The Income Tax Appellate Tribunal, Ahmedabad, has clarified that for assessment year 2015-16, the Rs. 50 lakh threshold under Section 194-IA of the Income-tax Act applies to the consideration paid to each individual transferor, not the aggregate value of the property. This decision reverses the lower authorities' interpretation and restores legal certainty for buyers in multi-owner property transactions.
Background & Facts
The Dispute
The appellant, Hasmukhbhai Jayantibhai Patel, purchased an immovable property from multiple co-owners during the financial year 2014-15. The total consideration for the property exceeded Rs. 50 lakhs, but the amount paid to each individual co-owner was below that threshold. The Assessing Officer treated the appellant as an "assessee in default" under Section 201(1) for failure to deduct tax at source under Section 194-IA and imposed a demand of Rs. 13,50,500, along with interest under Section 201(1A).
Key Facts
- The property was acquired from four co-owners in a single transaction
- The total sale consideration was approximately Rs. 68 lakhs
- The appellant paid Rs. 17 lakhs to each co-owner, all below the Rs. 50 lakh threshold
- No TDS was deducted at the time of payment, which occurred in January 2015
- The Assessing Officer issued a notice under Section 201(1) on 12.03.2020
- The demand notice was issued on 05.08.2020
- The appellant filed objections on 15.09.2020, contending that Section 194-IA was not applicable
- The Assessing Officer rejected the objections on 10.11.2020
- The appellant filed an appeal before the CIT(A) on 18.12.2020
- The CIT(A) passed an order on 21.01.2026, upholding the demand
- The appellant filed the present appeal before the ITAT on 15.02.2026
Procedural History
- January 2015: Payment made to each co-owner (Rs. 17 lakhs each)
- 12.03.2020: Notice issued under Section 201(1)
- 05.08.2020: Demand notice issued for Rs. 13,50,500
- 15.09.2020: Appellant's objections filed
- 10.11.2020: Assessing Officer rejected objections
- 18.12.2020: Appeal filed before CIT(A)
- 21.01.2026: CIT(A) order dismissing appeal
- 15.02.2026: Appeal filed before ITAT Ahmedabad
- 26.03.2026: Hearing held
- 27.03.2026: Judgment pronounced
The Parties' Positions
For the Appellant
- Argued that Section 194-IA, as applicable in A.Y. 2015-16, required TDS deduction only if payment to a single transferor exceeded Rs. 50 lakhs
- Contended that the statutory language was clear: "consideration for transfer of immovable property" referred to the amount paid to each seller, not the aggregate
- Highlighted that the Finance Act, 2024, which introduced aggregation of consideration across multiple transferors, was prospective and not applicable to A.Y. 2015-16
- Relied on three coordinate bench decisions of the ITAT Ahmedabad
For the Respondent
- Maintained that the total consideration of the property exceeded Rs. 50 lakhs, triggering the TDS obligation
- Argued that the transaction should be viewed as a whole, not fragmented by co-ownership
- Relied on the principle of "real light" from Supreme Court jurisprudence
- Contended that the CIT(A)'s interpretation was legally sound
Relief Sought
The appellant sought deletion of:
- The demand of Rs. 13,50,500 under Section 201(1)
- The interest of Rs. 1,25,000 levied under Section 201(1A)
- Any consequential penalties or notices
The Legal Issue
The central question was whether the Rs. 50 lakh threshold under Section 194-IA of the Income-tax Act applies to the total consideration paid for a property or to the individual share paid to each co-owner, in the absence of any aggregation provision prior to the Finance Act, 2024.
Arguments Presented
For the Appellant
The appellant's counsel relied on the plain language of Section 194-IA, which states that TDS is required when "the consideration for transfer of immovable property" exceeds Rs. 50 lakhs. The term "consideration" was argued to mean the amount paid to each transferor, not the aggregate. The counsel cited three binding decisions of the ITAT Ahmedabad: Aakash Pursottambhai Vaghela, Bhikhabhai Hirabhai Patel, and Archanaben Rajendrasingh Deval, all holding that where payments to individual sellers are below Rs. 50 lakhs, TDS is not required. The counsel emphasized that the Finance Act, 2024, which amended Section 194-IA to include aggregation, was prospective and could not be applied retrospectively.
For the Respondent
The Revenue contended that the transaction should be viewed as a single economic unit, and that the legislative intent behind Section 194-IA was to capture high-value property transactions regardless of how ownership was structured. The Revenue relied on the CIT(A)'s reasoning that artificial division of consideration among co-owners could not defeat the object of the statute. The Revenue also cited CIT v. Anjum M.H. Ghaswala to support the mandatory nature of interest under Section 201(1A), though this was not directly responsive to the threshold issue.
The Court's Analysis
The Tribunal undertook a detailed textual and contextual analysis of Section 194-IA as it stood during A.Y. 2015-16. It noted that the provision, prior to the Finance Act, 2024, contained no language requiring aggregation of payments made to multiple transferors. The provision stated: "Every person responsible for paying any sum to any resident for transfer of immovable property... shall deduct tax at source... if the consideration exceeds Rs. 50 lakhs."
"The expression 'consideration for transfer of immovable property' in Section 194-IA, as it existed in 2015-16, refers to the amount paid to each individual transferor, not the aggregate value of the property."
The Tribunal emphasized that statutory interpretation must begin with the plain meaning of the words. Where the legislature intended aggregation, as it later did in 2024, it explicitly inserted a proviso. The absence of such a provision in 2015-16 could not be remedied by judicial interpretation.
The Tribunal further held that the decisions in Aakash Pursottambhai Vaghela, Bhikhabhai Hirabhai Patel, and Archanaben Rajendrasingh Deval were directly on point and constituted binding precedent from coordinate benches. The CIT(A)'s reliance on the "real light" doctrine was misplaced, as that principle applies to substance-over-form analysis in avoidance cases, not to the mechanical application of a statutory threshold.
The Tribunal also rejected the Revenue's argument that the interest under Section 201(1A) was mandatory irrespective of the underlying demand. It held that if the primary obligation under Section 194-IA did not arise, then the consequent liability for interest under Section 201(1A) could not be sustained.
The Verdict
The appellant succeeded. The ITAT Ahmedabad allowed the appeal and deleted the demand of Rs. 13,50,500 under Section 201(1) and the interest of Rs. 1,25,000 under Section 201(1A). The Tribunal held that since the consideration paid to each co-owner was below Rs. 50 lakhs and no aggregation provision existed for A.Y. 2015-16, the provisions of Section 194-IA were not attracted. The order of the CIT(A) dated 21.01.2026 was set aside. No further compliance or payment is required.
What This Means For Similar Cases
TDS Obligation Is Per Transferor, Not Per Property
- Practitioners must now assess TDS liability under Section 194-IA based on the amount paid to each seller, not the total property value
- For transactions prior to 01.04.2024, aggregation of payments to multiple co-owners is not permissible
- Buyers in joint purchases must calculate TDS separately for each seller’s share
Amendments Are Not Retrospective
- The Finance Act, 2024, introducing aggregation, applies only prospectively from A.Y. 2025-26
- Assessments for A.Y. 2015-16 to 2023-24 must be reviewed for compliance with pre-2024 law
- Any demand raised on aggregate value for these years is legally unsustainable
Precedents from Coordinate Benches Are Binding
- Decisions of coordinate benches of the ITAT on identical facts are binding unless overruled by a larger bench
- Practitioners should cite Aakash Pursottambhai Vaghela, Bhikhabhai Hirabhai Patel, and Archanaben Rajendrasingh Deval as controlling authority for pre-2024 assessments
- Revenue authorities must withdraw demands based on aggregate consideration for assessments prior to A.Y. 2025-26
