2018, which is the date of payment of 1% TDS amount of Rs.96,875/-.  Further in the said intimation it was noted that if the demand of Rs.1,23,010/- was not paid by the petitioner within the specified period, recovery proceedings will be commenced by the 1st respondent as per provisions of the Act.  In the meanwhile, the BDA issued show cause notice dated 24.05.2018, calling upon the petitioner to show cause as to why his allotment should not be cancelled in view of nonpayment of balance sital value.  The petitioner replied on 31.08.2018, informing the BDA that he had paid the entire sital value on 09.06.2017 itself.  

Against the order of the Income Tax Department the petitioner field the present writ petition.  In the said writ petition prayed for the restriction to the department in recovery proceedings. 

The petitioner submitted the following before the High Court-

• The information available in the website of the Income Tax Department denotes BDA as an exempted institution.
• If the BDA is exempted under Section 12A of the IT Act, the petitioner was not required to deduct TDS amount and remit the 1% TDS amount. 
• At the earliest instance when the petitioner learnt regarding the payment of TDS amount, the same having been paid, the petitioner seeks indulgence of this Court in granting reliefs sought for in the present writ petition for the purpose of quashing the intimation dated 03.10.2018 demanding late fee and interest i.e., claimed by the respondent No.2-Tax Authorities.

The BDA submitted their objections to the petition before the High Court.  The BDA submitted the following before the High Court-

• At no point of time, it had instructed the petitioner not to deduct TDS while making payment of the balance sital value.     
• The BDA was not registered under Section 12A of the Act. 
• The BDA cannot be held responsible for the action initiated by the Income Tax department against the petitioner.
• The petitioner has paid a sum of Rs. 79,528/- in excess of the amounts payable and the 3rd respondent/BDA is willing to reimburse to the petitioner the said sum of Rs. 79,528/-.

The High Court considered the submissions of the parties.  The High Court noted that the total sale consideration payable by the petitioner for the site allotted vide allotment dated 07.12.2016 was a sum of Rs.96,87,510/-.  The petitioner had already paid a sum of Rs.12,11,000/- by way of initial deposit along with his application, the balance sale consideration payable was a sum of Rs.84,76,510/-.  Since the BDA insisted on payment of entire balance consideration of Rs.84,76,510/-, the same was paid on 24.04.2017.   There is no correspondence placed on record by the petitioner to demonstrate that he had enquired with the BDA or that the officials of the BDA had, to the specific query of the petitioner as to whether the BDA was exempted under Section 12A of the IT Act, insisted for payment of the entire balance consideration of Rs. 84,76,510/-.

After obtaining legal advice that the allotment was likely to be cancelled, the petitioner paid 1% TDS i.e., a sum of Rs.96,875/- on 29.09.2018 and after payment of TDS, the petitioner got generated Form No.16B-TDS-Certificate and 26QB statement and furnished the same to respondent No.3-BDA. The 1% TDS amount of ₹96,875/- was paid only on 29.09.2018.   Thereafter a demand of Rs.1,23,010/- has been made by Department for interest in terms of Section 201 of the Act and for late filing fee in terms of Section 234 of the Act for the period 24.07.2017 when the balance sale consideration was paid by the petitioner till 29.09.2018 on which date payment of 1% TDS for Rs.96,875/- was paid by the petitioner.

The High Court noted that there are litigations pending before the Division Bench of this Court with regard to the exemption of the BDA and other such entities.  But the High Court did not consider this issue in the present writ petition.  There was no material on record, even to the knowledge of the petitioner or by way of any specific assertion by the BDA, that the BDA is an exempted institution.

The High Court held that it is clear 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 3.10.2018 (Annexure-A) 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.  The petitioner has not made out any ground for grant of reliefs as sought for in the present writ petition.  Therefore, the High Court dismissed the writ petition.