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Facts
The assessee purchased immovable property and deducted TDS based on the consideration value. The AO, however, used the stamp duty valuation to calculate a higher value and made a disallowance under Section 40(a)(ia) for short deduction of TDS. The CIT(A) confirmed this disallowance.
Held
The Tribunal held that Section 40(a)(ia) is not applicable because the cost of the immovable property was not debited to the Profit and Loss account. The AO incorrectly fastened TDS liability on stamp valuation rather than the actual payment made.
Key Issues
Whether disallowance under Section 40(a)(ia) can be made for short TDS deduction on immovable property purchase when the cost is not debited to the P&L account?
Sections Cited
40(a)(ia), 143(3), 194IA
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Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI
Before: SHRI SS VISWANETHRA RAVI & SHRI JAGADISH
आदेश / O R D E R
PER JAGADISH, A.M : Aforesaid appeal filed by the assessee for Assessment Year (AY) 2016-17 arises out of the order of Learned Commissioner of Income Tax, Appeal, Addl/JCIT(A), Prayagraj [hereinafter “CIT(A)”] dated 05.12.2024 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Income-tax Act, 1961 (hereinafter “the Act”) dated 08.08.2019.
The effective ground of appeal raised in this appeal of assessee is against confirming the disallowance of Rs. 57,83,700/- u/s. 40(a)(ia) of the Act for non deduction of TDS in respect of purchase of immovable property.
3. The assessee-company has purchased immovable property comprising land and building for a consideration of Rs.9,35,00,000/- and deducted TDS @ 1% u/s. 194IA of the Act. However, the Assessing Officer (AO) observing that the stamp duty valuation of the property was Rs.11,27,79,000/-., the assessee should have deducted TDS u/s 194IA on such value , made disallownces on the difference of Rs.1,92,79,000/- @ 30% of the amount u/s 40(a)(ia) of the Act, for short deduction of TDS. Aggrieved, the assessee preferred an appeal before the Ld. Addl. CIT(A). On appeal, the Ld. Addl. CIT(A) had confirmed the disallowance.
The Ld. Authorized Representative (A.R) of the assessee has contended that the provisions of Section 40(a)(ia) of the Act are not applicable in the present case as the immovable property has not been debited to the Profit and Loss account and claimed as expenditure.
Therefore, there is no question of disallowance u/s.40(a)(ia) of the Act.
The Ld. AR further argued that Section 194-IA of the Act applies only on the actual consideration paid, and not on the stamp duty value of the property. It was also submitted that the Departmental Valuation Officer (DVO) had subsequently valued the property at Rs.9,42,77,300/-, thereby demonstrating that the stamp duty valuation used by the AO was arbitrary.
On the other hand, the Ld. Departmental Representative (DR), has relied on the orders of lower authorities.
We have heard the rival submissions, and perused the materials available on record. We find that the A.O has made disallowance of Rs.57,83,700/- u/s. 40(a)(ia) of the Act, being 30% of the difference between the stamp duty valuation and the actual purchase consideration. However, it is evident from the Profit and Loss account that the cost of the immovable property has not been debited to the P&L account. Therefore there is no occasion for disallowances of such cost u/s.40(a)(ia) of the Act. The A.O has completely misdirected himself on fastening TDS liability u/s 194IA on stamp valuation of the property rather than on actual payment made. We are in complete agreement with the submissions of the Ld. AR that disallowance u/s. 40(a)(ia) of the Act cannot be made in respect of balance sheet item not routed through the P&L account. In view of the above, we reverse the order of the Ld. Addl. CIT(A) and delete the disallowance made by the AO.
In the result, the appeal filed by the assessee is allowed.
Order pronounced on 08th May, 2025.