V. Chitambaresh, J.

1. Is income tax liable to be deducted from the sale consideration at the time of transfer of an immovable property by a resident transferor ? The issue crops up frequently in the wake of parcels of land being purchased in lieu of land acquisition for the prestigious Kochi Metro Rail Project.

2. An extent of 1.61 Ares (3.98 cents) of land comprised in R.S.No.78/2-1 of Aluva West Village in Aluva Municipality belonging to the petitioner is being transferred to the Government for the Kochi Metro Rail Project. A district level purchase committee constituted for the purpose has negotiated with the petitioner as regards the price of the property and a consideration at the rate of ` 17 lakhs per cent is agreed upon. The petitioner has already produced the consent letter as well as the original documents including the title deeds, encumbrance certificate, tax receipt, possession certificate etc. to the Special Tahsildar (Land Acquisition) No.II. The petitioner is apprehensive of deduction of income tax and has filed the writ petition for a direction to disburse the whole of the sale consideration without any deduction what so ever. Reliance is placed on Infopark Kerala v. Asst. Commissioner of Income Tax [2008 (4) KLT 782] to contend that such deduction is warranted only when there is a compulsory acquisition.

3. The respondents do concede that income tax is not liable to be deducted under Section 194LA of the Income Tax Act, 1961 ('the Act' for short) when the price is fixed by negotiation and not through land acquisition. But the respondents maintain that tax is liable to be deducted under Section 194 IA of the Act effective from 1.6.2013 though not under Section 194 LA of the Act. The respondents point out that the property agreed to be transferred is not an agricultural land and that the sale consideration exceeds ` 50 lakhs attracting the rigour of Section 194 IA of the Act.

4. I heard Mr.M.M.Saidu Mohammed, Advocate on behalf of the petitioner, Mrs.Sobha Annamma Eapen, Government Pleader, Mr.K.Jaju Babu, Standing Counsel for the Kochi Metro Rail Corporation and Mr.Jose Joseph, Standing Counsel for the Income Tax Department.

5. Section 194 IA of the Act is as follows:-

“194IA. 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.

(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 purpose 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.”

6. Section 194 IA of the Act has been introduced with effect from 1.6.2013 by the Finance Act, 2013 in order to have a mechanism for reporting of transactions in the real estate sector and to collect tax at the earliest point of time. It provides that every transferee at the time of making payment of or crediting any sum as consideration for transfer of immovable property to a resident transferor shall deduct tax. Such deduction at the rate of 1% of the sum as consideration will be applicable only if the property is not an agricultur