DCIT, CENTRAL CIRCLE-8(1), MUMBAI, MUMBAI vs. SHIVALIK VENTURES PRIVATE LIMITED, MUMBAI

The assessee is a company engaged in the business of development of commercial complexes and rehabilitation under Slum Rehabilitation Authority (SRA Scheme). The assessee filed the return of income for AY 2016-17 on 17.10.2015 declaring total income at Rs. 3,29,56,720/-. The Assessing Officer (AO) issued an information that the assessee has received a sum of Rs. 130,80,41,280/- as consideration from SRA for a project in the name of Aashiyana CHS and that there was no agreement or MOU or JV entered into at any stage of development with any other developer for AY 2016-17. Based on the said information the AO re-opened the assessment by issue of notice under section 148 dated 23.06.2021. Subsequently in view of the decision of the Hon'ble Supreme Court in the case of Union of India vs. Ashish Agarwal the notice under section 148 was deemed as notice issued under section 148A(b) and after considering the submissions the AO passed an order under section 148A(d) on 27.07.2022. Thereafter notice under section 148 was issued on 29.07.2022 and in response the assessee vide letter dated 10.02.2023 submitted the computation of total income. During the assessment proceedings after verification of details from SRA and from the assessee the AO found that the receipt of Rs. 130,80,41,280/- was a consideration received from sale of TDR and the same has been offered under the head "Capital Gain" in the return of income. The SRA has also clarified that no consideration has been paid to the assessee against any redevelopment. Therefore, the AO while completing the assessment under section 148 did not make any addition towards the reason for which the reopening was done. However, during the assessment proceedings, the AO found that a survey Shivalik Ventures Pvt. Ltd.

4.3 In furtherance to the above, it is essential to mention here that it is held by the judicial forums that sum of money for the payments of rentals during the redevelopment work would not be taxed only to the extent it was actually utilized for rent payments. Thus, it cannot be said that the receipts in the hands of deductees are not taxable, hence not liable for TDS. Since, any non-utilized money in the hands of recipients shall be taxable, the onus lies on payer to deduct the TDS u/s 194I of the Act.

4.4 To conclude, the provisions of section 194I as well as various judicial pronouncements cast responsibility on the developer to deduct TDS so as to enable proper tracking of the utilization of the amounts paid to the tenants.

4.5 In view of the above discussion, it can be safely held that the claim of the assessee that it has paid compensation to the dwellers for the intervening period till they are given the possession of their Rehabilitation units cannot nullify the findings of Survey Action that the payments made by the assessee are in the nature of rent and the same is liable to TDS.”

The AO therefore disallowed 30% of the amount paid under section 40(a)(ia) of the Act for the reason that the assessee failed to deduct tax at sources from the impugned payment. Aggrieved the assessee further filed appeal before he CIT(A). Besides contending the issue on merits the assessee also submitted that the identical issue has been considered by the Co-ordinate Bench in assessee's own case for Ay 2012-13 (ITA No. 3429/Mum/2024 dated 19.09.2024) and the addition made by the AO was held as unsustainable by the Tribunal. The CIT(A) by placing reliance on the above decision of the Co-ordinate Bench deleted the addition. The revenue is in appeal before the Tribunal against the order of the CIT(A).

We heard the parties and perused the material on record. The assessee during the year under consideration has made payments to the slum dwellers for enabling them to meet the expenditure incurred towards rent for the alternate accommodation since the slum dwellers have to vacate the property for the purpose of development. The AO held the payment to be in the nature of rent and accordingly called on the assessee to submit whether TDS under section 194I is deducted on the said Shivalik Ventures Pvt. Ltd.

Respectfully following the judgment of the Hon'ble Juri ictional High Court, we are inclined not to interfere in the impugned order, which is otherwise neither perverse nor suffer from any impropriety and/or illegality and therefore the impugned order is affirmed. Thus, the appeal filed by the Revenue Department stands dismissed.”

The Hon'ble High Court in the above decision has held that the transit rent which is paid to the tenant who suffers hardship due to dispossession does not fall within the definition "rent" under section 194I. As already stated, in assessee's case the payment is made towards compensation for handing over the vacant possession of the property and towards rent if any payable by the tenants in the alternate accommodation until the completion of the re-development. Therefore applying the ratio of the decision of the Hon'ble High Court we hold that the payment made by the assessee towards "Alternate accommodation charges / rent" is not liable for tax deduction under section 194I and accordingly we see no reason to interfere with the decision of the CIT(A) in deleting the disallowance made by the AO under section 40(a)(ia) of the Act.

In result, the appeal of the revenue is dismissed.

The assessee filed the return of income for AY 2021-22 on 31.03.2022 declaring a total income of Rs. 94,71,760/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The assessment under section 143(3) of the Act was completed on 27.12.2022 determining the total income of the assessee at Rs. 1,56,52,460/-. The AO while completing the assessment has made the following disallowance: Shivalik Ventures Pvt. Ltd.

Aggrieved the assessee filed further appeal before the CIT(A). The CIT(A) deleted the disallowance under section 40(a)(ia) made towards non-deduction of tax at source under section 194I on the payments made to slum dwellers towards alternate accommodation. The CIT(A) in this regard placed reliance on the decision of the Co-ordinate Bench in assessee's own case for AY 2012-13 (supra). The CIT(A) confirmed the disallowance made by the AO by placing reliance on the decision of the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT ([2022] 143 taxmann.com 178 (SC)). The relevant observations of the CIT(A) in this regard are extracted below:

During the appeal proceedings, the appellant mainly relied on the decision of the Hon'ble Supreme Court in the case of CIT vs Vinay Cements Ltd. and the decision of the Hon'ble Bombay High Court in the case of CIT vs Ghatge Patil Transports Ltd. (368 ITR 749) and contended that the deduction on payment of employees’ contribution to PF and ESIC is allowable as per the provisions of section 43B, as the payment is made before the due date of filing of return u/s 139(1) of the I.T Act.

This issue of allowability of deduction of employees’ contribution to PF and ESIC has been settled by the decision of the Hon'ble Supreme Court in the Shivalik Ventures Pvt. Ltd.

In the opinion of this Court, the reasoning in the impugned judgment that the nonobstante clause would not in any manner dilute or override the employer's obligation to deposit the amounts retained by it or deducted by it from the employee's income, unless the condition that it is deposited on or before the due date, is correct and justified. The non- obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees' contributions- which are deducted from their income. They are not part of the assessee employer's income, nor are they heads of deduction per se in the form of statutory pay out. They are others' income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under Shivalik Ventures Pvt. Ltd.

We heard the parties and perused the material on record. The issue of disallowance towards delayed payments of PF/ESI is settled by the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra). Respectfully following the judicial precedents as laid down by the Hon'ble Supreme Court, we see no reason to interfere with the decision of the CIT(A) in confirming the disallowance made by the AO.

In result, the appeals of both the assessee and the revenue are dismissed.