1. Need clarification on the deduction of Tax u/s 194-IA. The section requires the transferee to deduct tax @ 1% if the consideration amount exceeds Rs. 50,00,000. However, the section does not specify whether this slab limit is transaction specific or Transferor specific or both.
2. In the case of Pradeep Kr. Soni, New Delhi Vs ITO Dec 2018, there was a purchase of plot amounting to Rs. 1,50,00,000 by four different transferee. So shares of each transferee comes to Rs. 37,50,000. According to sec 194-IA(2) where the consideration amount payable by the transferee does not exceed Rs. 50,00,000 TDS @ 1% need not be deducted.
3. Now, AO issued a notice for non-deduction of TDS on the above transaction.
4. Department gave the decision in favor of assessee by citing the following reasons,
i) TDS provisions are for the purpose of compliance of Tax laws and there should not be unnecessary burdens to small taxpayers, and that is why the limit of Rs. 50,00,000.
ii) AO issued a single notice whereas the issue of four different notices to each transferee amounting to Rs. 37,50,000 would not make the applicability of sec 194-IA. AO has bent the law according to his benefit by issuing a single notice to all the four transferees.
iii) However, TDS is income specific to Individuals and only to the extent of the amount paid by the transferee TDS can be applied. The transferee cannot see how much others are paying and apply TDS on his transaction based on the accumulated amount.
5. Keeping the above points in mind Department upheld the view taken by the Assesses.
6. However, in the given case even though there are 3 different transactions, it was made with the same transferor and the accumulated amount exceeds Rs. 50,00,000. Provision has not used the words "accumulated amount during the year exceeds Rs. 50,00,000". But from the overall view, the point to deduct TDS is to trace the high-value transaction between the Transferor and transferee where the consideration exceeds Rs. 50,00,000 . From that view the above transaction exceeds Rs. 50,00,000 and there is a need to deduct TDS on such transaction 1 % on the overall amount. Though provision has not expressly stated from the underlying logic behind the deduction of TDS, this view can be given due consideration.
Please correct me if the above solution has an alternative view.