Kerala High Court
Jose V. Cherry vs Union Of India, Represented By ... on 14 May, 2024
Author: T.R. Ravi
Bench: T.R.Ravi
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. IMPLEADED
ADDL.R8 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 7 th 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
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 7 th 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 7 th 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
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
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
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 7 th
respondent might have earned owing to the transaction. The Bank
was impleaded in the proceedings as additional 8 th 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 7 th 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
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
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
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 7 th 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
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
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
