Nathani Parekh Constructions Pvt. Ltd. Vs ITO (ITAT Mumbai)
In the case of Nathani Parekh Constructions Pvt. Ltd. vs. ITO, the primary issue before the Income Tax Appellate Tribunal (ITAT) Mumbai was whether payments made by the assessee towards alternate accommodation and hardship compensation to tenants during a redevelopment project were liable for tax deduction at source (TDS) under Section 194IC of the Income Tax Act. The Assessing Officer (AO), based on a survey conducted under Section 133A(2A), had concluded that the assessee defaulted by not deducting TDS on these payments, made under a registered redevelopment agreement with Dalal Estate Co-operative Housing Society. The AO invoked Section 194IC, which mandates TDS at 10% on any monetary consideration paid under a “specified agreement” as referred to in Section 45(5A), and passed orders under Section 201(1) and 201(1A) treating the assessee as a defaulter.
The assessee argued that the compensation paid was not consideration under Section 45(5A) but rather a hardship allowance to facilitate the temporary relocation of tenants. It was emphasized that tenants were not owners of the land and the payments were not related to the transfer of capital assets. The CIT(A), however, upheld the AO’s view, holding that since the agreement qualified as a “specified agreement” under Section 45(5A), any payment arising from it, including hardship compensation, should attract TDS under Section 194IC.
