M/S. VASAVI HOUSING CO-OPERATIVE SOCIETY,BENGALURU vs. INCOME TAX OFFICER (TDS), WARD-3(4), BENGALURU

Page 2 of 10 to 289/Bang/2022 A.Y. 201(1) 201(1A) 2011-12  Nil  2012-13 Nil   2013-14   2014-15 3. Brief facts of the case are as under: 3.1 Assessee is a cooperative housing society with main object to provide residential sites to its members. Assessee entered into an agreement with M/s. Shree Sai Associates for procurement and development of sites and transfer the same to the assessee for purposes of allotting the sites to its members. It is a submission of assessee that the agreement was entered into between M/s. Shree Sai Associates vide MoU dated 21/09/2010 for purchases of developed land and therefore TDS was not liable to be deducted. Revenue however treated assessee to be ‘assessee in default’ for not deducting at source u/s. 194C of the Act on the payments made to M/s. Shree Sai Associates towards the works contract. The Ld.AO held that the payment made by assessee was towards works contract on which TDS was liable to be made and the MoU between assessee and M/s. Shree Sai Associates is in the nature of contract. The Ld.AO made addition in the hands of the assessee as under: 201(1) 201(1A) A.Y. (Rs.) (Rs.) 2011-12 2,52,300 Nil 2012-13 76,85,535 Nil 2013-14 11,14,620 8,43,302 2014-15 5,03,137 3,36,836 3.2 Aggrieved by the disallowance or addition made, assessee preferred appeal before the Ld.CIT(A). The Ld.CIT(A) upheld the order of Ld.AO and held that assessee was liable to deduct TDS on the payments made in relation to the development work.

Before us, the Ld.AR primarily submitted that, the work carried out by M/s. Shree Sai Associates are not in the nature of works contract and therefore assessee was not liable to deduct TDS. He submitted that the assessee proposed to purchase the developed land in a suitable location by transferring the documents from such land owners and the developed land would be transferred to its members, against which an agreed price was payable by the assessee. For this activity, assessee authorised M/s. Shree Sai Associates to develop the land and transfer the same to the society. He submitted that various clauses in the MoU categorically stipulates that M/s. Shree Sai Associates would procure the land and convey the developed society to the assessee. Referring to clause (4) of the MoU, the Ld.AR submitted that M/s. Shree Sai Associates has entered into purchase of lands from the respective owners in order to develop them. He thus submitted that assessee was in the bonafide belief that TDS was not liable to be deducted.

The Ld.AR submitted that assessee on completion of the layout work was to pay the remuneration at Rs. 387/- per sq.ft. of the developed premises which includes the cost of the land, various charges paid by M/s. Shree Sai Associates to the Government for obtaining necessary permissions, payment of conversion charges etc. He thus submitted that assessee cannot be held to be an assessee in default.

We have perused the submissions advanced by both sides in the light of records placed before us.

On perusal of the MoU between assessee and M/s. Shree Sai Associates dated 21/09/2010, we note that M/s. Shree Sai Associates is a developer cum contractor who has procured the land for the purposes of construction of residential houses at the request of the assessee on behalf of all its members. Upon purchases of land, confirmation of the site by the developer / contractor. It is also noted in clause (7) of the MoU that all necessary permission for registration of the project land was in the name of assessee and that the developer / contractor would be developing the layout as agreed with assessee. Clause (16) of the agreement mentions that the developer / contractor would be liable to pay sales tax on the works contract, VAT / service tax or any other applicable taxes leviable on or during the course of the development of the project land. The clause (17) further refers to the name that shall be adopted for the entire project that would be decided by the assessee alone. The obligation clause no. (22) of the MoU reveals that the work carried out by the developer / contractor was as per the requirements of the assessee. Assessee could have approached various government officials for necessary permission and therefore approach the developer/contractor to Page 5 of 10 ITA Nos. 284 to 289/Bang/2022 carry out the development of residential layout in all respects over the project land. For sake of clarity, we reproduce clause (22) herewith as under:

Before us, assessee alternatively argued that, the amount made towards the cost of the land and expenditure towards various permission, should be kept outside the purview of TDS provision as these are expenses, which does not fall within the ambit of works contract. In any event, purchase of immovable property, by an assessee from a developer, was otherwise for TDS at 1%. We therefore agree Ld.CIT(A) that the assessee was liable to deduct TDS. Assessee therefore cannot be exonerated from the charge of being ‘assessee in default’.

The alternative argument advanced by the assessee deserves to be accepted as the cost of the land cannot be considered to be liable for TDS along with the expenses incurred towards various permissions from the State Government.

Therefore the levy of interest u/s. 201(1A) of the Act, computed by the Ld.AO for A.Ys. 2013-14 and 2014-15 should exclude the payment made towards cost of the land and various approvals. We therefore do not find any infirmity in the view taken by Ld.CIT(A) in the appeals filed before us. In the result, all the appeals filed by the assessee stands dismissed. Order pronounced in open court on 22nd July, 2022.