TDS obligation under section 194IA is assessed based on individual transferor payments; if below the threshold, no TDS applies.

आदेश/ORDER

PER MAKARAND V. MAHADEOKAR, AM:

This appeal is filed by the assessee against the order dated 30.03.2023 passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “Ld. CIT(A)”], under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”], for the Assessment Year (AY) 2015–16. The appeal arises from the order of the Income Tax Officer, TDS Ward-1, Ahmedabad [hereinafter referred to as “AO”] dated 06.01.2022 passed under sections 201(1)/201(1A) of the Act.

Facts of the case:

2. The brief facts of the case, as emanating from the record, are that the assessee, an individual, had jointly purchased immovable property along with co-owners during the year under consideration. As per the information gathered by the TDS Wing, the assessee had purchased land situated at Survey No.196, Khata No. 430, at Village Shiholi Moti, Dist. Gandhinagar, for total consideration of Rs.1,23,67,360/-. The share of the assessee in the said property was Rs.53,67,360/-.

2.1. Based on this transaction, the AO initiated proceedings under section 201 of the Act for failure to deduct tax at source (TDS) under section 194IA of the Act. The AO issued notices to the assessee on multiple occasions including 11.08.2021, 07.10.2021 and 21.12.2021, seeking explanations along with copies of sale deeds and details of payment of TDS, if any.

2.2. In response to the notices issued by the AO, the assessee, vide letter dated 14.08.2021, submitted that the land purchased was agricultural land situated in Village Shiholi, Taluka Kalol, District Gandhinagar. It was stated that the land was purchased jointly and the share of the assessee in the total consideration of Rs.1,23,67,360/- was Rs.53,67,360/-. The assessee submitted that since the land is agricultural land, the provisions of section 194IA of the Act are not applicable. It was further submitted that since the payment to each seller was below Rs.50 lakhs, the provisions of section 194IA(2) of the Act would also apply, and therefore, no TDS was required to be deducted. Based on these grounds, the assessee contended that the provisions of section 194IA of the Act were not applicable.

3. The AO rejected the assessee’s claim that the land in question was agricultural in nature and therefore outside the purview of section 194IA of the Act. The AO referred to the letter dated 17.07.2021 issued by the Gandhinagar Urban Development Authority (GUDA), which confirmed that the subject land was located at an aerial distance of only 2.61 kilometers from the municipal limits of Gandhinagar. Further, the Assessing Officer noted that the assessee’s individual share in the total purchase consideration was Rs.53,67,360/-, which exceeded the monetary threshold of Rs.50,00,000/- as prescribed under section 194IA(2) of the Act. Accordingly, the AO held that the assessee was liable to deduct tax at source at the rate of 1% under section 194IA(1) of the Act. The AO rejected the assessee’s contention that no payment to any individual seller exceeded Rs.50 lakhs, observing that the statutory threshold under section 194IA of the Act applies with reference to the consideration payable by the transferee and not with reference to any individual share. Since no tax was deducted at source, the AO treated the assessee as an assessee-in-default under section 201(1) of the Act for failure to deduct tax.

4. The assessee preferred an appeal before the Ld.CIT(A). The assessee contended that the primary condition for the application of section 194IA of the Act, namely that the transaction involved transfer of an immovable property other than agricultural