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Refundable security deposits
The tax Appellate Tribunal (ITAT), Bangalore Bench ruled that the TDS isn’t applicable on refundable security deposits made with landowners. Prestige Group 2021 Launch Project In bangalore
The assessee, M/s.Prestige Estates Projects Ltd. is an Indian Company engaged within the business of land development. within the course of its business, the assessee entered into joint development agreements with 54 parties. The said agreement had been entered in respect of 11 acres of land located in Ranga Reddy district of Andhra Pradesh . Prestige Group 2021 Launch Project In bangalore
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As per the agreement, the assessee agreed to construct and deliver a share of the entire built-up area (31.66%) along side car parking spaces, terrace areas, private areas, and every one other built-up areas to the landowners in consideration of 68.34% of the land being conveyed thereto by the landowner. In terms of the agreement, a sum aggregating to Rs.21,85,00,000 had been paid by the assessee to the land owners as interest free ‘refundable security deposit’.
Best Apartments in Bangalore – This sediment is refundable to the assessed after 18 months of commencement of the development . As per the Agreement, the safety deposit paid by the assesses is recoverable through the sale of constructed area of the landowners. The Agreement also recognizes that any deficit shall be made good by the landowners. Prestige Group 2021 Launch Project In bangaloreThe Assessing Officer issued a notice whereby the assessee was provided a chance to point out cause why proceedings under section 201(1) and 201(1A) shouldn’t be initiated in respect of payments made under the event agreement entered by the assessed.
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The assessed contended that the quantity paid to landowners are within the nature of refundable margin and thus can’t be characterized as consideration for transfer of immovable property attracting provisions of section 194IA. the difficulty raised during this case was the CIT(A) has erred in concurring with the learned AO and concluding that refundable security deposits made with landowners amounting to Rs. 21,85,00,000/- are responsible for TDS under section 194-IA of the Act. The coram headed by the vice chairman , N.V.Vasudevan held that albeit it’s an advance payment, it’s not linked to the transfer of immovable property as enumerated in Section 194-IA of the Act, since the condition laid down in Section 2(47)(v) of the Act wasn’t complied with within the meaning of Section 53A of the T.P. Act, so on deduct TDS by the assessee on the said refundable margin . Prestige Group 2021 Launch Project In bangaloreThe assessee can’t be held because the assessee in default under sections 201(1) and 201(1A) of the Act.
