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Income Tax Appellate Tribunal, DELHI BENCH ‘B’, NEW DELHI
Before: Sh. Kul BharatDr. B. R. R. Kumar
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the revenue against the order of ld. CIT(A)-2, New Delhi dated 27.06.2018.
Following grounds have been raised by the revenue:
“1. Whether on the facts and in the circumstances of the case and in law, the ld. CIT (A) is legally justified in deleting the disallowance of Rs.3,45,00,000/- made on account of non-deduction of TDS which is in violation of Section 40(a)(ia) read with Section 194-IA of the Income Tax Act, 1961 by the AO.”
Brief facts of the case are that the assessee filed its return of income on 30.11.2014 declaring an income of Rs.3,26,12,830/-. The assessee company is a joint venture
ITA No.6401/Del/2018 2 Caparo Power Ltd. company formed by Caparo Vehicle Products India Ltd. and Wartsilla. During the assessment proceedings, the assessee has advanced an amount of Rs.3,45,00,000/- to M/s Caparo Vehicle for purchase of land. The AO made addition of this amount paid by the assessee as no TDS u/s 194IA of the Income Tax Act, 1961 has been deducted.
The exact portion of the order of the AO is reproduced as under:
“4.8 In view of the above facts, the payment for land advance on which TDS has not been deducted u/s 194IA cannot be allowed. Hence, Rs.3,45,00,000/- is added back to the income of the assessee u/s 56(2)(viib) of the Act.”
Section 194IA reads as under:
“After section 194-I of the Income-tax Act, the following section shall be inserted with effect from the 1st day of June, 2013, namely:
“194-IA. Payment on transfer of certain immovable property other than agricultural land.— (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 as income-tax thereon.
ITA No.6401/Del/2018 3 Caparo Power Ltd. (2) No deduction under sub-section (1) shall be made where the consideration for the transfer of an immovable property is 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; (b) "immovable property" means any land (other than agricultural land) or any building or part of a building.”
Further, Section 40(a)(ia) reads as under:
“Section 40(a)(ia) (ia) thirty per cent of any sum payable to a resident, on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139 :
Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, thirty per cent of such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid :
Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201,
ITA No.6401/Del/2018 4 Caparo Power Ltd. then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the 38[resident] payee referred to in the said proviso.
Explanation.—For the purposes of this sub-clause,—
(i) “commission or brokerage” shall have the same meaning as in clause (i) of the Explanation to section 194H; (ii) “fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9; (iii) “professional services” shall have the same meaning as in clause (a) of the Explanation to section 194J; (iv) “work” shall have the same meaning as in Explanation III to section 194C; (v) “rent” shall have the same meaning as in clause (i) to the Explanation to section 194-I; (vi) “royalty” shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;”
In nutshell, the AO disallowed an amount of Rs.3.45 Crores paid as advance for purchase of property by the assessee for not deducting TDS u/s 194IA and added this amount to the income of the assessee u/s 56(2)(viib) while at the same time referring to the provisions of Section 40(a)(ia).
Such action of the AO cannot be upheld as the provisions of Section 40(a)(ia) are applicable only to the expenditure claimed while computing income under the head “profit and gains of business or profession” of the Income Tax Act, 1961. In this case, this amount has not been claimed as expenditure being the amount paid as advance for acquisition of a capital
ITA No.6401/Del/2018 5 Caparo Power Ltd. asset. Further, we also find that the provision of Section 56(2)(viib) would not be attracted even remotely in this case. The order of the ld. CIT (A) is affirmed.
In the result, the appeal of the revenue is dismissed. Order Pronounced in the Open Court on 24/08/2021.
Sd/- Sd/- (Kul Bharat) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 24/08/2021 *Subodh* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR