Interest and Late Fees u/s 234E Invalid Due to Section 194-IA Inapplicability; Appeals Allowed.

The ITAT ruled that the levy of interest and late fees under section 234E was invalid, as section 194-IA was deemed inapplicable due to the consideration paid to property owners being below the prescribed limit. Consequently, the demand for interest and late fees was ordered to be deleted. The TDS already deposited would not be refunded. Both appeals were allowed, with the order pronounced on 08/06/2018.

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Issues:
Challenge to levy of interest and late fees under section 234E of the Act.

Analysis:
The appeals were filed against the order of the ld. CIT(A)-3, Jaipur for Assessment Year 2014-15, challenging the levy of interest and late fees under section 234E. The facts revealed that the assessee entered into an agreement for the purchase of a residential house jointly owned by two individuals. The assessee deposited TDS amounts for the payments made to the owners. The intimation received by the assessee regarding the levy of interest and late fees under section 234E was contested in the appeal.

During the hearing, the argument presented was that the provisions of section 194IA were not applicable as the consideration paid to the property owners was less than the prescribed limit. It was further contended that the TDS deduction was a mistake and should not be the basis for the levy of interest and late fees under section 234E.

The issue of the applicability of late fee under section 234E before 01.06.2015 was raised, citing a prospective effect of the amendment made under section 200A. A reference was made to a decision of the Hon'ble Karnataka High Court to support this argument. The Revenue, on the other hand, relied on the transfer value of the property and a Rajasthan High Court decision to support the imposition of fees under section 234E.

The Tribunal analyzed the provisions of section 194-IA, which require the deduction of tax at source for consideration exceeding a specified limit. Despite the total consideration being agreed at a higher amount, the assessee paid individual sums to the property owners, which did not exceed the limit. Consequently, the Tribunal concluded that section 194-IA was not applicable in this case. Therefore, the basis for the levy of interest and late fees under section 234E was deemed invalid, and the demand was directed to be deleted. It was clarified that the TDS already deposited would not be refunded to the assessee.

In conclusion, both appeals of the assessee were allowed, and the order was pronounced in the open court on 08/06/2018.

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