Kushalava Spinners & Ginners Private Limited Vs ITO (ITAT Visakhapatnam)
Conclusion: Demand raised under Section 201(1) and 201(1A) for failing to deduct 1% TDS (Tax Deducted at Source) was justified as purchase of factory land was not agricultural land for s.194-IA purposes and moreover, in absence of evidence, assessee’s claim that part of consideration was for machinery could not absolve TDS liability.
Held: Assessee had purchased property measuring 56,005.5 square yards at Marripalem Village, Guntur District for a consideration of ₹9.90 crore from three vendors. AO noted that company had failed to deduct TDS @ 1% u/s 194-IA and raised a demand of ₹17,04,430 under sections 201(1) and 201(1A). CIT (A) dismissed the appeal ex-parte and upheld the assessment. Assessee argued that the delay in filing the appeal was due to its counsel’s ill health and disruptions caused by COVID-19. Assessee also moved an application for admission of additional evidence (sale deed, tripartite agreement, purchase document) under Rule 29 of the Income Tax Appellate Tribunal Rules, 1963. Assessee contended that the land purchased was agricultural land under section 2(14), thus outside the ambit of Section 194IA and part of consideration (₹99 lakhs) was for machinery, not “immovable property”; hence no TDS obligation. It was held that on verification of documents, it was found that assessee-company had not purchased any agricultural land, but in fact, had purchased factory land, therefore, the exception carved out in Section 194IA i.e., no obligation was cast upon an assessee to deduct/withhold tax at source from the consideration for purchase of agricultural land would not assist the case of the assessee. Apropos the assessee’s claim that Section 194IA was not applicable to the purchase consideration of Rs.99 lacs that was paid by the assessee towards purchase of machinery installed on the subject land, it was noted that nothing was discernible from the registered sale deed, dated 06.11.2015, based on which assessee company had made a payment of Rs. 99 lacs for purchase of machinery, hence assessee’s claim was rejected. Tribunal dismissed the appeal and upheld the demand raised under Sections 201(1) and 201(1A).
