2019 (5) TMI 994 - AT - Income Tax

TDS u/s 194-IA - demand u/s. 201(1)/201(1A) - assessee buyer/transferee has not deducted tax in the hands of the Joint Owners of the property but deducted in the hand of POA holder - demand raised @ 20% applying Section 206AA - HELD THAT - Even though the admitted position is that the assessee buyer/transferee has not deducted tax in the hands of the Joint Owners of the property, still we note that sub-section(2) of sec. 194-IA provides an exception from deducting tax of 1% of the sale consideration, when the sale consideration for the transfer of an immovable property is less than ₹ 50 lacs. Therefore, in the instant case, we note that the total sale consideration is only ₹ 60,12,000/- and the admitted fact as taken note by AO Ld. CIT(A) is that Shri Anant Ram Kumawat and Smt. Seema Kumawat are the co-owners, and jointly owning the immovable property. So, the sale consideration has to be divided equally into two by virtue of sec. 46 of the Transfer of Property Act which prescribed that where immovable property is transferred for a consideration by persons having distinct interest therein. In this case consideration for each transferor comes to ₹ 30,06,000/- each, which is below the prescribed limit of ₹ 50 lacs given by the statute as aforesaid and, therefore, in the light of the same, we are of the opinion in the facts as discussed, supra, that the provisions of sec. 194 IA are not applicable In any case, we note that when the department was knowing the PAN details of the Power of Attorney holder Shri Vijay Kumawat who was none other than the son and brother of the Joint Owners Shri Anant Ram Kumawat and Smt. Seema Kumawat the AO could have easily found out whether these co-owners have reflected the sale consideration as discussed above in their respective Return of Income, if he had made some enquiry or referred the case to the AO who has jurisdiction over the POA holder Shri Vijay Kumawat, (who had obtained the entire sale consideration in his bank account or as to whether POA has shown it as his capital gain or not). Then only picture would be clear and the apprehension of income/gain escaping from the hands of co-owners could have been easily addressed rather than finding fault with the assessee s omission of not doing due diligence to track down the PAN details of the co-owners of the immovable property and in any case the department is now also empowered to find out the reality of the facts discussed above if the statute permits and in accordance to law. Therefore, we are of the considered opinion that in this case, sec. 194-IA of the Act is not applicable and we find force in the ground no. 3 of the assessee s appeal which is hereby allowed and addition is directed to be deleted - Decided in favour of assessee.

Summary

Issues Involved:
1. Non-deduction of tax at source in the name of the actual property owners.
2. Applicability of tax deduction at source on the sale consideration.
3. Interpretation of Section 194-IA of the Income-tax Act, 1961.

Analysis:

Issue 1: Non-deduction of tax at source in the name of the actual property owners.
The appellant contested the order of the Ld. Commissioner of Income Tax (Appeals) upholding the demand raised by the Deputy CIT Range-TDS for non-deduction of tax at source. The appellant argued that tax was deducted in the name of the Power of Attorney holder who executed the sale deed, not in the name of the actual property owners. The Assessing Officer (AO) raised a demand of ?14,30,856 under sections 201(1) and 201(1A) of the Act. The Tribunal noted that the Power of Attorney holder was not the actual owner but acted on behalf of the joint owners. The Tribunal held that the appellant, as the transferee, should have deducted tax from the joint owners, not the Power of Attorney holder. The Tribunal allowed the appeal, emphasizing that the Power of Attorney holder was not the transferor of the property, and the tax should have been deducted from the joint owners.

Issue 2: Applicability of tax deduction at source on the sale consideration.
The main grievance of the appellant was against the demand raised by the DCIT, Range TDS for non-deduction of tax at source on the sale consideration. The appellant purchased a property owned by joint owners through a Power of Attorney holder. The AO concluded that tax should have been deducted at 20% of the purchase consideration. However, the Tribunal found that since the sale consideration was below ?50 lakhs and divided equally between the joint owners, the provisions of section 194-IA exempted tax deduction. The Tribunal held that the tax deduction was not applicable in this case as the sale consideration did not exceed the prescribed limit.

Issue 3: Interpretation of Section 194-IA of the Income-tax Act, 1961.
The Tribunal analyzed Section 194-IA of the Act, which mandates tax deduction on immovable property transfers. The Tribunal interpreted the section to exempt tax deduction when the sale consideration is less than ?50 lakhs. It noted that the sale consideration was divided equally between the joint owners, falling below the prescribed limit. The Tribunal emphasized that the appellant's failure to deduct tax from the joint owners did not attract the provisions of Section 194-IA. The Tribunal highlighted the importance of due diligence by the department in verifying the income details of the joint owners to prevent income leakage.

In conclusion, the Tribunal allowed the appeal, directing the deletion of the addition. The Tribunal found that Section 194-IA was not applicable in this case due to the sale consideration being below the prescribed limit and the joint ownership structure. The judgment emphasized the significance of correctly identifying the liable parties for tax deduction in property transactions to ensure compliance with the Income-tax Act.