Sections 194C and 194LA Do Not Apply to TDR Certificate Payments, Interim Relief Granted Under Sections 201 and 201(1A)

The HC held that Sections 194C and 194LA of the Income Tax Act do not prima facie apply to issuance of TDR Certificates in lieu of payment, as these sections contemplate payment in cash or cheque/draft and do not address payments made entirely in kind. The court found merit in the petitioner's argument that the phrase "or by any other mode" should be read ejusdem generis with cash or cheque payments, excluding TDR issuance. Given the absence of provisions similar to Sections 194B and 194R in Sections 194C and 194LA, the HC granted interim relief by staying the operation of the impugned orders under Sections 201 and 201(1A) pending final disposal.

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ISSUES:

Whether the issuance of Transferrable Development Rights (TDR) constitutes a "payment" attracting Tax Deducted at Source (TDS) obligations under Section 194C of the Income Tax Act, 1961.Whether TDS is deductible under Section 194LA of the Income Tax Act, 1961, when TDRs are issued as compensation for acquisition of immovable property under the MRTP Act, 1966.Whether the phrase "or by any other mode" in Sections 194C and 194LA includes issuance of TDR certificates as a mode of payment for purposes of TDS deduction.Whether the absence of specific provisions analogous to Sections 194B and 194R regarding payment wholly or partly in kind affects the applicability of Sections 194C and 194LA to TDR issuance.

RULINGS / HOLDINGS:

The Court held that the words "or by any other mode" in Section 194C must be read ejusdem generis with "payment thereof in cash or by issue of a cheque or draft," and thus do not extend to issuance of TDR certificates as a mode of payment for TDS deduction.Similarly, Section 194LA's phrase "or by any other mode" is to be read ejusdem generis with "payment of such sum in cash or by issue of a cheque or draft," excluding TDR issuance from TDS deduction obligations under this section.Sections 194C and 194LA do not apply when TDR certificates are issued in lieu of compensation, as supported by the presence of explicit provisions in Sections 194B and 194R for payments wholly or partly in kind, which are conspicuously absent in Sections 194C and 194LA.The Petitioner was prima facie entitled to interim relief, and the impugned Orders under Sections 201 and 201(1A), the Demand Notice under Section 156, and the Penalty Notice under Section 274 read with Section 271C were stayed pending final disposal.

RATIONALE:

The Court applied the principle of ejusdem generis to interpret the phrase "or by any other mode" in Sections 194C and 194LA, limiting its scope to modes similar to cash, cheque, or draft payments.The Court relied on a comparative statutory interpretation by referencing Sections 194B and 194R, which explicitly address TDS deduction on winnings or payments wholly or partly in kind, highlighting the absence of such provisions in Sections 194C and 194LA.This interpretation prevents an expansive reading of TDS obligations beyond monetary payments, thereby excluding issuance of TDR certificates from the ambit of Sections 194C and 194LA.No dissent or doctrinal shift was noted; the Court's reasoning was grounded in established principles of statutory construction and the express language of the Income Tax Act, 1961.

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