Section 194-IA of the Income tax Act, 1961 (Act), introduced vide Finance Act 2013, requires the buyer to withhold tax at the rate of 1% of the consideration or the stamp duty value (SDV) whichever is higher when the resident transfers the immovable property (other than agricultural land). Historically, there has been ambiguity regarding whether threshold of Rs. 50 lakhs under the section is to be considered in relation to the immovable property or the buyer.
In a recent case, four individuals collectively purchased an immovable property for a consideration of Rs. 1.26 crores, with each individual holding a 1/4th share and paying a sale consideration of Rs. 31.50 lakhs. The Assessing Officer (AO), considering the purchase cost of Rs. 1.26 crores, treated the assessee as being in default by applying the provisions of section 194-IA of the Act, and imposed fines under various sections of the Act.
The Hon’ble Jodhpur ITAT held that the provisions of Section 194-IA of the Act are applicable where consideration for transfer of an immovable property exceeds Rs.50 lacs. In the instant case, since, the consideration paid by the assessee is Rs.31.50 lacs, the provisions of Section 194-IA of the Act cannot be invoked.
Comments