Sugee Seven Developers LLP Vs ITO (ITAT Mumbai)
ITAT Mumbai gives partial relief to Developer in JDA TDS dispute – Section 194IC held applicable even for leasehold land, but benefit of proviso to Sect 201(1) may still protect assessee if payee has paid tax
Assessee, a real estate developer, entered into a Joint Development Agreement (JDA) with Shri Premal Dayalal Doshi, who held perpetual leasehold rights in land on which redevelopment was undertaken. Under the JDA, Assessee was entitled to sell the constructed area to buyers, while the landholder was entitled to a share of constructed area as well as monetary consideration. During survey under section 133A(2A), AO noticed that Assessee paid large amounts to the landholder over multiple years & deducted only 1% TDS under section 194IA (sale of immovable property). AO held that this was actually a “specified agreement” under section 45(5A) (i.e., JDA) & therefore section 194IC (TDS @10% on monetary consideration under JDA) applied. Since Assessee deducted only 1% instead of 10%, AO treated Assessee as an “assessee in default” u/s 201(1) & charged differential TDS @9% plus interest u/s 201(1A).
Assessee argued that section 194IC applies only where the landholder is the “owner” of land or building, whereas Shri Doshi was only a leasehold right holder & not an absolute owner, hence section 194IC should not apply. Alternatively, it was argued that Shri Doshi had already offered the capital gains in his return (as per completion certificate based taxation in AY 2024-25), hence by virtue of the proviso to section 201(1), Assessee cannot be treated as an assessee in default. However, the AO rejected this contention as Assessee could not produce Form 26A. CIT(A) also affirmed the AO & held Assessee liable under section 194IC.
