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TMI Blog2021 (8) TMI 1009X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent No. 4 to 7, along with compensatory interest thereon, such a relationship does not spell out a debtor-creditor relationship nor is the payment made by the Respondent Nos. 4 to 7 to the Petitioners one in discharge of any pre-existing obligation, so as to attract Section 2(28A) of the IT Act. The compliance of the Respondent Nos. 4 to 7 with the Schedule of Payments under the Consent Terms dated 4th March, 2021 and our Order dated 4th March 2021, is to be made without making any deduction of tax at source. The Respondent Nos. 4 to 7 are directed to pay to the Petitioners the balance sum of ₹ 5,05,989/- deducted from the 5th instalment which became due on 20th July 2021, in compliance with the Consent Terms, within a period of one week from today. Place the Interim Application No. 2545 of 2020 and Interim Application No. 1151 of 2021 on 25th August 2021 for consideration. - WRIT PETITION (L) NO. 4804 OF 2020 WITH INTERIM APPLICATION NO. 1151 OF 2021 WITH INTERIM APPLICATION NO. 998 OF 2021 WITH INTERIM APPLICATION NO. 2545 OF 2020 WITH INTERIM APPLICATION (L) NO. 6724 OF 2020 - - - Dated:- 18-8-2021 - S.J. KATHAWALLA AND MILIND N. JADHAV, JJ. Mr. Subit Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 20.06.2021 50,00,000 1,03,253 51,03,253 5. 20.07.2021 50,00,000 59,887 50,59,887 6. 20.08.2021 25,00,000 20,650 25,20,650 Net Total 2,80,03,188 5. On 4th March 2021, this Court accepted the undertakings recorded in the Consent Terms and an Order in terms thereof came to be passed. 6. In pursuance of the Schedule of Payments under the Consent Terms and in compliance with the Order dated 4th March 2021, Respondent Nos. 4 to 7 made payments of the instalments from March 2021 till June 2021 to the satisfaction of the Petitioners. 7. However, for the instalment due on 20th July 2021, Respondent Nos. 4 to 7 deducted 10% of the amount, namely, ₹ 5,05,989/- from the total of ₹ 50,59,887/payable towards the July instalment, as tax deductible at source ( TDS ) on the amount of interest under the Recovery Warrant and the Consent Terms. It is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgments (i) Estate Officer, Greater Mohali Area Development Authority v. Gaurav Mutneja 2020 SCC Online NCDRC 278; (ii) Ghaziabad Development Authority v. Dr. NK Gupta 2002 SCC Online NCDRC 39; (iii) Ghaziabad Development Authority v. Naresh Kumar Sharma (2005) 9 SCC 477; (iv) Rajnish Bhardwaj v. CHD Developers Ltd. 2019 SCC Online NCDRC 739; (v) Central India Spinning and Weaving and Manufacturing Co. Ltd., the Empress Mills, Nagpur v Municipal Committee, Wardha AIR 1958 SC 341; and (vi) Commissioner of Income-tax Shimla vs. M/s HP Housing Board, Shimla (2012) 340 ITR 388. 11. We have considered the case law tendered by both the parties, and heard the Learned Counsel appearing for the Petitioners and the Learned Senior Counsel appearing for Respondent Nos. 4 to 7. The issue which arises for our consideration is whether the Respondent Nos. 4 to 7 are entitled to deduct TDS on the interest payable under the Recovery Warrant dated 15th October 2018, the Consent Terms and the Order of this Court both dated 4th March 2021? 12. To answer this, we must first look at the relevant provisions of the Income Tax Act, 1961 ( IT Act ). Deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised. 16. While analysing the issue of payment of interest as compensation by a builder and consequent deduction of tax at source thereon, the Calcutta High Court in the case of PCIT v West Bengal Housing Infrastructure Development Corporation (supra), held in paragraph 16, that from the definition of interest as occurring in section 2(28A) of the IT Act, it appears that the term interest has been made entirely relatable to money borrowed or debt incurred and various gradations of rights and obligations arising from either of the two.. It further held in paragraph 18 that, We accordingly are of the view that the payment made by the assessee to the allottee was in terms of the agreement entered between them where the liability of the assessee would arise only if it failed to make the plots available within the stipulated time. Hence, the payment made under the relevant clause was purely contractual and as rightly held by the Tribunal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uilder. Such a relationship does not spell out a debtor-creditor relationship nor is the payment made by the appellant to the purchaser one in discharge of any pre-existing obligation to be termed as interest as defined in section 2(28A) 18. It has also been held by the Hon ble Supreme Court in the case of All India Reporter Ltd vs Ramchandra D Datar (supra) that when the claim is merged in the decree of the court, the claim assumes the character of a judgment debt, which is not liable to deduction of tax at source. 19. In Madhusudan Shrikrishna v Emkay Exports (supra), a Single Judge of this Court held that once a decree is passed, it is a judgment and the order of the court which culminates into a final decree being passed which has to be discharged only on payment of the amount due under the said decree. The judgment debtor, therefore, cannot deduct tax at source, since it is an order and direction of the court and, as such, would not be liable for penal consequences for non-deduction of the tax due. 20. We have also gone through the judgments tendered by the Respondent Nos. 4 to 7 and find them supportive of the proposition that provision of interest by way o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is compensation has been calculated in terms of interest but this is because the parties by mutual agreement agreed to find out a suitable and convenient system of calculating the damages which would be uniform across the Board for all the allottees. 9. While taking this view we are relying upon the judgement of the Apex Court in Bikram Singh v. Land Acquisition Collector [1997] 224 ITR 551 /[1996] 89 Taxman 119. In the case before the Apex Court the question was whether the interest paid to the persons whose land had been compulsory acquired under Sections 28 and 31 of the Land Acquisition Act was a revenue receipt or a capital receipt. The Apex Court held that though it was termed as interest on delayed payment, it was actually a revenue receipt and therefore the provisions of Section 194A of the Income tax Act would have no application. It would be pertinent to mention that the National Consumer Dispute Redressal Commission in Revision Petition No. 2244 of 1999 titled as G.D.A. v. Dr. N.K. Gupta under similar situation held that when the State Commission directed payment of interest to the allottees for delayed completion of flats the same did not fall within the purvie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r view, therefore, considering the definition of 'interest' as contained in Section 2(28-A) of the Income Tax Act, provisions of Section 194-A were not applicable and the GDA was clearly wrong in deducting the TDS from the interest payable to the Complainant. Accordingly, the order of the State Commission is upheld and this Revision Petition is dismissed. 24. The Learned Senior Counsel for Respondent Nos. 4 to 7 submits that the National Consumer Disputes Redressal Commission ( NCDRC ) has passed several orders clarifying the position in all such matters wherein flat purchasers have executed agreements to sell/ flat buyer agreements but have not received physical possession of their flats in the committed period. Therefore, the NCDRC has directed refund of the amount paid by the buyers, along with interest for the loss or injury suffered by the buyers on account of delayed possession. In one such judgment of Rajnish Bhardwaj vs CHD Developers Ltd. (supra), the NCDRC held 30. Before parting, we may make it clear that the interest @ 12% p.a. on the refund of the amount which has been awarded as compensation and not factually as interest on refund and, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2021 and our Order dated 4th March 2021, is to be made without making any deduction of tax at source. The Respondent Nos. 4 to 7 are directed to pay to the Petitioners the balance sum of ₹ 5,05,989/- deducted from the 5th instalment which became due on 20th July 2021, in compliance with the Consent Terms, within a period of one week from today. 28. As regards compliance with the payment of the 6th instalment due on 20 th August 2021 as per the Consent Terms, the Learned Senior Counsel for the Respondent Nos. 4 to 7 submits that an amount a sum of ₹ 25,00,000/- lying with Respondent Nos. 1 to 3 (being part of the Recovery Warrant as deposited by Respondent Nos. 4 to 7) has been deposited by the Respondent Nos. 1 to 3 in the Registry of this Court on 11th November 2020 in compliance with the Order of this Court dated 6th November 2020. The Petitioners have filed Interim Application No. 2545 of 2020 and the Respondent Nos. 4 to 7 have filed Interim Application No. 1151 of 2021, seeking withdrawal of the amount so deposited. The Learned Government Pleader appearing for the Respondent Nos. 1 to 3 states that Reply has been filed and she would be taking instructions and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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