Messages

I have gone through the decision of the learned Ahmedabad Tribunal. In my personal opinion it seems bad in law and the learned members have taken a very restricted meaning of the words "debt incurred" and focused mainly on the word "deposit". There is no justification for the same. There is also no reference to the judgments of the Hon'ble Madras HC judgments in this decision, which makes it seem to me that there is a good case for revisit and referral to HC where the claim of the tribunal may not stand.

In many cases of real estate developers I have been informed that TDS is being deducted by them on compensation payments.

I believe the view of the Hon'ble Madras HC is correct. As a last resort, once can write to the AO and take his approval on the same if it is felt that this can create issues later on.

Hi,

I have just come across some decisions that have enhanced my concept on the issue at hand. I draw your attention to Section 2(28A) that defines "Interest". The definition is wide enough to cover the type of payment proposed by you and me. I have also referred to the following decisions on 2(28A) that have further cleared my doubts on the same and accordingly i now believe that the same is liable to TDS. The decisions referred are:

1. Viswapriya Financial Services & Securities Limited V.s CIT - Madras HC - 179 CTR (Mad) 334
2. A&M Agencits V.s CIT & Ors - Madras HC - 153 CTR (Mad) 497
3. Bikram Singh & Ors. V.s Land Acquisition Collector & Ors.- Supreme Court - 139 CTR (SC) 475

I guess this may bring some bother to you now, but better getting to know on this now than later. :-)

Regards,

Dear Sir,

I am presently faced with the situation involving compensation paid by a developer to tenants for not delivering as per terms agreed. Although the facts of the case differ, the situation and concept remains the same and hence I am giving my PERSONAL VIEW in this regard, not to be quoted

There are ITAT decisions in case of Enam Securities and Bank of Saurashtra that can come to your aid and you can adopt the thoughts and logic put in by the learned tribunal as regards allowability of compensation. However, at no place in both these judgments has there been an issue or matter about TDS. I have tried searching for judgments on treatment of compensation as interest, but i have not come across any judicial precedents in this regard.

However I believe that for it to be regarded as interest, the precondition is that there should be a loan. If there is no loan or advance there cannot be any situs of interest. In your present situation, I believe that under no condition can there be a situation of creation of a loan of any nature what so ever and hence there cannot be any question of interest.

I am personally taking the same stand going forward giving my client a disclaimer about absence of judicial decisions directly relatable to the matter.

Hope this can be of some help to you.