Bombay HC says refund by builder to buyers under RERA order not liable to TDS

 31 August 2021

Mumbai

The Bombay High Court recently directed a builder to refund amounts to flat buyers based on a March order without making any Deduction of Tax at Source (TDS).

The HC bench of Justices SJ Kathawalla and Milind Jadhav passed the order.

Several individuals who between 2015 and 2016 had booked flats in a real estate project at Malad (west) had sought orders from HC for recovery of arrears under a recovery warrant of 2018 passed by the Maharashtra Real Estate Regulatory Authority (MahaRERA) against the builders.

In March 2021, via a consent term order, the builder agreed to pay Rs 2.75 crore through instalments to the petitioners. But in their July 2021 installment, 10 percent was deducted from the amount as TDS on the amount of interest under the recovery warrant, which the petitioners said was not permissible in law.

The petitioning-buyers' counsel Subit Chakrabarti said the refund was in the form of compensation or a judgment debt while senior counsel Zal Andhyarujina for the builders submitted that the deduction was based on the provision of section 194A of the Income Tax Act, but later after analyzing the law said the refund was as compensation and out of the purview of the section invoked and hence, has no objection to paying the deducted amount back to the petitioners.

The HC too said the refund was akin to a judgment debt and cannot be liable to TDS