25December

13 April 20182018

In the case of joint buyers, the tax is not required to be deducted if the
individual's share in a purchase consideration to acquire an
immovable property does not exceed INR50 lakh

Background
The Finance Act, 2013 introduced Section 194-IA in  The Assessing Officer (AO) contended that the
the Income-tax Act, 1961 (the Act) with effect from 1 total purchase consideration payable to a
June 2013 wherein the transferee making payment resident transferor for transfer of immovable
on the transfer of certain immovable property other property exceeded INR50 lakh and hence each
than agricultural land, is responsible to deduct tax at taxpayer is required to deduct tax at the rate of
source at the rate of 1 per cent. Further, where the
1 per cent as per Section 194-IA of the Act.
purchase consideration paid by the individual buyer
in case of joint acquisition of immovable property is
less than INR50 lakh, the tax is not to be deducted  In view of the same, the AO has called for
under Section 194-IA of the Act. specific information under Section 133(6) of
the Act for which taxpayers have clarified that
Recently, the Delhi Bench of the Income-tax the individual share of consideration is less
Appellate Tribunal (the Tribunal) in the case of than INR50 lakh.
Vinod Soni and others1 (taxpayers) held that in the
case of joint buyers, Tax Deducted at Source (TDS)  The AO further contended that the total
provisions under Section 194-IA of the Act shall not consideration was more than INR50 lakh and
apply in case the share of purchase consideration the transfer was effected by a single purchase
paid by the individual transferee is less than INR50 deed. Based on the same, the AO opined that
lakh.
TDS provisions were applicable for individual
taxpayers, and each taxpayer is required to
Facts of the case deduct tax in spite of the individual share in
 The taxpayers had jointly purchased an consideration was less than INR50 lakh.
immovable house property on 3 July 2013 for a
total consideration of INR150 lakh, and the  The AO issued a common demand notice to all
share of consideration pertaining to each the joint buyers for the payment of TDS in
taxpayer is INR37.5 lakh. addition to the interest payable by invoking the
provisions under Section 201(1) and Section
 The respective share of consideration has been 201(1A) of the Act for non-deduction of taxes.
made by the taxpayers from their individual
bank account.  The Commissioner of Income-tax (Appeals)
[CIT(A)] has passed an ex-parte order by
dismissing the appeal of taxpayers and upheld
the additions made by the AO.

 Aggrieved, the taxpayers filed an appeal

before the Tribunal.
_____________
1
Vinod Soni and others v. ITO (ITA No. 2736/Del/2015) – Taxsutra.com

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International”), a Swiss entity. All rights reserved.
 Tribunal’s decision
 The Tribunal observed that each transferee has
an equal share in the property and the payment
of the individual share was made by the
respective taxpayer from their respective bank
accounts.

 Each transferee is a separate individual, and

hence the purchase consideration paid by each
transferee shall be the determining factor for the
applicability of Section 194-IA of the Act.

 Whether a single purchase deed was executed

for the purchase of property by four joint buyers,
or four separate purchase deeds were executed
separately by four buyers, does not change the
nature of the transaction. The law cannot be
interpreted and applied in two different ways for
the same transaction.

 Accordingly, TDS provisions were not

applicable on the purchase consideration paid
by each taxpayer, which was less than INR50
lakh. With respect to interest under Section
201(1), the same was consequential in nature
and hence not applicable in the instant case.

Our comments
The applicability of Section 194-IA of the Act with
regard to deduction of tax at source on property
transactions has been a matter of debate.

The Tribunal in the instant case has held that

Section 194-IA of the Act should be interpreted from
the transferee’s perspective and hence the limit of
INR50 lakh shall be with respect to the purchase
consideration paid by each transferee and not on
the entire consideration payable to the transferor.

Accordingly, in case of joint acquisition of property,

where the total purchase consideration is more than
INR50 lakh, the applicability of TDS shall be
determined based on each transferee’s share in the
purchase consideration.

Though the decision has been rendered by the

Delhi bench of the Tribunal, adoption of the same in
other jurisdictions could be evaluated on a case-to-
case basis.

© 2018 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
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