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Facts
The assessee purchased an immovable property and failed to deduct TDS under section 194-IA, as the total consideration exceeded Rs. 50 lakhs. The Assessing Officer treated the assessee as in default and levied tax and interest. The assessee contended that their individual share of consideration was below the threshold.
Held
The Tribunal held that for the assessment year in question, Section 194-IA applied to the aggregate consideration of the property, not individual shares. However, subsequent amendments changed this position. Citing previous rulings, the Tribunal found that for the period before the amendment, if individual shares were below the threshold, TDS was not required.
Key Issues
Whether the threshold limit of Rs. 50 lakhs under Section 194-IA for TDS on property transactions applies to the aggregate consideration or individual shares of co-owners, particularly for assessment years prior to the Finance Act, 2024 amendment.
Sections Cited
194-IA, 201(1), 201(1A), 250
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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), ADDL/JCIT(A), Faridabad vide order dated 21.01.2026 passed for A.Y. 2015-16.
The assessee has raised the following grounds of appeal:
“1. The order passed u/s 201(1) and 201(1A) by assessing officer and confirmed by the first appellate authority u/s 250 is bad in law and deserves to be uncalled for.
2. The assessing officer as well as first appellate authority has erred in law and on facts in charging tax u/s 194IA of Rs. 3,50,500/- towards the purchase of the property. The same deserves to be deleted.
The appellant craves to reserve his right to add, alter, amend, or DELETE any ground of appeal during the course of hearing.”
Hasmukhbhai Jayantibhai Patel vs. ITO Asst.Year –2015-16 - 2– 3. The brief facts of the case are that the assessee was subjected to proceedings under the provisions of Chapter XVII-B of the Income-tax Act, 1961 ("the Act"), wherein the Assessing Officer observed that the assessee had made payment towards purchase of an immovable property but had failed to deduct tax at source under section 194-IA of the Act. Since the total consideration of the property exceeded the prescribed threshold of Rs. 50 lakhs, the Assessing Officer held that the assessee was under a statutory obligation to deduct TDS at the rate of 1% on such payment. In the absence of such deduction, the Assessing Officer treated the assessee as an “assessee in default” under section 201(1) of the Act and raised a demand of Rs. 13,50,500/-. Further, interest under section 201(1A) was also levied for the period of default on account of failure to deduct and/or deposit the tax.
Aggrieved by the action of the Assessing Officer, the assessee preferred an appeal before the CIT(Appeals) and raised specific grounds challenging the applicability of section 194-IA as well as the consequential levy of interest. The primary contention of the assessee under Ground No. 02 was that the threshold limit of Rs. 50 lakhs prescribed under section 194-IA of the Act should be applied with reference to the individual share of each co-owner and not with reference to the aggregate consideration of the property. It was submitted that since the assessee’s individual share in the property was below the threshold limit, the provisions of section 194-IA were not attracted. Under Ground No. 03, the assessee challenged the levy of interest under section 201(1A) and contended that the same was not justified under the facts of the case. The other grounds were general and consequential in nature.
Hasmukhbhai Jayantibhai Patel vs. ITO Asst.Year –2015-16 - 3– 5. The CIT(Appeals), after considering the submissions of the assessee and examining the statutory provisions, dismissed Ground No. 02 by holding that section 194-IA clearly mandates deduction of tax where the consideration for transfer of immovable property exceeds Rs. 50 lakhs and that such threshold is to be seen with reference to the property as a whole and not with reference to the individual shares of co-owners. The CIT(Appeals) relied upon the principle of interpreting the transaction in its “real light” as emphasized by the Hon’ble Supreme Court in the context of property transfer provisions, holding that artificial division of consideration among co-owners cannot defeat the object of the statute. It was further observed that where a single property is transferred through a common agreement and the total consideration exceeds the prescribed limit, the provisions of section 194-IA are clearly attracted. Reliance was also placed on the decision of the ITAT Jodhpur Bench in the case of Sachin Kumar Kabra vs. ITO, wherein it was held that the threshold limit is property-centric and not person-centric. Accordingly, the CIT(Appeals) upheld the action of the Assessing Officer in treating the assessee as an assessee in default under section 201(1) of the Act and Ground No. 02 was dismissed. With regard to Ground No. 03 relating to levy of interest under section 201(1A) of the Act, the CIT(Appeals) held that the charging of interest is automatic, mandatory and compensatory in nature. The CIT(Appeals) observed that the provisions of section 201(1A) of the Act use the expression “shall”, which leaves no discretion with the authorities in the matter of levy of interest. The CIT(Appeals) placed reliance on the decision of the Hon’ble Supreme Court in the case of CIT vs. Anjum M.H. Ghaswala (252 ITR 1), wherein it has been held that such interest cannot be waived on the ground of reasonable cause or hardship. Accordingly, the levy of interest was held to be in accordance with law and Ground No. Hasmukhbhai Jayantibhai Patel vs. ITO Asst.Year –2015-16 - 4– 03 was also dismissed. The remaining grounds being general and consequential in nature were not adjudicated separately. In the result, the appeal of the assessee was dismissed in entirety.
The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.
Before us, the ld. counsel for the assessee submitted that that the the share of the assessee being 25% was approximately 17 lakhs and therefore was clearly below the threshold limit of 50 lakhs. Further, the ld. counsel for the assessee submitted that that the amendment in section 194- IA of the Act for aggregation of consideration in case of multiple transferors was introduced vide Finance Act 2024 and effective from 01- 04-2024 and is not applicable to the impugned assessment year. The ld. counsel for the assessee also placed reliance on case laws in favour of the assessee on the subject.
In response, Ld. DR placed reliance on the observations made by CIT(Appeals) in the appellate order.
We have heard the rival contentions and perused the material on record.
In the case of Aakash Pursottambhai Vaghela vs. Income-tax Officer [2025] 176 taxmann.com 372 (Ahmedabad - Trib.)[26-06- 2025], the Ahmedabad ITAT held that where assessee purchased an immovable property from four co-owners and made payment of Rs. 40.25 lakhs to each of them on 30-01-2018 on which no TDS was made under provisions of section 194-IA, since payment was made much before applicability of proviso to section 194-IA(2) on 1-10-2024, aggregate Hasmukhbhai Jayantibhai Patel vs. ITO Asst.Year –2015-16 - 5– amount of consideration paid by assessee to all transferors could not be considered for purpose of section 194-IA(2) of the Act and, thus, assessee was not required to deduct TDS where consideration paid to each transferor was less than Rs.50 lakhs.
In the case of Bhikhabhai Hirabhai Patel vs. Deputy Commissioner of Income-tax [2023] 155 taxmann.com 87 (Ahmedabad - Trib.)[31-01-2020], the Ahmedabad ITAT held that where share of consideration paid by assessee to each transferor for acquisition of immovable property was less than Rs. 50 lakhs, assessee would not be under obligation under section 194-IA to deduct TDS on such consideration on behalf of transferor/seller and thus, consequential late filing fees imposed on assessee was to be deleted.
In the case of Archanaben Rajendrasingh Deval vs. Income-tax Officer, TDS [2025] 173 taxmann.com 722 (Ahmedabad - Trib.)/[2025] 212 ITD 414 (Ahmedabad - Trib.)[02-04-2025], the Ahmedabad ITAT held that where assessee had made payments to two sellers, both of which were individually below threshold of Rs.50 lakhs prescribed under section 194IA, provisions of section 194IA were not attracted and therefore, assessee could not be held to be an assessee-in- default under section 201(1) of the Act.
On careful consideration of the facts and legal position, we find merit in the contention of the assessee. It is an undisputed position that the assessee had purchased the property from multiple co-owners and the consideration attributable to the share of each co-owner was below the prescribed threshold of Rs. 50 lakhs. The provisions of section 194-IA, as applicable to the year under consideration, did not contain any stipulation Hasmukhbhai Jayantibhai Patel vs. ITO Asst.Year –2015-16 - 6– for aggregation of consideration in respect of multiple transferors. The amendment providing for such aggregation has been introduced only by the Finance Act, 2024 with effect from 01.04.2024 and is therefore prospective in nature and not applicable to the year under consideration.
We further find that the issue is no longer res integra and stands squarely covered in favour of the assessee by a series of decisions of the coordinate benches of the Tribunal. In the case of Aakash Pursottambhai Vaghela vs. Income-tax Officer [2025] 176 taxmann.com 372 (Ahmedabad - Trib.) dated 26.06.2025, it has been categorically held that where the consideration paid to each co-owner is less than Rs. 50 lakhs, the provisions of section 194-IA are not attracted and the aggregate consideration cannot be considered for the purpose of determining the threshold, particularly for the period prior to insertion of the proviso by the Finance Act, 2024. Similarly, in the case of Bhikhabhai Hirabhai Patel vs. Deputy Commissioner of Income-tax [2023] 155 taxmann.com 87 (Ahmedabad - Trib.) dated 31.01.2020, the Tribunal held that where the share of consideration paid to each transferor is below Rs. 50 lakhs, there is no obligation on the part of the assessee to deduct tax under section 194- IA. Further, in the case of Archanaben Rajendrasingh Deval vs. Income- tax Officer, TDS [2025] 173 taxmann.com 722 (Ahmedabad - Trib.)/[2025] 212 ITD 414 (Ahmedabad - Trib.) dated 02.04.2025, it was held that where payments to individual sellers were below the threshold limit, the assessee could not be treated as an assessee-in-default under section 201(1) of the Act.
In light of the aforesaid judicial precedents and considering the fact that the assessee’s share of consideration in the present case was admittedly below Rs. 50 lakhs, we hold that the provisions of section 194- Hasmukhbhai Jayantibhai Patel vs. ITO Asst.Year –2015-16 - 7– IA were not applicable and consequently, the action of the Assessing Officer in treating the assessee as an assessee-in-default under section 201(1) of the Act is not sustainable in law. Accordingly, the demand raised under section 201(1) is hereby deleted.
Since the very foundation for levy of interest under section 201(1A) does not survive, the interest levied thereunder is also directed to be deleted.
In the result, the appeal of the assessee is allowed. 17. This Order pronounced in Open Court on 27/03/2026