Case Law Details
Sawhney Builders Pvt. Ltd. Vs ACIT (ITAT Delhi)
In a recent case, Sawhney Builders Pvt. Ltd. challenged the treatment of compensation payments to allottees by the Income Tax Department. The dispute revolved around whether these payments should be categorized as interest, and whether the builder was obligated to deduct Tax Deducted at Source (TDS). This article discusses the case in detail and the Income Tax Appellate Tribunal (ITAT) Delhi’s verdict.
Detailed Analysis: Sawhney Builders Pvt. Ltd. filed an appeal against the order dated 09.09.2019 by the Commissioner of Income Tax (Appeals) [CIT(A)], New Delhi, for the assessment year 2015-16. The grounds of appeal included challenging the classification of the company as a defaulter under Sections 201(1) and 201(1A) of the Income Tax Act, 1961.
The key contention was whether the payments made by the builder to allottees as compensation for project delays should be treated as interest, thereby invoking Tax Deducted at Source (TDS) obligations under Section 194A of the Act.
The builder explained that they had inadvertently classified these payments as interest and deducted TDS on them until September 2009. It was subsequently corrected by a tax consultant who recognized that the payments were actually compensation or damages due to project delays. The CIT(A) treated these corrective actions as an afterthought and upheld the department’s treatment of Sawhney Builders Pvt. Ltd. as a defaulter.
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