NRI Entitled to Full TDS Credit on Property Sale Despite Buyer's Lapse; Delhi HC Orders Correction of Records and Refund Computation
NRI Entitled to Full TDS Credit on Property Sale Despite Buyer’s Lapse; Delhi HC Orders Correction of Records and Refund Computation
The Delhi High Court has held that the Non-Resident Indian (NRI) is entitled to full Tax Collected At Source (TDS) Credit on property sale despite the buyer's lapse.
The bench of Justice Vibhu Bakhru and Justice Tejas Karia has directed the department to correct the record and reflect the TDS deposited by the buyers to the NRI’s credit under the return filed in the Form 26QB with effect from the date the amount was deposited. The Revenue shall further compute the amount of the refund, if any, that may be due to the petitioner in accordance with law.
The petitioner/assessee is a Non-Resident Indian [NRI] and a tax resident of the United States of America [USA]. In the year 1998, the petitioner had purchased a residential property [the subject property] in Pune, Maharashtra. The petitioner was desirous of selling the subject property and certain prospective buyers had also shown interest to purchase the subject property.
The petitioner states that Dr. Sharad Moreshwar Hardikar and Mrs Leela Sharad Hardikar [the buyers] had formally expressed their interest to purchase the subject property and on 18.03.2015 offered to pay earnest money for concluding the transaction. The petitioner accepted the said offer and conveyed his consent to sell the same to the buyers. He also informed the buyers that he intended to open a new bank account in India to ensure that the sale proceeds are repatriated to him.
The buyers stated that the Tax Deducted at Source [TDS] on the sale of the subject property was required to be deducted at the rate of 20 percent as the petitioner was a non-resident. The buyers called upon the petitioner on 05.09.2015, to confirm his willingness for deduction of the TDS at the rate of 20 percent, which the petitioner affirmed. Thereafter, on 08.09.2015, the petitioner and the buyers executed the sale deed for the subject property at the agreed consideration of ₹2.00 Crores. Out of the sum, the buyers credited a sum of ₹1,81,31,823/- to the petitioner’s bank account and withheld the remaining amount of Rs. 18,68,177/-. There is no dispute that this amount was deposited by the buyers with the Government to the credit of the petitioner.
The petitioner computed the balance of income tax liability and deposited the same as advance tax. the petitioner repatriated the balance amount of sale proceeds to the USA. The petitioner claimed that he was not aware at the material time that he was also required to file the Income Tax Return [ITR] for the relevant period and therefore, had failed to do so.
The Assessing Officer [AO] issued a notice under Section 148A(b) of the Income Tax Act, 1961 on the basis of the information available that the petitioner had sold the subject property, which according to the AO, suggested that the petitioner’s income has escaped assessment. The petitioner responded to the notice and furnished all details to establish that he had discharged his tax liability on the sale consideration received for the subject property and, therefore, no part of the income, which was chargeable to tax, had escaped assessment.
However, the AO did not accept the same and proceeded to pass an order under Section 148A(d) holding that it is a fit case for issuance of notice under Section 148 of the Act. The said order was forwarded to the petitioner along with a notice dated 15.04.2023 issued under Section 148 of the Income Tax Act.
The department submitted that the Revenue has been unable to correct the error, as under the Standard Operating Procedure [SOP], the consent of the buyers is required, along with an indemnity bond and other documents.
On a pointed query, as to why the buyers’ consent would be required, the department submitted that the same would be necessary in order to obviate any action on the part of the buyers to recover the amount of the TDS that had been deposited. She states that although, there is no dispute as to the deposit of the TDS, the petitioner’s case has been withheld only on account of the documents required from the buyers.
The court allowed the petition.
Case Details
Case Title: PARAG KESHAV BOPARDIKAR Versus ITO
Case No.: W.P.(C) 6475/2025 & CM APPL No.29510/2025
Date: 27.05.2025
Counsel For Petitioner: Shashi Mathews
Counsel For Respondent: Debesh Panda
Mariya is the Senior Editor at JurisHour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.
