Top Stories No Deduction of TDS u/s 194 C of Income Tax Act for land leveling Expenses: ITAT deletes Income Tax addition [Read Order] ITAT has decided to delete the Income Tax addition, as it found that no deduction of Tax Deducted at source (TDS) under Section 194C of the Income Tax Act, 1961, was required for land leveling expenses By Aiswarya Krishnadas – On February 22, 2024 8:19 pm – 2 mins read The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) has decided to delete the Income Tax addition, as it found that no deduction of Tax Deducted at source ( TDS ) under Section 194C of the Income Tax Act was  required for land leveling expenses. The assessee during the year under consideration sold land property against which claimed land leveling cost of Rs. 34.5 Lakhs.

The assessee before the AO submitted that he entered a contract for land leveling with one Shri Bharatbhai Devshibhai Ukani. As per such MOU, the assessee paid an amount of Rs. 34.50 Lakh through banking channel. AO found that impugned land property was sold by the assessee vide sale deed dated 14-07-2011 whereas payment to contractor Shri Bharatbhai was made after expiry of 8 months of execution of sale. Likewise, the MOU furnished by the assessee was not signed. There was no PAN detail of the party mentioned in the MOU, and no detail regarding deduction of tax was furnished. Accordingly, the AO disallowed the claim of cost incurred on land leveling for Rs. 34.5 Lakh.

The CIT(A), it was contended that the necessary details of the work carried out by the party were furnished before the AO, the payment to party was made through banking channel and acknowledgement of receipt of payment by the party was also furnished. It was further contended that the individual assessee who is not subject to audit under section 44AB of the Income Tax Act was not required to deduct TDS The assessee held that the AO was not justified rejecting the documentary evidence merely on his premises and conjecture.

However, the CIT(A) confirmed the disallowances made by the AO for the reason that assessee failed to deduct tax under section 194C of the Income Tax Act Aseem L Thakka representing the assessee contended that the assessee was not subject to tax audit under the provisions of section 44AB of the Income Tax Act. Years 2012-1302013-14 14 of deducting the TDS under the provisions of section 194C of the Income Tax Act does not arise. The two member bench of the tribunal comprising T.R. Senthil Kumar ( Judicial member ) and Waseem Ahmed ( Accountant member )  it can be inferred that the assessee was not subject to Section 44AB of the Income Tax Act,  in the previous year, thus exempt from TDS deduction under Section 194C of the Income Tax Act , for land leveling expenses. Therefore, overturned the CIT(A)’s decision and instruct the AO to remove the addition made