SKYTECH CONSTRUCTION PVT. LTD.,DELHI vs. ITO (TDS), NEW DELHI

Brief facts of the case are that the assessee, a real estate developer, purchased a plot of land on 29/07/2010 from the Noida Authority for development purposes for a total consideration of Rs.40,67,98,900/-, out of which, 10% being a sum of ₹ 4,26,79,890/-, was paid as allotment money and balance 90% was payable in 16 equal half yearly installments after a moratorium period of 24 months. The balance payment of 90% was bearing interest at the rate of 11% per annum. During the year under consideration, the assessee paid annual lease rent of ₹ 32,56,250/- to the Noida Authority. The Assessing Officer observed that the assessee had not deducted tax at source (TDS) on such lease rental payment and interest to the Noida Authority, accordingly, he passed order under section 201(1)/201(1A) of the Act, holding the assessee as assessee-in-default and demand was raised under section 201(1) and interest under section 201(1A) of the Act. The learned CIT(A) after considering various decisions of the Hon’ble Courts, held that assessee was liable to deduct TDS on the annual lease rent payment made to the Noida Authority.

Before us, the Ld. counsel of the assessee relying on the decision of the Rajesh Projects (India) Pvt. Ltd (supra) submitted that once the original demand under section 201(1) of the Act has already been deleted and thus, the assessee is no more assessee- in-default, the interest liability under section 201(1A) cannot be enforced upon the assessee. The Ld. counsel also submitted that in the subsequent order passed by the Commissioner of Income- tax (Appeals) on 12/09/2019 for assessment year 2011-12, he has deleted liability of interest under section 201(1A) in the case of the assessee and no further appeal has been preferred by the department against the said order of the Ld. first appellate authority.

On the contrary, the Ld. DR submitted that learned CIT(A) has followed the decision of the Hon’ble Delhi High Court in the case of Rajesh Projects (India) (P) Ltd (supra) and accordingly, retained the interest liability for non-deduction of tax at source, to be paid by the assessee. 5. We have heard the rival submission and perused the relevant material on record. We find that the Hon’ble Delhi High Court in the case of Rajesh projects (India) (P) Ltd (supra) has directed as under: “21. In view of the above conclusions, it is hereby directed that wherever amounts have been paid by the petitioners, towards TDS as a result of the coercive process used by the Revenue, the GNOIDA shall make appropriate orders to credit/reimburse such payments. In case payments are made through deposit, over and above the rental amounts paid to the GNOIDA, without TDS, the income tax authorities shall not pursue any coercive proceedings; GNOIDA shall duly reimburse the petitioners for such amounts. Any amounts deposited in the court or with the Revenue, shall, to the extent of TDS liability only be appropriated for such purpose. It is clarified that GNOIDA shall ensure that reimbursement is made to compensate the petitioners' excess payments; the income tax authorities shall not pursue any coercive methods for recovery of the amounts, or penalty, once the basic liability (with interest, to be paid by GNOIDA) is satisfied. The impugned orders are quashed; the Revenue shall make consequential orders, to give effect to this judgment, after duly hearing the petitioners and those likely to be affected, within 12 weeks from today.” (Emphasis supplied externally)

Thus, it is evident that Hon’ble Court has directed not to take any coercive method for recovery of the amount or penalty once the basic liability (with interest to be paid by the GNOIDA) is satisfied. In view of the direction, it is clear that if the tax on the under dispute lease rental income along with the interest has been paid by the deductee, i.e., GNOIDA, no recovery can be made from the deductor. In the light of the ratio of the decision, in the instant case, the NOIDA authority is required to pay tax as well as interest if any corresponding to the lease rental paid the assessee. However, if such tax and interest are not paid by the NOIDA, the assessee cannot be exonerated from the liability under section 201(1) and 201(1A). We find that in the instant case, the learned CIT(A) has deleted liability under section 201(1) of the Act but retained the interest liability under section 201(1A) of the Act. The first appellate authority in assessment year 2011- 12, has deleted the interest liability observing as under:

Thus, learned First Appellate Authority in assessment year 2011-12 has held that Noida Authorities are under an obligation to comply with the provision of the law relating to TDS and also for making all related payments. In our opinion, if the interest has already been paid by the NOIDA Authority on the lease rental income corresponding to payment of the assessee (i.e. Rs.32,56,250/-), no liability can be raised on the assessee u/s 201(1A) of the Act. This is a matter of verification and cannot be presumed. In view of the facts and circumstances, we feel it appropriate to restore this issue to the file of the Assessing Officer for verifying the facts of interest paid on the tax liability by the Noida Authority, corresponding to lease rental paid by the assessee, and decide the issue in accordance with law. It is needless to mention that the assessee shall be afforded adequate opportunity for producing all the relevant records and of being heard. The grounds raised