Should a purchaser deduct TDS u/s 194IA of the Income Tax Act if the total consideration/ Circle rate Value of the joint property exceeds Rs. 50 lacs but the share of the joint seller is less than Rs. 50 lacs?
Before deliberating on the subject it would we trite to reproduce Section 194IA of the Income Tax Act, which reads as under:
Payment on transfer of certain immovable property other than agricultural land.
194-IA. (1) Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum or the stamp duty value of such property, whichever is higher, as income-tax thereon.
(2) No deduction under sub-section (1) shall be made where the consideration for the transfer of an immovable property and the stamp duty value of such property, are both, less than fifty lakh rupees.
(3) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.
Explanation.—For the purposes of this section,
(a) “agricultural land” means agricultural land in India, not being a land situate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2;
(aa) “consideration for transfer of any immovable property” shall include all charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property;
(b) “immovable property” means any land (other than agricultural land) or any building or part of a building;
(c) “stamp duty value” shall have the same meaning as assigned to it in clause (f) of the Explanation to clause (vii) of sub-section (2) of section 56.
From the plain reading of the aforesaid section, transpires that the sub-section 2 above refers to the word consideration/ stamp value for the transfer of immovable property. Therefore, the revenue officers, insist on deduction of TDS, in respect of transfer of immovable property if the total consideration/ stamp value of the entire property exceeds Rs. 50 lacs even if the share of the co- purchaser/ co- seller is less than Rs 50 lacs. To explain with the help of an example 2 brothers A & B jointly, purchase a residential house, both having 50% share each, having circle rate value/ sale consideration of Rs. 80 lacs. Both A& B pay Rs. 40 lacs each and do not deduct any TDS u/s 194 IA contending that the sale consideration/ stamp value for them individually is less than Rs. 50 lacs. In such a case, first of all the registering authority insists on deposition of TDS. Even if you are able to convince them, the Income Tax Department can issue notice for non compliance of the mandate of Section 194 IA of the Income Tax Act. A penalty under various provisions of Section 271 can be very well imposed for non deduction & non deposit of TDS, which is hefty.
Another converse situation arises when a single purchaser purchases a joint property having consideration/circle rate above Rs. 50 lacs but the individual share of the joint seller works out below Rs. 50 lacs. For example, if a property owned jointly by 3 co-owners is sold for Rs. 120 lacs and an individual seller receives Rs. 40 lacs towards his share, would the buyer be under legal obligation to deduct TDS u/s 194 IA of the Income Tax Act.
It would be relevant to refer to some cases decided by the ITAT which answers the queries raised above.
It would be trite to refer to the case of M/s. Oxcia Enterprises Private Limited Vs DCIT (ITAT Jodhapur) Appeal Number : ITA No. 291/Jodh/2018 decided on 06/05/2019. The facts of the case is that the assessee buyer/transferee had not deducted TDS in the hands of the Joint Owners of the property. The total sale consideration was Rs.60,12,000/- and there were 2 co-owners who jointly owned the said immovable property. So, the sale consideration was divided equally between the two by virtue of sec. 46 of the Transfer of Property Act which prescribed that where immovable property is transferred for a consideration by persons having distinct interest therein, the transferors are entitled to share in the consideration equally. The consideration for each transferor came to Rs.30,06,000/- each, which was below the prescribed limit of Rs.50 lacs given by the statute and the Tribunal accordingly held that the provisions of Section 194- IA of the Act were not attracted.
It would be apropos to refer to the case of Vinod Soni Vs. ITO (TDS) in ITA No. 2736/Del/2015 decided on 10th December, 2018 by the ITAT Delhi Bench wherein it was categorically held that Section 194-IA will not be attracted in case of joint sellers of an immovable property where the share of each joint seller is less than Rs. 50 Lakhs. For the purpose of applicability of TDS u/s 194-IA, each seller is to be treated as a separate entity and therefore, the law is to be applied individually to each seller/buyer. The Tribunal categorically held thus:
” In the instant case there are 04 separate transferees and the sale consideration w.r.t. each transferee is Rs. 37,50,000/-, hence, less than Rs. 50,00,000/- each. Each transferee is a separate income tax entity therefore, the law has to be applied with reference to each transferee as an individual transferee / person. It is also noted that Section 194-IA was introduced by Finance Act, 2013 effective from 1.6.2013. It is also noted from the Memorandum explaining the provisions brought out alongwith the Finance Bill wherein it was stated that “in order to reduce the compliance burden on the small tax payers, it is further proposed that no deduction of tax under this provision shall be made where the total amount of consideration for the transfer of an immovable property is less than fifty lakhs rupees.” We further find that the main reason by the AO is that the amount as per sale deed is Rs. 1,50,00,000/-. The law cannot be interpreted and applied differently for the same transaction, if carried out in different ways. The point to be made is that, the law cannot be read as that in case of four separate purchase deed for four persons separately, Section 194-IA was not applicable, and in case of a single purchase deed for four persons Section 194-IA will be applicable.”
In a catena of other cases, the ITAT has categorically held that Section 194IA is qua each transferee and not qua aggregate consideration:
b. ITA No 1680/Ahd/2018 Bhikhabhai Hirabhai Patel vs. DCIT
c. ITA No 77 & 78/JP/2018 Smt. Sandhya Gugalia vs. DCIT
Thus, it is no longer ‘Res Integra’ that Section 194IA is qua each Transferee/Transferor. It is imperative that CBDT should issue a Circular in accordance with the law in this regard as held by a catena of cases by ITAT, referred to above. This would end unscrupulous litigation and bring certainty in this regard.