Jose V. Cherry V. Union of India and State of Kerala and Chief Commissioner of Income Tax Ernakulam and Income Tax Officer Thiruvalla and Sub Treasury Officer Thiruvalla and Sub Registrar Kadapra and Merin Benedict

WP(C)/6528/2023

AI Insights

The case revolves around a writ petition filed by Jose V. Cherry, the decree holder in a specific performance suit, against multiple respondents including the Union of India and the State of Kerala, seeking permission to remit TDS in the name of the Sub Court, Thiruvalla, instead of the judgment debtor, due to the latter's unavailability and lack of PAN details. The petitioner had previously been directed by the Sub Court to remit TDS for the execution of a sale deed, which was contested due to the absence of the judgment debtor's PAN and the procedural inability to remit TDS in the current system. The court examined the applicability of Sections 194-IA, 200, 201, and 206AA of the Income Tax Act, 1961, and the specific circumstances under which the sale deed was to be executed by the court.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 811324 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 14-05-2024
• Assessment Year: misc
• Other Referred Cases: J.K. Cotton Spinning and Weaving Mills Ltd. v. Union of India, Bengal Immunity Co. Ltd. v. State of Bihar, East End Dwellings Co. Ltd. v. Finsbury Borough Council
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: T C KRISHNA; CHRISTOPHER ABRAHAM; JITHESH MENON
• Assessee Lawyers: P HARIDAS; BIJU HARIHARAN; SHIJIMOL MATHEW; P C SHIJIN; RISHIKESH HARIDAS; RAJASREE
• Keywords: Execution of decree; Income Tax; Sale deed; Specific performance; TDS
• Section: 201; 199; 200; 194-IA; 203A; 206-AA; 206AB

Judgement Text

"W.P .(C). No.6528/2023 1 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE T.R.RAVI TUESDAY, THE 14TH DAY OF MAY 2024 / 24TH VAISAKHA, 1946 WP(C) NO. 6528 OF 2023 PETITIONER: JOSE V. CHERRY AGED 50 YEARS S/O V.V. CHERRY, VIZHALIL HOUSE, KADAPRA MURI, KADAPRA VILLAGE, NIRANAM P.O., THIRUVALLA TALUK., PIN - 689621 BY ADVS. SRI P.HARIDAS SRI BIJU HARIHARAN SMT.SHIJIMOL M.MATHEW SRI P.C.SHIJIN SRI RISHIKESH HARIDAS MS.RAJASREE T.R. RESPONDENTS: 1 UNION OF INDIA, REPRESENTED BY SECRETARY MINISTRY OF FINANCE, DEPARTMENT OF FINANCIAL SERVICES, MINISTRY OF FINANCE, 3RD FLOOR, JEEVAN DEEP BUILDING, SANSAD MARG, NEW DELHI, PIN - 110001 2 STATE OF KERALA REPRESENTED BY SECRETARY DEPARTMENT OF FINANCE, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM., PIN - 695001 3 CHIEF COMMISSIONER OF INCOME TAX ERNAKULAM, ITO (HQ) (PR&TPS-I), KOCHI, CENTRAL REVENUE BUILDING, IS PRESS ROAD, KOCHI., PIN - 682018 4 INCOME TAX OFFICER THIRUVALLA, OFFICE OF THE INCOME TAX OFFICER, THIRUVALLA, PATHANAMTHITTA DISTRICT., PIN - 689101 5 SUB TREASURY OFFICER THIRUVALLA, OFFICE OF THE SUB TREASURY OFFICER, W.P .(C). No.6528/2023 2 THIRUVALLA., PIN - 689101 6 SUB REGISTRAR KADAPRA, SUB REGISTRAR OFFICE, VALANJAVATTOM, KADAPRA, THIRUVALLA,PATHANAMTHITTA., PIN - 689104 7 MERIN BENEDICT AGED 40 YEARS D/O. THANKAMANI LALACHAN AND W/O. BENEDICT ROZARIO, ELAMATHAYIL, KADAPRA MANNAR MURI, KADAPRA VILLAGE, THIRUVALLA TALUK NOW RESIDING AT CHARUVIL HOUSE, (KALLUVILA), KATTANAM, BHARANIKAVU P.O, MAVELIKKARA TALUK., PIN - 690503 ADDL.R8 ADDL.R8. IMPLEADED STATE BANK OF INDIA, NOORANAD BRANCH, REPRESENTED BY ITS BRANCH MANAGER, NOORANAD.P.O, P.B. NO. 1, JABALNOOR PLAZA, ALAPPUZHA DISTRICT, PIN-690504 [IMPLEADED AS PER ORDER DATED 18.01.2024 IN I.A.1/2024 IN WP(C) 6528/2023.] BY ADVS. SRI TC KRISHNA SRI CHRISTOPHER ABRAHAM (SC) SRI JITHESH MENON (SC) THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 6.3.2024 THE COURT ON 14.05.2024, DELIVERED THE FOLLOWING: W.P .(C). No.6528/2023 3 “CR” T.R. RAVI, J. -------------------------------------------- W.P.(C)No.6528 of 2023 -------------------------------------------- Dated this the 14th day of May, 2024 JUDGMENT The prayer in the writ petition is for a direction to respondents 1 to 6 to permit the petitioner to remit TDS in the name of the Sub Court, Thiruvalla, or to formulate an appropriate mechanism for receiving the TDS from the vendor/court by making necessary updation in the web portal and to register the sale certificate issued by the Sub Court, Thiruvalla. 2. Heard the Government Pleader and the standing Counsel for the Income Tax Department. Notice to the 7th respondent taken out through special messenger and she was served. She has however chosen not to appear in these proceedings. 3. The petitioner is the plaintiff/decree holder in OS No.95/2012 of Sub Court, Thiruvalla, filed for specific performance of an agreement and the 7th respondent is the judgment debtor. Ext.P1 produced along with the writ petition, is a copy of the decree. When the decree was not complied with, the petitioner filed an application for execution of the sale deed through the intervention of the Court. The draft sale deed was approved. The petitioner was W.P .(C). No.6528/2023 4 directed by the Sub Court, Thiruvalla, to remit stamp duty before the 6th respondent. The petitioner submits that the 6th respondent directed the petitioner to deposit TDS equal to 1% of the value of the property (Rs.55,000/-), in the name of the 7th respondent, as is required under the provisions of the Income Tax Act. The 7th respondent was ex parte before the court below, and the petitioner does not know the PAN details of the 7th respondent and is not able to deposit the TDS. The petitioner filed Ext.P2 application before the Sub Court, seeking permission to remit TDS in the name of the Court, but the same is said to be dismissed. The petitioner submits that there is no provision in the e-treasury portal to receive TDS other than from the vendor. The writ petition is filed in the above circumstances. 4. Section 194-IA of the Income Tax Act, 1961 ('IT Act' for short), casts a duty on the transferee of immovable property to deduct tax at source, while making a payment to a resident transferor. The provision reads thus: “194-IA. Payment on transfer of certain immovable property other than agricultural land.—(1) Any person, being a transferee, responsible for paying (other than the person referred to in Section 194-LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at the W.P .(C). No.6528/2023 5 time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum or the stamp duty value of such property, whichever is higher, as income tax thereon. (2) No deduction under sub-section (1) shall be made where the consideration for the transfer of an immovable property and the stamp duty value of such property, are both, less than fifty lakh rupees. (3) The provisions of Section 203-A shall not apply to a person required to deduct tax in accordance with the provisions of this section. Explanation.—For the purposes of this section,— (a) “agricultural land” means agricultural land in India, not being a land situate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of Section 2; (aa) “consideration for transfer of any immovable property” shall include all charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property;] (b) “immovable property” means any land (other than agricultural land) or any building or part of a building. (c) “stamp duty value” shall have the same meaning as assigned to it in clause (f) of the Explanation to clause (vii) of sub-section (2) of section 56.” 5. The responsibility to deduct the tax falls on the transferee, in this case, the petitioner herein. The amount W.P .(C). No.6528/2023 6 deductible is 1%, or the stamp duty payable, whichever is higher. Going by the rate of stamp duty, the higher amount is the stamp duty, and the same will have to be deducted. Under Section 206 AA of the Income Tax Act, 1961, the transferor is bound to furnish his PAN to the person responsible for deducting the tax. In the case on hand, the transferor has chosen not to appear, and it is the court that is executing the document invoking Order XXI Rule 34 of the Code of Civil Procedure. The Court, not being the transferor, is not expected to have a PAN to pay tax. Wherever the PAN is not provided by the transferor, the tax is deductible at a higher rate of 20%. Under Section 200 of the IT Act, the person deducting the tax must pay the sum so deducted to the credit of the Central Government or as the Board directs. Under Section 199 of the IT Act, the tax so deducted and paid to the Central Government shall be treated as payment on behalf of the person from whose income the deduction is made. Section 201 of the Act, dealing with the consequences of failure to deduct or pay the tax under the provisions of the Act, says that the person who is obliged to deduct the tax will be deemed to be an assessee in default in respect of such tax. Section 206AB relates to deduction of tax in case of non- filers of income tax return. Section 203A which is not applicable for deduction of tax under Section 194-IA, relates to the Tax Deduction W.P .(C). No.6528/2023 7 and Collection Account Number (TAN). The persons liable to deduct tax under Section 194-IA can use the PAN number instead. No information is available as to whether the transferor is a non-filer of income tax returns. 6. The requirement of the taxing statute in case of sale of immovable property of value of Rs.50 lakhs and above can be summed up as: (a) The buyer is obliged to deduct the tax at the time of the payment of the consideration for the sale at 1% of the sale value or the stamp duty payable, whichever is higher. (b) If the transferor does not provide the PAN details, the tax is to be deducted at the higher rate of 20%. 7. In the case on hand, the real vendor of the immovable property is not before Court. The provisions of the Income Tax Act do not contemplate a situation where the sale deed is being executed by the Court in execution of a decree for specific performance of contract. The facts would reveal that the consideration for the sale has been in the form of settlement of the debts of the 7th respondent with her banker on a loan. The petitioner could not hence deduct any amount towards the tax liability if any, of the 7th respondent, on the capital gains that the 7th respondent might have earned owing to the transaction. The Bank W.P .(C). No.6528/2023 8 was impleaded in the proceedings as additional 8th respondent and the additional 8th respondent has submitted that the debtor had not given details of her PAN number while taking the loan. The Standing Counsel for the Income Tax Department has also submitted on instruction that there is no manner in which they could verify whether the 7th respondent had any PAN number. This Court had as a last measure directed the Government Pleader to make an enquiry regarding the whereabouts of the 7th respondent and whether the 7th respondent was in the electoral rolls and had an electoral ID or any such Identification details, which might help in finding out whether the 7th respondent had a PAN card. The Government Pleader has submitted a report from the concerned Tahsildar along with a memo, stating that the 7th respondent was not a resident of the address available and is not included in the electoral roll and that on enquiry in the locality it is reveals that the 7th respondent is residing with her family in the Andaman and Nicobar Islands for the past more than 20 years. 8. Section 201 of the Act creates a legal fiction whereby a person responsible for deduction of tax under Section 194-IA is deemed to be an assessee in default, if he fails to deduct the tax. The question is whether in the circumstances narrated, the petitioner can be treated to be an assessee in default, particularly W.P .(C). No.6528/2023 9 when the document of transfer is to be executed by the Court in his favour, in execution of the decree for specific performance. True, a legal fiction has to be given effect to. A legal fiction, as held by the Hon’ble Supreme Court in J.K. Cotton Spinning and Weaving Mills Ltd. v. Union of India [1987 Supp SCC 350], is an admission of the non-existence of the fact deemed. The legislature is competent to enact a deeming provision to assume the existence of a fact that does not exist. In Bengal Immunity Co. Ltd. v. State of Bihar [1955 SCC OnLine SC 2], the Hon’ble Supreme Court held that legal fictions are created only for some definite purpose and must be limited to that purpose and should not be extended beyond that legitimate field. The Apex Court referred to the decision in East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952 AC 109 (HL)], wherein it was held that if you are bidden to treat an imaginary state of affairs as real, you must, unless prohibited from doing so, also imagine as real, the consequences and incidents which would inevitably flow from such imagination and that you cannot permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs. The legal fiction created by Section 201 can apply only to transferees in a normal sale of immovable property and the same cannot be extended to cases where the sale takes place through the W.P .(C). No.6528/2023 10 intervention of a civil court, in the execution of a decree for specific performance. Had it been a case where in the execution of the decree, the judgment debtor himself comes forward and executes the sale deed in favour of the decree-holder, Section 201 would apply, since it becomes a voluntary sale. However, in a case where the transfer is effected by a Judge of a civil court, who cannot be termed as the transferor, unless there is a specific provision in the Statute which requires the deduction of tax at source even in cases of sale by Court, the transferee cannot be mulcted with the liability to pay tax. The legal fiction of treating the transferee as an assessee in default cannot be extended to such cases. Moreover, a Statute cannot cast an obligation on any person to perform the impossible. In this case, the transferee does not have details of the PAN number of the 7th respondent. The Income Tax Department itself is not in a position to state about the PAN number. There is no statutory obligation to obtain any TAN number for such transactions. This Court also made efforts to find out if there was a way to find out any identification documents of the 7th respondent but was unsuccessful. This Court also contemplated the possibility of directing the petitioner to deposit a sum in Court towards the tax liability if any, of the 7th respondent, but decided against such a course of action, since no purpose would be served by such a W.P .(C). No.6528/2023 11 deposit. The Income Tax Department will not be able to withdraw the amount, and the petitioner’s money will remain in court deposit indefinitely. Moreover, any payment by the petitioner in this case towards such tax liability of the 7th respondent will be amounts that belong to him, as the same has not been included in the consideration for the sale, which he has already parted. What is contemplated by the Act is deduction from the amount payable to the transferor, which cannot be understood to mean that the transferee will have to pay the amounts due as tax from the transferor from out of his funds. This is also not a case where there is a failure to deduct any amount from out the consideration, since there has been no direct payment to the transferee, but only a settlement of debt of the transferor with her bank. 9. In view of my findings above, this writ petition is disposed of with the following directions/declarations; (i) The petitioner shall approach the Sub Court, Thiruvalla for getting the sale deed executed in his favour, as has been decreed in O.S.No.95 of 2012. (ii) The Sub Court shall thereupon pass necessary orders for the execution of the document, without insisting on the deposit of any amount towards TDS by the petitioner. (iii) The Registering Officer before whom the document is submitted for registration shall W.P .(C). No.6528/2023 12 register the same, if it is otherwise in order, without insisting on the production of any proof of deduction of tax at source and paying into the account of the Central Government. (iv) Once the document is executed and registered, the 7th respondent/judgment debtor on whose behalf the document is executed would become the transferor and the 4th respondent will be entitled to proceed against the 7th respondent for dues of income tax if any, on the transaction in question, treating the same as a sale of immovable property. Sd/- T.R. RAVI JUDGE dsn W.P .(C). No.6528/2023 13 APPENDIX OF WP(C) 6528/2023 PETITIONER EXHIBITS Exhibit P1 TRUE COPY OF THE DECREE IN OS NO.95/2012 OF THE SUB COURT, THIRUVALLA DATED 23.02.2017 Exhibit P2 TRUE COPY OF THE IA NO. 3/2022 IN IA NO. 859/2017 IN OS NO.95/2012 OF THE SUB COURT, THIRUVALLA DATED 27.10.2022 "