Ahmedabad ITAT Removes Addition, No TDS Deduction U/S 194C for Land Levelling Costs

The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) wishes to delete the Income Tax addition since it found that no deduction of Tax Deducted at source ( TDS ) under Section 194C of the Income Tax Act was needed for land levelling costs.

The taxpayer in the year under consideration sold land property against which claimed land levelling cost of Rs. 34.5 Lakhs. The taxpayer furnished before the AO that he entered a contract for land levelling with one Shri Bharatbhai Devshibhai Ukani. According to the MOU, the taxpayer has filed an amount of Rs. 34.50 Lakh via the banking channel.

AO discovered that the taxpayer had sold the impugned land property vide the sale deed on 14-07-2011 whereas payment to contractor Shri Bharatbhai was made after the expiry of 8 months of execution of the sale. The Memorandum of Understanding (MoU) that the taxpayer furnished was not signed.

There was no PAN particular of the party cited in the MOU, and no information for the deduction of tax was filed. The avail of the cost made on land levelling for Rs. 34.5 Lakh was disallowed by AO.

As per CIT(A), it argued that the required information on the work that the party holds was provided to the AO, the payment to the party was incurred via the banking channel and acknowledgement of receipt of payment through the party was provided. It argued that the individual taxpayer not liable for the audit under section 44AB of the I-T Act was not required to deduct TDS

AO was not explained rejecting the documentary proof only on his premises and conjecture, the taxpayer ruled. CIT(A) verified the disallowances that the AO made for the cause of taxpayer losses to deduct tax under section 194C of the Income Tax Act.

Aseem L Thakka representing the taxpayer argued that the taxpayer was not liable to tax audit under the provisions of section 44AB of the Income Tax Act. Years 2012-1302013-14 14 of deducting the TDS under the provisions of section 194C of the Income Tax Act does not emerge.

The two-member bench of the tribunal comprising T.R. Senthil Kumar ( Judicial member ) and Waseem Ahmed ( Accountant member ) it can be reasoned that the taxpayer was not liable to Section 44AB of the Income Tax Act, in the previous year, therefore waived from TDS deduction under Section 194C of the Income Tax Act, for land levelling expenses. Consequently, overturned the CIT(A)’s decision and demanded the AO to withdraw the incurred addition.