TaxTMI 
TaxTMI 
2021 (8) TMI 1009
X X X X Extracts X X X X
X X X X Extracts X X X X
....district. 2. The present petition has been filed seeking directions for the recovery of arrears due to the Petitioners under a Recovery Warrant dated 15th October 2018 passed by the Maharashtra Real Estate Regulatory Authority against Respondent Nos. 4 to 7. 3. It is admitted by the Petitioners that Respondent Nos. 4 to 7 have previously paid the Petitioners an amount of Rs. 1,80,00,000/- (Rupees One Crore Eighty Lakhs Only) as part payment under the Recovery Warrant. 4. Subsequently, in view of there being balance amounts due and payable by Respondent Nos. 4 to 7 under the Recovery Warrant, the Petitioners and these Respondent entered into consent terms dated 4th March 2021. By these Consent Terms, Respondent Nos. 4 to 7 undertook, jointly and/or severally, to pay the Petitioners a sum of Rs. 2,75,00,000/- (Rupees Two Crore Seventy Five Lakhs Only) along with simple interest at 10.05% thereon. Such sums were to be paid in the form of instalments and in the following manner: SCHEDULE OF PAYMENTS Sr.No. Date Amount (INR) Interest (INR) payable as on date of payment Total (INR) 1. 20.03.2021 50,00,000 --- 50,00,000 2. 20.04.2021 50,00,000 1,79,661 51,79,661 3. 20....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as TDS, to the Petitioners, so far as it is in compliance with the statutory provisions and no penalties are imposed upon these Respondent Nos. 4 to 7 due to non- payment of the same. 10. The Learned Senior Counsel on behalf of the Respondent Nos. 4 to 7 has now considered the legal position with respect to deduction of the tax in the facts of the present matter and has tendered a Note dated 18th August 2021 in support of the contention that the provision for payment of interest to the flat purchasers/Petitioners in the present matter is by way of compensation, and hence outside the purview of Section 194A and Section 2(28A) of the Income Tax Act, 1961. The Learned Senior Counsel for Respondent Nos. 4 to 7 has no objection to this legal position being clarified. To supplement the judgments tendered by the Petitioners, the Respondent Nos. 4 to 7 have relied upon the following judgments (i) Estate Officer, Greater Mohali Area Development Authority v. Gaurav Mutneja 2020 SCC Online NCDRC 278; (ii) Ghaziabad Development Authority v. Dr. NK Gupta 2002 SCC Online NCDRC 39; (iii) Ghaziabad Development Authority v. Naresh Kumar Sharma (2005) 9 SCC 477; (iv) Rajnish Bhardwaj v. CHD....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ring the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under this section.] Explanation.-For the purposes of this section, where any income by way of interest as aforesaid is credited to any account, whether called "Interest payable account" or "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. ..." 15. The IT Act defines "interest" under section 2(28A) as: "2. In this Act, unless the context otherwise requires,- ... (28A) "interest" means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised." 16. While analysing the issue of payment of interest as compensation by a builder and consequent deduction of tax at source thereon, the Cal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ge of a pre-existing obligation. In so far as these cases are concerned, facts stated by us itself would show that the purchaser had paid certain amounts to the appellant. At a later point of time, the purchaser opted out of the agreement and the appellant entered into fresh agreements with new buyers for prices that are higher than what was agreed with the purchasers. Out of the receipts from the new buyers, the appellant refunded to the purchasers the amount paid by them and a portion of the excess amount received. The amount thus refunded to the purchasers represents the consideration the purchasers paid towards the undivided shares in the property agreed to be purchased and also the cost of construction of the apartment, which work was entrusted to the appellant, being the builder. Such a relationship does not spell out a debtor-creditor relationship nor is the payment made by the appellant to the purchaser one in discharge of any pre-existing obligation to be termed as interest as defined in section 2(28A)" 18. It has also been held by the Hon'ble Supreme Court in the case of All India Reporter Ltd vs Ramchandra D Datar (supra) that when the claim is merged in the decree of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llottees for the delay in construction, the High Court of Himachal Pradesh held as follows - "8. In the case in hand it stands proved that in case the houses were ready within the stipulated period the Board would not be liable to pay interest. When construction of a house is delayed there can be escalation in the cost of construction. The allottee looses the right to use the house and is deprived of the rental income from such house. He is also deprived of the right of living in his own house. In these circumstances the amount which is paid by the Board is not payment of interest but in our view is payment of damages to compensate the allottee for the delay in the construction of his house/flat and the harassment caused to him. It may be true that this compensation has been calculated in terms of interest but this is because the parties by mutual agreement agreed to find out a suitable and convenient system of calculating the damages which would be uniform across the Board for all the allottees. 9. While taking this view we are relying upon the judgement of the Apex Court in Bikram Singh v. Land Acquisition Collector [1997] 224 ITR 551 /[1996] 89 Taxman 119. In the case ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as interest under the Income Tax Act. ..... The word interest used in the order of the State Commission is not what interest is as defined in Section 2(28-A). There in the order of the State Commission interest means compensation or damages for delay in construction of the house or handing over possession of the same causing consequential loss to the Complainant by way of escalation in the price of the property and also on account of distress, disappointment faced by him. Interest in the order has been used merely as a convenient method to calculate the amount of compensation in order to standardise it. Otherwise, each case of the allottee will have to be dealt with differently. Nomenclature does not decide the issue. In our view, therefore, considering the definition of 'interest' as contained in Section 2(28-A) of the Income Tax Act, provisions of Section 194-A were not applicable and the GDA was clearly wrong in deducting the TDS from the interest payable to the Complainant. Accordingly, the order of the State Commission is upheld and this Revision Petition is dismissed." 24. The Learned Senior Counsel for Respondent Nos. 4 to 7 submits that the National Consum....