ITO Vs N Rose Developers Private Limited (ITAT Mumbai)
The ITAT Mumbai dismissed appeals filed by the Income Tax Officer (ITO), challenging the Commissioner of Income Tax (Appeals)’s (CIT(A)) order, which held that N Rose Developers Private Limited was not liable to deduct tax under Section 194IC of the Income Tax Act, 1961, on payments made as compensation for alternate accommodation. The assessee, a real estate developer, had made these payments to occupants of a building under redevelopment, as per a development agreement. The Assessing Officer (AO) argued that these payments were subject to TDS under Section 194IC, as they fell under a “specified agreement” under Section 45(5A) of the Act.
The ITAT, however, agreed with the CIT(A)’s decision, relying on a precedent set by a Co-ordinate Bench in Nathani Parekh Constructions Pvt. Ltd. It held that alternate accommodation charges or rent cannot be considered part of the consideration paid for a share in land or building under a “specified agreement.” The tribunal clarified that Section 194IC applies to sums paid as consideration under such agreements, specifically related to the transfer of land or building shares. The payments in question were deemed compensation for hardship caused by displacement, not part of the share in the developed property. Therefore, the ITAT concluded that the assessee was not obligated to deduct TDS under Section 194IC, and upheld the CIT(A)’s order, dismissing the Revenue’s appeals for both Assessment Years 2018-19 and 2019-20.
