What the courts have decided on section 194-IC, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Sugee Seven Developers LLP v ITO (TDS)
ITATCuts both ways
My joint development agreement is with a perpetual lessee, not the owner of the land. Do I deduct one per cent under section 194-IA or ten per cent under section 194-IC?
Ten per cent. The Mumbai Tribunal held that section 194-IC applies. Reading section 45(5A) with the Memorandum explaining its introduction, the definition of specified agreement cannot be confined to the holder of freehold title, because that would take a transfer by a leaseholder under a joint development agreement out of the net altogether, contrary to the purpose of a provision meant to ease the burden on the transferor. The land here had been on perpetual lease since 1938, the payee held the right to give it for development and to receive consideration in money and in kind. On the alternative plea, the Tribunal remitted the matter and directed that relief not be refused merely for want of Form 26A.
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Nathani Parekh Constructions Pvt Ltd v ITO (TDS) (ITAT Mumbai) — section 194-IC does not reach alternate accommodation and hardship compensation paid under a redevelopment agreement
ITATHelps taxpayerNo later treatment found
As a developer under a redevelopment agreement I pay tenants a monthly sum for alternate accommodation and a hardship allowance. The TDS officer says every sum paid under the agreement attracts section 194-IC at ten per cent. Is he right?
No. The Tribunal held that a sum is within section 194-IC only if it is consideration paid as part of a share in the land or building or both under a specified agreement, including cash payments forming part of that share. Alternate accommodation charges and hardship allowance are compensation for the hardship of dispossession and for rent payable elsewhere until redevelopment is complete; they are not a share in the land or building, so section 194-IC does not apply and the developer is not an assessee in default for not deducting.
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Statutory position — s.194-IC: ten per cent on the cash consideration under a specified agreement, with no threshold at all, and the one section in this family that does not disapply s.203A
CBDT Circulars & InstructionsCuts both waysNo later treatment found
I am the developer under a joint development agreement with an individual landowner. I am giving him constructed area plus some cash. What do I have to deduct, on what, and do I need a TAN?
You deduct ten per cent, but only on the monetary consideration. Section 194-IC applies notwithstanding section 194-IA to any person responsible for paying a resident any sum by way of consideration, 'not being consideration in kind', under the agreement referred to in section 45(5A), at the time of credit to the payee's account or at the time of payment, whichever is earlier — and unlike sections 194-IA, 194-IB and 194M it contains no provision disapplying section 203A, so the deductor needs a TAN and files an ordinary quarterly return.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.
