2018 (11) TMI 865 - AT - Income Tax

TDS u/s 194C - non deduction of TDS while making the payment to the agencies Bhagyashree Developer, Jaaji Developer and Jaaji Promoters who have developed the residential complex for the employees - Held that - When the assessee is only a purchaser, if any advance sale consideration is paid, the assessee has no business to deduct the tax at source as it is for the seller of the sites to pay the capital gains depending upon the tax payable by him. See THE COMMISSIONER OF INCOME TAX, BANGALORE AND THE INCOME TAX OFFICER, BANGALORE VERSUS M/S KARNATAKA STATE JUDICIAL DEPARTMENT 2010 (3) TMI 1211 - KARNATAKA HIGH COURT - Decided against revenue.

Summary

Issues:
1. Whether the assessee was required to deduct tax at source u/s. 194C from payments made to developer.
2. Deletion of demand u/s. 201(1) and 201(1A).

Analysis:
1. The Revenue filed an appeal challenging the CIT(A)'s order, arguing that the assessee should have deducted tax at source u/s. 194C from payments to the developer. The Revenue contended that the works contract with the developer fell under Section 194C. However, the CIT(A) ruled in favor of the assessee, citing agreements and nature of contracts as not requiring TDS deduction. The Revenue's appeal was dismissed as the CIT(A)'s decision was upheld based on the nature of the contracts and agreements.

2. The Revenue further contended that the CIT(A) erred in deleting the demand u/s. 201(1) and 201(1A). The Revenue argued that the agreements with the developer constituted composite contracts for works falling under Section 194C. However, the CIT(A) relied on previous judgments and dismissed the Revenue's appeal. The Tribunal upheld the CIT(A)'s decision, stating that there was no discrepancy in the CIT(A)'s reasoning. Consequently, the Revenue's appeal was dismissed, affirming the deletion of the demand u/s. 201(1) and 201(1A).

Overall, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision regarding the non-deduction of tax at source u/s. 194C and the deletion of demand u/s. 201(1) and 201(1A). The Tribunal emphasized the nature of the contracts and agreements in determining the applicability of TDS requirements, ultimately ruling in favor of the assessee based on the existing legal precedents and interpretations.