ut | Awards | Blog | News Alert | Sswvardhmaan@gmailcom Search for Articles Q CONTRIBUTOR D @eo ARTICLE India: Applicability Of Sec 194-IC On Transfer Of Land Or Building Or Both Being Capital Asset 08 January 202 by Dhaval Wasson and Pratik Shinde ‘Your Linkedin Connection wth ee arors See 19441Cs a withholding tax provision wherein it specially deals with the deduction of tax at source hereinafter referred as "TDS") on transfer af land or building or both by resident (hereinafter referred as "Ac. In this connection, Sec 1941C of the Act reproduced in verbatim hereunder: 19410, Nowithstanding anything contained In section 194+4A, any person responsible for paying to resident any sum by way of consideration, not being consideration In kind, under the agreement referred to In sub-section (54) of ection 45, shall at the time of credit of such sum to the account ofthe payee or atthe Lime of payment thereof in cash or by issue of a cheque or drattor by any other made, whichever is earlier, deduct an amount equal to ten per cent of such sum as income-tax thereon. (on perusal of the language ofthe above provision it may be appreciated thatthe scope of section 194C of the Acts restricted towards the “specified agreement” referred in sec 45(5A) of the Actin ether words unregistered agreement is not covered within sec 45(SA) ofthe Act, than in uch circumstances sec 1944C of the Act becomes inoperative). Further, the transferor af land or building ar both must be resident, Accordingly, the relevant extract of sec 45(5A) ofthe Ac is reproduced hereunder (54) Notwithstanding anything contained in sub-section (1), where the capital gain arises to an assessee, being an individual or a Hindu undivided family, from the transfer ofa capital asset, being land or building or both, under a specified agreement, the capital gains shall be chargeable fo incame-tax as income af the previous year in which the ceriicate of completion forthe whale or part ofthe project i issued by the competent authority; and for the purposes of section 48, the stamp duty value, on the date of isue of the said certificate of his share, being land ar building or both inthe project as increased by che consideration received in cash, if any, shall be deemed to he the ful value of the consideration received or ‘accruing asa result ofthe transfer ofthe capital asset: Explanation For the purposes ofthis sub-section the expression |. "competent authority” means the authority empowered to approve the building plan by or under any be law forthe time being in force; speci agreement’ means registered agreement in which a person owning land or building or both, agrees to allow anather person to develop areal estate project on such land or building or both, Inconsideration ofa share, being land or buléing or both in such project, whether with or without payment of partof the cansiderston in cash; ‘stamp duty value" means the value adopted or assessed or assessable by any authority ofthe Government for the purpose of payment of stamp duty in respect ofan immovable property being land ‘or building or both (on conjoint reading of sec 45(5A) and sec 194C ofthe Act, can be falrly inferred that sec 45(5A) mainly deals with transfer of land or building or both being a "Capital Asset” and further, sec 45(5A) ofthe Acts the part of sec 45 of the Act which is governing provision of "Capital Gain’. Therefore, fany land or building or both which has been classified as stock in trade in the books of accounts, which has been transferred ‘subsequently, than in such circumstances the sald transaction is outside the ambit of sec 45(SA) ofthe Act ‘on account of not being a capital asset and accordingly, the payer (transferee) is not required to deductTDS u/s 194IC of the Act. Further, the legislature has also explicitly stated the abave discussed proposition in the "Memorandum to Finance Bill 2017" and on perusal ofthe said memorandum ican be safely inferred ‘that the purpose behind introduction of sec 194C in the Act iso cater the TDS requirement arises from the ‘transfer ofland or building or both being a capital asset u/s 45(SA) of the Act I may also be nated that on perusal of te language of sec 1944C ofthe Act can be perceived thatthe labilty co deauct TDS arises only when the transferor receives a part of consideration in “cash or by issue of a cheque or draft or any other mode". In other words, if there is absence of cash consideration under “specified agreement” than in such circumstances transferor is not required to deduct TDS us 194C of the Act. CONDITIONS FOR DEDUCTING TDS U/s 194.{C: If he following conditions are satistied cumulatively, than only the payer is required to deduct TDS u/s 1941C of the Act |-Transferor of land or building or both rust be resident individual or HUF i Land or Building or both must be capital asset. i Land or Bulling or both must be wansferred under "Specified Agreement’ referred uls sec 45{SA) of the Act (Le, reglstered agreement |v. Part of the consideration under "Specified Agreement” must be in “cash or by fssue of cheque or draft or any other made" I¥ any ofthe above mentioned conditions falls to satisfy, then in such circumstances the payer (transferee) is. not required to deduct TDS u/s 194-C ofthe Act. ‘Tabular summary to summarized the implication of sec 45(5A) and sec 19441 along with its interplay amongst ‘sec A5(SA) and various TDS provisions such as 194-18, 194IC and 195 of the Act are reproduced hereunder: ee eg a gob nt pide aa a awe Ti rie he ree nite bear aa ae nae Hier of fia cng eh r Aie emi “hse Sn pa | The content ofthis article is intended to provide a general guide to the subject matter. Specialist advice “should be sought about your specific cireumstances. AUTHOR(S) Dhaval uso Pratik shinde Dravel Vusonf Dhaval vussony Dew ‘Mondag's Pview eran Dhaval Shinde ussoni Monde Profle page Profle page ‘Abaus | flog | ContactUs | Contibunrs | fasshack | EeeNawcAlens | TACs | Uosubecbe | ervacy Samant