Saturday, May 4, 2013

Old Caselaw- to be dumped in dustbin ; TDS WOES -continues persistently, with no remedy still in sight >

TDS on service tax portion of 'fees paid' - depends on what contract says !


Assessment of Builders And Developers

A Useful Compilation of Decided Cases ...

II .....Ans. As per Maharashtra Co-op. Societies Act, 1960, a Co-operative Society cannot distribute the corpus funds to its Individual member, it can only declare dividends.
However, the declaring of Dividends has lots of restrictions and formalities.
Liability of Income Tax, if any, on interest income arising from investment of such Corpus Money by the Society/individual members in the Co-operative/other Banks.

<Ans. If the Society receives interest income form a Co-operative bank then the same is exempt from tax.
And, if the interest income is received from other banks than the same is taxable and the Society has to pay tax on the same.
However, as per recent Hon’ble Tribunal Judgment in the case of ITO v. Sagar Sanjog C.H.S. Ltd., ITA Nos. 1972 to 1974 and 2231 to 2233/ Mum./ 2005(BCAJ) it was held that the interest income earned out of the fund money invested went to reduce the maintenance. According to the tribunal, the interest would have been taxable, had there been surplus left after it being adjusted against the maintenance expenses. The tribunal also noted that there was nothing on record to suggest that the interest income would be given to members on dissolution of the Society.
Thus, even the interest income received from other than Co-operative Bank and spent on Society’s work then the concept of Mutuality will apply and is not liable to tax but this view is not free from litigation.>


The longish write-up, on a quick reading, has to be commended ; as it makes for a painful compilation of decided cases  on the topic.
Might serve the useful purpose as a ready and quick reference for anyone concerned,
Under item II, among others, the concept of 'mutuality' invokable for claiming tax exemption by a housing society has been covered. In that context, reference has been made to a  itat order in favor of assessed. However,  subject to a reading thereof, to say the least, the implications of the recent verdict of the SC * on a closely related issue in re. a members' club in Bangalore requires to be kept in full view and given due consideration.
* » M/s Bangalore Club vs. CIT (Supreme Court Latest ...



(AT News- Old Blog)

Direct Tax legislation mandatory furnishing of the Tax identification number by buyer and seller if immovable property if the value exceeds Rs 5Lakh:
The current provisions of the direct tax legislation provide for mandatory furnishing of the tax identification number by the buyer and seller of an immovable property if the value exceeds Rs 5 lakh. Also, every registry of property is required to furnish annually information regarding transactions in immovable property if the value exceeds Rs 30 lakh. However, as many registrar offices still operate on a manual system, there are a number of gaps and lapses in the reporting of such transactions.
To deter element of black money in immovable property deals focus on actionable intelligence by monitoring agencies and simple reporting system:
To reduce the element of black money in transactions relating to immovable property and facilitate focused action based on actionable intelligence by monitoring agencies, simple reporting systems can be evolved that will facilitate the development of a nationwide database. Such a database should be computerdriven with minimal interface between the authorities and the people, and accessible to all financial regulatory authorities.
One of the measures for deterring use of the real estate sector for generation and investment of black money could be the provision of deducting tax at source on payments made on real estate transactions and mandating it as a pre-condition for registering of the transacted property. The provisions of tax collected at source on the developers of the property can also be considered as a possible policy measure. Electronic payment and electronic reporting can mitigate the compliance burden.
Further, to reduce the element of black money in transactions relating to immovable property, the provision of no objection certificate (NOC) may be introduced in the income tax law with safeguards to reduce administrative complications and increased ease of compliance, so that an appropriate and uniform database is set up and a proper national-level regulation also put in place. The new system should be computer-driven with minimal interface between the tax authorities and taxpayers, and enforced by a dedicated unit within the investigative machinery of the income tax department on the basis of pre-determined parameters and standard operating procedures.

2nd Aug


Section 194 IA – A Write-up - Tax India › In Income Tax | Articles  Section 194IA  TDS

Section 194 IA – A Write-up - CAIndiaGroup..
19th July

<To review

18th JUly

It is not mandatory for all real estate developers to workout their profits by following percentage of completion method as prescribed by ICAI under AS-7
In the instant case the assessee was engaged in the business of developing and selling real estate projects. It filed nil return of income for both the assessment years 2008-09 and 2009-10, by adopting Project Completion Method. During assessment, the AO rejected the assessee's accounts on the ground that it hadn’t followed AS-7 for recognition of revenue as per which income was to be deduced on the basis of Percentage Completion Method. The AO, accordingly, computed the profit on percentage completion method and completed the assessment. Further, CIT(A) upheld the action of action of AO.
On appeal, the Tribunal held in favour of assessee as under:
1) The assessee maintained complete books of account, which were duly audited by qualified Chartered Accountants. It had also maintained its account on mercantile basis by regularly applying Project Completion Method. The assessee had been consistently following the same method. The auditors had reported no change in method of accounting adopted by the assessee;
2) The real estate developers are not pure contractors but are sellers of flats or goods. It is not mandatory for all real estate developers to follow Percentage Completion Method as per AS-7 prescribed by ICAI. The AS-7 recognizes the position that in the case of construction contracts the assessee could follow either the Project Completion Method or Percentage Completion Method.;
3) The Apex Court in the case of CIT v. Hyundai Heavy Industries Co. Ltd., [2007] 161 Taxman 191 (SC) also took the similar view and held that both the methods of accounting ( i.e., Project Completion Method and Completed Contract method) were recognized methods of accounting. The assessee was at liberty to choose any of the above methods and if any one of the method of accounting was consistently followed by the assessee, the AO couldn’t change such method of accounting;
4) The completed contract method followed by the assessee, in the instant case, therefore, could not be faulted with by the revenue authorities and on that basis it was not correct to say that the accounts of assessee did not present correct and complete picture of its profits;
5) Therefore, there was no justification in rejection of accounts by application of provisions of section 145(3) and changing the method from project completion to percentage completion method by the AO, which was upheld by the CIT(A). Therefore, the order of the Commissioner (Appeals) was to be set aside - KRISH INFRASTRUCTURE (P.) LTD. V. ACIT [2013] 35 38 (Jaipur - Trib.)

Recent Circular >

CBDT Instructions On S. 143(1) Intimations And S. 154 Rectifications

Who To Monitor ?

 Court on Its Own Motion vs. UOI 352 ITR 273

  CBDT Instruction Nos. 03 & 04/2013 dt. 05.07.2013 (185.1 KiB, 983 hits)


For a detailed write-up since posted @taxguru, click HERE >

Spl. Ref.
< To contradict

Pallonji Shapoorji and Co P Ltd Versus Deputy Commissioner of Wealth tax - [2006 6 TMI 469 ITAT MUMBAI] - Case Law - Wealth tax

xcerpts >

52. In the present case, the land is registered in the name of society. The building was also constructed by it. Further, property tax is levied on the society, water supply bill, electricity bill and insurance policy of the premises are in the name of society. Considering these facts coupled with the legal position discussed in the preceding paras, we answer the question in favour of the assessee by holding that the flat occupied by the assessee continues to belong to society and, therefore, the value of the same cannot be included in the net wealth of the assessee-company.

Sections of WTA ACT

S 4

92[(7) Where the assessee is a member of a co-operative society, company or other association of persons and a building or part thereof is allotted or leased to him under a house building scheme of the society, company or association, as the case may be, the assessee shall, notwithstanding anything contained in this Act or any other law for the time being in force, be deemed to be the owner of such building or part and the value of such building or part, shall be included in computing the net wealth of the assessee; and, in determining the value of such building or part, the value of any outstanding instalments of the amount payable under such scheme by the assessee to the society, company or association towards the cost of such building or part and the land appurtenant thereto shall, whether the amount so payable is described as such or in any other manner in such scheme, be deducted as a debt owed by him in relation to such building or part.
(8) A person—
 (a) who is allowed to take or retain possession of any building or part thereof in part performance of a contract of the nature referred to in section 53A93 of the Transfer of Property Act, 1882 (4 of 1882) ;
 (b) who acquires any rights (excluding any rights by way of a lease from month to month or for a period not exceeding one year) in or with respect to any building or part thereof by virtue of any such transaction as is referred to in clause (f) of section 269UA of the Income-tax Act, 1961 (43 of 1961),
shall be deemed to be the owner of that building or part thereof and the value of such building or part shall be included in computing the net wealth of such person.]

92. Sub-sections (7) and (8) substituted for sub-section (7) by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997. Prior to its substitution, sub-section (7), as inserted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972, read as under :
 "(7) Where the assessee is a member of an association of persons, being a co-operative housing society, and a building or a part thereof is allotted or leased to him under a house building scheme of the society, the assessee shall, notwithstanding anything contained in this Act or any other law for the time being in force, be deemed to be the owner of such building or part and the value of such building or part shall be included in computing the net wealth of the assessee; and, in determining the value of such building or part, the value of any outstanding instalments of the amount payable under such scheme by the assessee to the society towards the cost of such building or part and the land appurtenant thereto shall, whether the amount so payable is described as such or in any other manner in such scheme, be deducted as a debt owed by him in relation to such building or part."

(8) A person—
 (a) who is allowed to take or retain possession of any building or part thereof in part performance of a contract of the nature referred to in section 53A93 of the Transfer of Property Act, 1882 (4 of 1882) ;
 (b) who acquires any rights (excluding any rights by way of a lease from month to month or for a period not exceeding one year) in or with respect to any building or part thereof by virtue of any such transaction as is referred to in clause (f) of section 269UA of the Income-tax Act, 1961 (43 of 1961),

  1. Finance (No. 2), Act, 1996 4. - Income Tax Department

    I. Rate of income-tax in respect of incomes liable to tax for the assessment year 1996-97. Finance (No. 2), Act, 1996. 4. In respect of incomes of all categories of ...
  1. The Finance (No. 2) Bill, 1996 - Indian Kanoon

    (1) This Act may be called the Finance (No. 2) Act, 1996 . (2) Save as otherwise provided in this Act, sections 2 to 58 and section 88 shall be deemed to have ...

  3. <Amendment of provisions regarding inclusion of
  4. certain assets in the net wealth

Under the Wealth-tax Act, specified assets are includible in the wealth of
a legal owner. An exception to this general rule is in cases where a building
or a part thereof is allotted or leased to a member of a Co-operative Housing
Society under a house building scheme of the society. The member is deemed to
be the owner of such building or part thereof. The corresponding provisions,
dealing with similar situations, in the Income-tax Act, are found in clause
(iii), clause (iiia) and clause (iiib) of section 27 of that Act. These
clauses deem the beneficial owner to be the owner for the purpose of taxation
in the following situations:-

(i) a member of a co-operative society or a company or any association of
persons, to whom a building or part thereof is allotted or leased under a
house building scheme of the society or the company or the association, as
the case may be,

(ii) a person who is allowed to take or retain possession of any
building or part thereof in part performance of a contract of the nature
referred to in section 53A of the Transfer of Property Act, 1882,

(iii) a person who acquires any rights, excluding any rights by way
of a lease from month to month or for a period not exceeding one year, in
or with respect to any building or part thereof, by virtue of any such
transaction as is referred to in clause (f) of section 269UA of the
Income-tax Act.

In order to bring harmony in the provisions under the Income-tax Act and
Wealth-tax Act, any building or part thereof should be taxed in the hands of
the beneficial owner of such building, as understood under clause (iii) or
clause (iiia) or clause (iiib) of section 27 of the Income-tax Act. This
amendment, therefore, seeks to amend section 4 so as to tax the aforesaid
assets in the hands of beneficial owners, in the same manner in which they are
taxed under the Income-tax Act. The amount payable to the co-operative
society or company by the assessee in relation to such property shall be
allowed as a debt.

This provision shall come into force with effect from 1st April, 1997 and
will, accordingly, apply in relation to assessment year 1997-98 and subsequent
years. [Clause 55]
  • The provisions in the Finance (No.2) Bill, 1996, in the sphere of direct taxes relate to the following matters:- (i) Prescribing the rates of income-tax on incomes ...
      Earlier >

      Is it not high time that the shock and anguish expressed by the judiciary,- though this is not the first time it has happened but has been happening again and again,  in recent times, -to be felt by/impacts  the Tax Dept., turns to be sentive and resort to remedial measures , immediately- if it be late, than never ?
      27th June

      25th June

      TDS on Transfer of Immovable Property u/s.194-IA of Income-tax Act, 1961

                                 Courtesy: RSM Astute Group (
                                 Kindly email your queries to

      Yet another Article from Dr....
      • The tax has to be deducted at the rate of 1% even if exemption is claimed by the Seller under Section 54,54EC, 54F, 54GB of the IT Act, on reinvestment of the sale proceeds or the capital gains as the case may be.
      The term ‘immovable property’ means any land (other than agriculture land) or any building or part  of  building.

      In one's perception, nay frank view, this is one more of the several 'run of the mill' kind of write-ups. It would have been useful to the readers had an attempt been made by the learned Doctor at adding value by covering certain areas remaining uncovered. So as to  providing the most needed and urgently called-for clues or guidance to the readers on some of the worrisome aspects on which the provision is prima facie very much lacking in clarity. 

      Topping them all is the grave doubt on as to why the provision , in its present terms, must be considered to have application to, hence  warrant to be complied with, in cases where the transfer is of 'unit' of a building comprising "Flats" or "Apartments"; which, based on genuine reasons , backed up by  sound logic, is, as could be stressed, not to be rightly regarded as covered by the extant wording, - "part of building". In the comments posted elsewhere on this website sincere efforts have been made to underline/drive home the point why there arises such a grave but reasonable doubt crying for an eminent answer  and useful guidance to the concerned tax payers who choose to abide by the rules as far as feasible; provided, of course, they are clear-cut and do not suffer from any such glaring lacuna or loophole as brought to the fore.
      Even the Revenue , as has never been known to be otherwise, appears to have thus far preferred to lie low and remain mute, thereby creating an impression that all is well with the new provision; and that there is no lacuna(e) or loophole to be plugged in, on the mentioned aspect. So much so, none, be it the tax paying community or advising professionals are no wiser but obliged to continue in a ‘trishanku’ like situation.
      (Left un-edited; as, in any case, the comments are mainly addressed to those who have the expertise and competence , also the mind and time to painstakingly examine in-depth the focussed area of controversy)

      18th June

      Top Executive >

      India Will Have The Best Tax Regime In The World: New CBDT Chief

      @Nem Singh

      While echoing his sentiments, one is provoked to hasten and add an open Appeal, in the larger public interests:

      As is being canvassed and reiterated in concerned quarters , the CBDT will , living up to the sincere expectations, do well to immediately act on, besides others, the following two matters, of common concern, on a top priority basis:

      1. As is common knowledge, in the wake of, and following, the Delhi HC’s writ of Mandamus, there has been an unprecedented heavy rush and workload in the Department, particularly in core centers e.g. cities like Bangalore. That is mostly because of enormously huge number of assessees’ applications made but pending for rectification. Many, as gathered, are against patently infructuous and frivolous demands, mindlessly raised by AOs / CPC by reason of no credit or proper credit having been allowed for taxes paid by way of TDS. According to information, the fate of many of the applications so made has not been made known to the assessees, hence worried not having been sent any communication, whatsoever . Further, no confirmation of cancellation of the demand is heard to have been sent; not even in known cases where, based on the explanations and data provided by assessees, such demands deseved to have been cancelled forthwith.

      2. In the recently introduced section 194 IA, supposed to be in effect from April 1, 2013, as pointed out and urged in certain quarters , including the affected Realty Sector, there are lacunae requiring the necessary correctives to be plugged in, for the Department to expect the requirement to be strictly complied with. Among them, one grave doubt is on the very basic question, – as to whether the provision, in its present terms / wording, has application to cases of transfers of “units” of a building comprising “flats” or “apartments”. Albeit, one's guess is, that is the type of transactions intended to be mainly targetted. In one’s impartial view, the cogent reasons given and the sound logic behind, for urging prompt action / clarifications, are not-so-difficult as not to be readily noted; and the validity thereof appreciated.

      It is hoped on hopes, the newly appointed madam-chief of the top Executive Authority (CBDT) would , as indicated, bring in a new-look to the functioning of the Department; and primarily, a welcome change for the long desired / clamoured for but pending tax-payers-friendly environment. Reference, of course, is to the mentioned, – “the only about 3.5 crore assesses, a mere 2.9% of the national population”).

      <> KEY NOTE: The several write-ups authored by professsionals at large, mainly CAs, who have merrily been engaged in the pastime of dealing with the new TDS requirement, are invariably bent upon following a ‘beaten track’, and, on more than one aspect. Topping them all, is the term “part of a building” , which, it appears, is presumed to be wide enough to rope within its ambit, also ‘units’ (Flats or Apartments). In doing so, the viewponts stressed and put across , with supporting logic and reasoning, to counter and urging why nothing can be more wrong, seem to have been glossed over, and not been accorded any serious thought.

      Even the Revenue , as has never been known to be otherwise, appears to have thus far preferred to lie low and remain mute, thereby creating an impression that all is well with the new provision; and there is no lacuna(e) or loophole to be plugged in, on the mentioned aspect. So much so, none, be it the tax paying community or advising professionals are no wiser but obliged to continue in a ‘trishanku’ like situation.

      In consequence, no option except to take one’s choice; and wait for that d’day when any further development comes along and brings about a rude awakening. That may or not happen at all; in any case, seems unlikely in the foreseeable future. Not to worry ; historically, the pattern of events are not remembered to have ever been any diffrerent.


      Cross Refer>

      17th June

      Tax Deduction on Purchase of Immoveable Property

      A daring atempt by a CA, a student at that, to "oversimplify" the law ! Prima facie preposterous ?
      < ".... The property may be in the nature of land, buildings or flats. However, the deduction...."

      " Such TDS would be deducted irrespective of who the seller is. whether a builder or a flat owner making a sale. ...."

      "....not required to comply with the cumbersome TDS procedural requirements applicable to other TDS deductors, such as obtaining a Tax Deduction Account Number, filing a TDS return, issuing a TDS certificate, etc. All that he is required to..."

      (Compiled by ‘Prateek Manocha’ A Student of Institute of Chartered Accountants of India)

      $ The crucial term "part of a building" has been read by the would-be CA to mean  "Flat" ?

      KEY NOTE: No doubt, if a layman were simply asked (e.g. an architect or a mason, even if he were truly (to the core) an expert in building construction), his abrupt answer could be expected to be no different. Be that as it should, the points of genuine doubt raised, are not without substance, as may be readily noted from the elaborated aspects. Hence, those require to be necessarily examined, having due regard to what the law "in terms" actually and fasctually provides. It will, thererfore, to put it mildly, not be prudent to form or go by any view put across , which has no reasoning or logic advanced to support. As such, it is strongly advisable is to either make a representation to the Revenue asking for a clarification, as is warranted , and /or seek and obtain an independent detailed oipoion of a law expert, before deciding whether need to comply or not.

      In gist : To emphatically say, founded on one's own courage of conviction: - It is a sad commentary,- wisdom has ostensibly failed to be gathered , unwittingly or otherwise, even in hindsight; that is, in not making a conscious note of and / or not keeping in sharp focus the most important thing of all- namely, the legislatve history of the 'law'- the provisions drawn pointed attention to; particularly, in so far as it is of direct relevance and has special application to the concept of "FLAT", being of a comparatively recent origin, a stranger to the tax law before.

      But, certainly, not so recent as to justify or permit any plea of ignorance thereof, until now; especially, if it be a feigned ignorance. 

      In this context, looking back, in the KLJ pulication (2003) - A HANDBOOK ON TAX PRACTICE, the peculiar characteristics of the property in the form of 'flat', being a unit of a building, and the changes brought in (clauses (iii) and (iiib) newly inserted ), to rope it in for taxing the holder as "deemed owner",  have been dealt with - ref. pages 61, 62, 63. 

      @SG the wld-be CA is noted to be on the same wave length,  hence in good company with the EXperts  @LCi -read here > Click here to view the reply

      < In Sec. 194-IA "immovable property" has been defined to mean "any land (other than agricultural land) or any building or part of a building."
      One can argue that a "Flat" is not a building. But can anybody say that it is not part of a 'building'? One it is a part of a building, will not get covered under the definition of immovable property? If it gets covered under that definition, will not one obliged to effect TDS under Sec. 194-IA?>

      Debates /arguments are thus bound to go on, and on, and on eternity- any doubt ?

      Recommend to Read the Zen Stories; for instance:

      16th June


      The new write-up of CA , it is noted, provides no help or guidance to the readers on the intricate point raised (see below)



      @s bajaj
      Suggest that in the interest of one and all concerned, it may be worthwhile to have his own thoughts analysed and reviewed in-depth; so as to come to a conclusion in proper light. For, in one’s considered but independent view-points, better view  would be  that section 194IA, in its present terms, particularly having regard to the special definition vide the Explanation there under, the requirement of TDS  cannot be regarded to apply to a transfer of  ‘apartment’ or ‘ flat’; as it could be forcefully urged that, in the context of the extant law,  it is a ‘unit’ of a building- not a “part of a building”. For an elaboration thereof, refer the contents of the personal Blog @
      In short, buyers, individually , or cllectively through a proper forum, should seek and obtain a categorical  pronouncement from the Revenue; or better, and in the alternative, obtain and be armed with, for sake of defence, a written opinion from a competent lawyer , with exposure and experience in not only Taxation but also in Property Law ( especially, the special state law governing  Flats /Apartments).

      That should, it is earnesly believed, save the buyers from the otherwise possible, nay inevitable, unsavoury idomatic consequence of, - they falling between two stools.
      June 13

       Property buyers in Bangalore, have first pay up TDS

      June 12
      TOI et al

              Times of India ‎-  
      “....on transfer or sale of immovable property (MAINLY LAND OR HOUSE) other than agricultural land.....” (bold Font supplied)
      Reading in between lines, ?!

      Jan 10

      Is There No Respite From The Dept’s TDS And Refund Harassment?

      (Click Here To Read More)

      <><> In one’s understanding, reflecting on the Delhi HC’s judgment /writ , there has been an alarmingly increasing tendency on the part of the lower authorities not to strictly follow/abide by not only what the law unequivocally declares / mandates on several related matters, but also the supposedly binding directives, notifications, circulars issued by the government (i.e. the Finance Ministry or the CBDT, the highest empowered executive authority). In this scenario, there is a growing worrisome recalcitrant behavior on their part to by -pass or neglect even courts’ orders, in the form of mandamus.

      In one’s view, there is an urgency to consider how best the government can try and bring about at least semblance of discipline among its appointed authorities. Though commented in a different context, perhaps, it might be worthwhile to accord a serious consideration to the course of action impliedly suggested as under:

      < IN the changed circumstances, it is not the governing bodies (government, ministries and or their empowered administrative authorities (CBDT being the highest of them)) who could be expected to effectively take on and tackle the menace faced by the governed; or rightly be regarded as truly answerable. But, who must be regarded to be so answerable is every one of the lower authorities, - say, down from the level of CITs , as are entrusted with the duties and responsibilities as a 'public servant' , and directly responsible to implement and enforce what any ‘rule of law’ in its profound sense provides or mandates. Digressing for a while, for instance, in the income-tax regime, who must be questioned for eliciting an upright answer, is the assessing officer, he being the authority at whose level respect for the law, through implementation /enforcement of any statutory provision, both in its letter and spirit, is expected to begin. What inevitably to be asked is, - in case of any failure, be it blatantly or otherwise  gross, flagrant , or the like, on his part to do so. The poser for a serious deliberation and fitting action is this, - is it not he i.e. any erring officer, who must be visited with appropriate ‘personal’ action. For, immunity or protection from personal action could, after all, be rightly claimed only if he has , and proves to have, acted "in the performance of his duties” in the profound sense, as envisaged by the law governing "Public Servants"; not if he has failed to so perform ! For an appreciation in proper light, anyone so minded may have to go through the material galore available on websites , on the prevailing tragic state of affairs - e.g. in the realm of 'TDS' regime.

      Above thoughts are intended to be shared, with a view to provoking like-minded others to do likewise, and openly come out with sane and fruitful ideas- solely with the avowed aim of  betterment of the law and order scenario; sooner than later, before the situation gets still worse.

      (Unedited / not elaborated- leaving it for anyone truly interested to do so)>


      June 8

      June 6

      Apollo Tyres Ltd vs. DCIT (ITAT Cochin)

      No s. 40(a)(ia) disallowance for default of short-deduction of TDS

      (Click Here To Read More)

      On a reading of the order, particularly paragraph 13, the issue is seen to have been decided in assessee’s favour, in effect on the ground that there is an omission on the part of the legislature to ensure that the two referred provisions are mutually compatible and consistent.
      If the legislative history were to be given a close look, this, perhaps, is not a solitary instance but just one in a series of its kind. What is deplorable is the fact that such issues have come to be raised time and again, and led to prolonged disputes and court litigation; thereby proving an irritant both to taxpayers and adjudicating authorities. To recall, one of the rudimentary principles of jurisprudence, well settled by case law, is that in a taxing enactment, nothing must be read in or implied. Even so, one will find that is the very rule often broken ; butchered and made a casualty by assessing officers dictated by own whims and fancies.
      The instant case brings to one’s mind a closely related provision of a later origin; that is, section 200A, and the new insertions in section 201, after sub-section (2). On a tentative study, one’s irresistible feeling is, that the said provisions do not cover, adequately or otherwise, all possible situations giving rise to excess or short TDS, and for whatever reason. So much so, seem to bristle with immense scope for problems, and potentials for disputes and a right royal legal battle..
      For a clue : Section 200A talks of computerised processing of TDS statement (s) made by the deductor, But that concerns itself to such statement(s) on record for any one year. In a case where any incorrect particulars are furnished in that year’s statement , but not having been detected hence left to be reflected in that year’s statement, there appears to be no way for making any such ‘adjustments’ as envisaged in section 200A (1)- (a) and/ or (b) in a later year.
      Not all said, over to the supposedly well equipped stalwarts and experts in practice, who could better identify and consider in-depth all such areas; also follow-up by representing to the government for appropriately effective correctives in a wholesome manner. As, otherwise, are bound to add to the woes already being faced by honest taxpayers, because of the messed-up TDS regime; especially, after the set-up of the CPU .
      For a quick idea, the recent Delhi High Court Writs in the PIL matter exclusively devoted to such hassles and hardships is worthwhile to go through.

      June 3

      TDS on transfer of immovable properties wef 01.06.2013 & How to pay

      <> The media reports, as has always been the case, have widely publicised that the new TDS requirement has become a reality wef June 1.

      1. It seems, however, the following aspect has been left unclear and with a grave doubt of a serious nature, hence begs for a well considered answer:
      Why and how, having regard to its terms, the tax withholding requirement can have application to a case where the subject matter of the transaction ( of transfer) is 'unit' of a building (say, Flat or Apartment)?
      For clues: Suggest, read closely the long winding  definition specially introduced  in the Act years ago,- albeit in a cumbersome manner,- so as to cover ‘unit’ of a building  within the tax net – house property income and capital gains. There appears to be no such special definition for the purpose of section 194 IA. Further, no way to import and read such extant special definition into, for other purposes of the Act e.g. section 194 IA.    
      2. Another aspect, in one’s view not being free from doubt but lacking in clarity, hence must be of common concern, pertains to the timing of withholding. .... 
      Sooner there is clarity brought about by the Revenue, better. Tax Experts at large, if inclined to share the doubts raised as genuine / not without substance, will do well to come out with a well-reasoned and logical opinion , to be of help to the mandatees. That could obviate any further muddling  of the already messed- up TDS regime.

      For clues, refer section 27 (iii b), section 2 (47) (vi) (rws


      Personal Reaction:
      Some of the comments posted herein (also in some other  websites) pertain to compliance of the new TDS requirement in cases where the subject matter of 'transfer' is a 'unit' of a building, commonly known as Flat or Apartment. The concept of "unit" is a special concept, with entirely different legal significance and characteristics.
      The Explanation (b), u/s 194 IA provides that, for it’s purposes , - "immovable property” means any land (other than agricultural land) or any building or part of a building. To focus on, the term used is “part of a building”.
      The special concept of “unit”, however, is, - though often confused with, not only by common man but also by advising professionals, - not the same but is clearly distinct from "part of a building “referred to in the Explanation. The stated proposition, in one’s longstanding conviction, is indisputable ; and  finds ample support in the very fact that  is the reason why the government itself considered it necessary hence later amended  the law so as to specifically bring within the tax net, the so called asset ,- “unit” of a building. Reference is to the amendments made way back, wef 1-4-1988.
      Those are to be found in the then introduced sub-clause (vi) of section 2 (47), and clause (iiib) of Section 27 (both required to be read with clause (d) of Section 269 UA). These are provisions for taxing income from /in respect of “unit” of a building, respectively under the head of capital gains and house property.
      On the premise that the foregoing observations do not suffer from faulty logic but are well reasoned, the noted omission to cover “unit” for the propose of section 194 IA, is patently unintended and a lacuna over sighted. If so, the government, if and when realised, may come out with a suitable amendment of section 194 IA to plug in the corrective. Till then, need not add, to that extent, the TDS mandated would remain in animated suspense.
      Now, it is for the stalwarts/ law experts in the field, if not in agreement with the foregoing viewpoints, to come out with an independent opinion. For, any useful and purposeful guidance may help out the honest taxpayers and retrieve them from the quandary pushed into. 

      Another aspect of concern is the timing of withholding. In one’s view, if special regard be had to the purport of the provision, – to be precise,the clinching words used namely, “payment on transfer”, “consideration for transfer”,‘transferor’ and ‘transferee’, emphasis must be on the event of actual transfer. If so, withholding will, logically, be called for only at the time when the ‘transfer’ can be regarded to become conclusive in law. That is when the document of transfer is duly stamped and registered.
      Not being free from doubt, however,for the sake of uniformity in enforcing the requirement,a categorical confirmation by the CBDT might help; thereby avoid varying practices being followed by deductors.

      KEY NOTE s: For an appreciation in proper light, of the viewpoints stressed above, the following basic propositions ought to be kept in mind:

      1. Under the scheme of the special  enactments of States e.g. Maharashtra and Karnataka, governing Apartments , being the units of a buidling , there is, if critically examined, no 'sale' envisaged, within its strict legal sense, to purchasers of units. See the distinctly precise nomenclature used for denoting the conveyance document in certain main contexts - that is, Deed of (Transfer of) Apartment (or Deed of Apartment) - ref. the sections of the State Act; also the Model Form.

      The word 'sale', it is noted, has crept in , in certain contexts of the State Act; presumably, unwittingly used. Over all , however, for a mindful apprisal, at best that could only be regarded to be attributable to the not so unusual clumsiness or  carelessness  often come-across in the dradfting of such enactments, not only by any State but also by the Centre. Any way, for a proper understanding and interpreatation, as often stressed by case law,the entire scheme of the composite code has to be read as a whole /in totality- not piecemeal.

      2. The title to the property in the "land and building" (comprising the Flats or Apartments, as its units) is required to be transferred, and its actual physical possession handed over,- as made unequivocally clear in the State Act rw Rules, are to be finally conveyed to the legal entity, - that is, in the case of Flats, the co-operative housing society duly formed and registered, AND of Apartments, to the 'Owners' Association' duly constituted and formed.

      3. Albeit the term 'co-owners' is often loosely used, rather interchangeably, even in the enactments of States, the crucial point to be made a conscious note of is this: Unlike in the case of  a building owned by more than one as 'co-owners', as in the case of say, a HUF or jointly purchaserd property, in the case of a building comprising 'units' the purchase thereof is by individuals, independently ; and it is only later that they become 'joint' owners of the apartment complex (condominium) on being admitted as members of "owners' association",  specially formed / constituted for this purpose.

      In support, pinpoint the following: 

      (A) Clause (iiib) of Section 27 reads:
      “a person who acquires any rights by way of....or with respect to  any building or part thereof,  by  virtue of any such transaction as is referred to in clause (f) of section 269 UA, shall be deemed to be the owner of that building or part thereof.” (highlighting supplied for added emphasis)
      As is thus implicit, without the referred deeming provision, any transaction of the kind spoken of would have been left uncovered, for income taxation.  
      (B) Section 26 which separately and specifically deals with “Property owned by co-owners”, it is to be specially noted, bears on its sleeves the basic distinction in law, between the concepts of “co-owners” and “joint owners”. 
      Prima facie, these should convincingly clinch, rather take away the afore-stated propositions beyond the pale of any controversy or genuine doubt.  

      In the several other Blogs herein, on the related topics, the foregoing aspects have been dealt with in greater details. 

      In the comments on some published articles on the topic of DTC, the self-same lacuna observed in the proposed related provisions thereunder have been focussed on. Additionally pointed out in that context is the deletion in the DTC, of the extant Chapter XXA of the Act, in which the above referred Section 269 UA presently finds its place. That being so, the said lacuna is rendered all the more conspicuous / strikingly glaring.


      Another Write-up but seemingly incomplete (half -baked), and will be of no proper guidance; in that, one very Crucial Point as to how and why the Provison, in its present form and substance requires TDS on transfer of 'flats' or 'apartments' ,- which presumably were the types of transactions intended to be mainly covered but has been bypassed or pathetically overlooked.

      Over to those tax experts cum professional advisers, if truly "equipped", to immediately, WITH NO FURTHER PROCRASTINATION,  make a careful study and come out, AT THE EARLLIEST,openly with a well-considered and -reasoned opinion, so as to be of useful guidance, as expected of them by their serviced clientele. Is anyone listening ?

      1. vswami
        Your comment is awaiting moderation. 
        The Bill has been passed and come into force. But expectations have remained a pipe dream.
        In one’s considered opinion, as to how the provision , in terms, has application to any transfer of a “FLAT” Or “APARTMENT” has remained to be clarified and necessary correctives, if any , regarded to be called for, plugged in.
        For viewpoints put forth, look up the personal Blog @

      June 3

      The Economic Times: Business News, Personal Finance, Financial ...

       click here

      < Income Tax department to file court cases against bankers, depositors
      » Read more

      jUNE 2

      Economic Times

      No PAN, no gain: Property sellers face 20% tax hit

      Times of India-14 hours ago
      NEW DELHI: Those selling immovable property without disclosing their permanent account number (PAN) are in for a tough time with the ...

      One percent TDS on purchase of immovable property | The ... › Ujjain
      2 June 2013 16:25

      TAX BY MANISH: TDS on Immovable Property U/s 194IA

      As per the latest media report (ref. TOI of June 2), the TDS requirement has become a reality
      wef June 1.
      According to a view, not without substance, even so, on a plain reading and understanding of the provision, there is no clarity on certain points. That is, especially, having regard to the purport of the provision, and its actual terms. The lack of clarity is particularly on following:
      1. As to whether, compliance with the requirement is called for,- only at the time of registration of the document evidencing the transaction; for instance, if it be a 'sale', only at the time of registration of 'Sale (Conveyance) deed’?
      2.Whether, in view of the special definition,- which, in comparison to the more comprehensive definitions elsewhere in the IT Act for other purposes, is prima facie limited in its scope, so can have no application to cases where the subject matter of the transaction is 'unit' of a building (i.e. Flat or Apartment)?
      Pending any possible move from the Revenue, Tax Experts at large, provided they share the doubts raised, will do well to come out with a well-reasoned and logical view, to be of help to the 'mandatees'  of the requirement!

      JUNE 1

      # ICAI President’s Message – June 2013

      1. Acknowledgement by banks at the time of submission of Form 15-G / 15-H

      2. Taxation in India- Mockery of IT System ; Why E-filling returns are released so late?

      3. What to check before making deposits with NBFCs & FAQ

      29th May
      1% TDS on property costing more than 50 lakh is applicable from 1st June

      Change of Guards in MCHI-CREDAI


      IMP:>ITAT on sec. 143 (1) finality (ref. Kar HC on tax disputes arising out of wrong refusal to fefund but ajusting bogus demands)- categorical observetions stressing the implications of sec 143(1) and 143 (2) might lend fresh support:

      Gurinder Singh Bawa vs. DCIT (ITAT Mumbai)

      May 17th, 2013

      (79.1 KiB, 111 DLs)Download: Gurinder_Singh_153A_143_1_non_abated_assmt.pdf

      S. 153A: After expiry of s. 143(2) time limit, s. 143(1) assessment is final & addition u/s 153A can be made only if incriminating material is found in search

      CIT vs. Crescent Export Syndicate (Calcutta High Court)

      S. 40(a)(ia) vs TDS: Special Bench verdict in Merilyn Shipping is not good law



      Steep Penalty for PAN non- compliance by banks - why only banks ????

      Sting op: Banks face steep penalty - The Times of India

      By enforcin the same with other avenues, in particular at the Property Registry / players in the Realty Sector, could not the cumbersome section 194 IA been easily avoided ? 

      (more senatioinal !)

      Suspension of membership of CA by ICAI valid for having two wives

      CBI court imposed 3 Crore Fine for cheating of 33 Lakhs

      Applicability of RTI Act to Cooperative Societies?

      <>For comments, look up >

      1. HC recommends US-like ‘restatement of law’ to consign a large body of useless case law to dustbin of legal history

      2.On TDS WOES:

      Sec 194 IA>


      May 7, 2013 at 7:24 PM

      The fear or apprehension about getting a proper credit allowed for TDS and inherent hassles, as aired in the second sub-para under, -2. Business income, it needs to be underlined, is very much real, not imaginary. For knowing more and an appreciation in proper light, attention is invited to a couple of material authored by accounting experts published in the ICAI’s Book, titled, -A Comprehensive Workshop on Real Estate and Property Development (November 2011). Particularly, the one on the relevant topic of “Accounting for Real Estate Transactions” (pgs. 191-244) is noted to cover the implications of the Accounting (also of the Tax Accounting) Standards on Construction Contracts; and makes for a useful reading,

       May 7, 2013 at 1:58 PM

      Contd. (to elaborate):

      The scheme of provisions governing taxation of profits or gains from transfer of immovable property of the kind sought to be covered in section 194IA are to be found in two sets of sections, respectively governing (1) capital gains and (2) business income.
      1. Capital gains:
      By virtue of the overriding provisions of sections 54 and /or 54EC, any income chargeable as long term capital gains will not be assessable / chargeable to tax, in the event the transferor qualifies for the exemption as envisaged. That is, by reason of his having complied with the specified conditions in absolute terms. If so, then, at no point in time, he wiil conceivably have income to be charged – be it in the year of transfer (of the old property) or the year in which he has utilised and appropriated the amount of capital gains for purchase of a new asset as contemplated by law.
      It is beyond doubt that , withholding tax is a mode of collection of tax at source and in advance. As such, by necessary implication, in order to attract withholding tax, the transferor under a transaction envisaged in section 194 IA should have chargeable income , and eventually be assessable. That will not be so, in a case qualifying for the tax exemption in terms of sections 54 or section 54EC. To be precise, in such cases the requirement of withholding tax should not come into play; hence ought not to be complied with, more so insisted upon. As , otherwise, it will be tantamount to offending, and in patent violation of the very scheme of things under the law.
      Under the present wording of section 199, left unchanged for the current year, if it were strictly construed, in a case where the income is entitled for full exemption, allowing credit for tax withheld will pose a problem; for, in any such case, deductee will have no chargeable income so as to become “assessable” as envisaged there under.
      2. Busiiness income:
      The 1% deduction is, as intended, required to be made on the amount of ‘gross receipt’; not on the ‘income’ (profits or gains) imbedded therein.
      In the case of transfer by a business man, of a property held as his stock-in-trade, he, as may be/to the extent permissible by law, follow, for accounting of income, what is known as the percentage- of- completion method (also as, Progressive basis). Under the extant law, so far as one could see, there is no rule providing for an apportionment, on a suitable and acceptable basis; hence, no way to allow, without hassle, credit for TDS spread over more than one year.
      For the foregoing reasons (subject to correction if wrong or without substance), in one’s independent perception, the above mentioned aspects do not seem to have been kept in mind, or duly taken into consideration, before deciding to go ahead with enactment of the subject section 194IA in its present form.
      In the common interest of both deductors and deductees, it might be worthwhile for those really concerned, if/suject to being convinced of the merits thereof, to expeditiously take up the foregoing aspects, so also others, if any, with the Revenue / CBDT, urging for a suitable remedial action ; do so advisably, before it turns out to be too late.

      May 5, 2013

      “No requirement to obtain TAN by transferee of immovable properties”

      Reflecting on this develoment, it is really sad to observe that the amendment has come to be applauded by some but from a closed (in-box) point of view; but without having due regard or giving any insightful thought to the deficiencies inherent in the very proposal in question.

      As brought out in several related previous expert articles or posts on this website, so also elsewhere, the proposed withholding requirement, particularly if proceeded with in its present form, without making the requisite changes in all the other connected provisions- i.e.mainly, sections 197 A and 199, - perceptibly, has every potential to eventually result in hassles / hardships, otherwise avoidable; thereby lead to a further muddling up, beyond ready repair, of the already prevailing tragic state of affairs largely obtaining in the TDS regime.

      It appears that, paradoxically, certain crucial points of concern/suggestions, though briefly made and underlined, have, by and large, failed to percolate through, let alone amongst the directly concerned taxpayers (i.e.both deductors/deductees of withholding tax), even in the supposedly well informed circle of advising professionals.

      And, the Revenue, of course, as has always been its wont, but as is not unusual or unexpected, is bent upon going ahead with the proposal, obstinately and in a cavalier fashion, not even caring to go into/ mindfully consider the rationale behind those valid suggestions.

      To reinforce and repeat,one such crucial point of concern is that, the 1% TAX WITHHOLDING IS REQUIRED TO BE EFFECTED, ALBEIT IN ONE’S OPINION WRONGLY, EVEN IF THE PAYEE IS GOING TO HAVE NO INCOME CHARGEABLE IN RESPECT OF A GIVEN TRANSACTION. FOR A CLUE, CONSIDER THE CASE OF SELLER OF A RESIDENTIAL PROPERTY, BY REASON OF HIS HAVING ALREADY PURCHASED OR CONSTRUCTED A NEW ONE EVEN BEFORE SUCH SALE, HENCE STRAIGHTAWAY TAX EXEMPT U/S 54. Also, the other instance, where the taxpayer has already gone ahead by taking serious steps/ fully committed to a third party for purchase / or construction of  a new property, within the stipulated time limit of 2/3years.

      Further, it is one’s conviction that, under the present unclear wording of section 199- the word of concern is, “assessable”-, and if it were to be strictly construed by the AO, then a taxpayer might be faced with the problem of , -even if he is not admittedly chargeable to tax,- getting credit for and a refund of the 1% tax withheld in the year of sale of old property.

      (unedited; may be contd.)

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