The Income Tax appellate tribunal (ITAT) , Delhi Bench granted relief to BIBA Apparels Private Ltd. Company and held that Common Area Maintenance was not part of rent hence there is no default by the assessee for filing Tax Deduction at Source (TDS).
Assesee BIBA Apparels Private Ltd., company make an agreement with Ambience group for business purpose and make payment one for rent and the other for maintenance charges while making the assessment the assessing officer noted that this arrangement has been made to avoid the higher deduction of TDS rate and pass an order under section 201(1) and 201(1A) of the Income Tax Act 1961. Against this order assesse filed an appeal before ITAT.
Under section 201(1) Income Tax Act 1961 when the company or the principal officer did not deduct TDS or failed to pay tax after deducting they shall be considered to make a default tax payment.
Counsel for the Assessee Vishal Kalra contended that there was a separate clause of ‘payment of rent’ and payment of common area maintenance charges. Payments could not be mixed for attracting the provisions of TDS. As per the certificate issued by the TDS officer, the assessee has deducted TDS at 2% which is sufficient to comply with the provisions of the Income Tax Act, 1961.
Counsel for the revenue Kanav Bali, contented that payments received by Ambience group are split into two companies of the same group on single contract one for rent and the other for maintenance charges. Assesse make the agreement to avoid the higher deduction of TDS rate.
After considering the contentions of the both parties The Division bench of ITAT Delhi comprising Anil Chaturvedi, Accountant Member, and C.M. Garg, Judicial Member, allowed the appeal and held that Payments of rent and common area maintenance charges have been made to distinct companies, therefore, the authorities below was not right in creating the impugned liability payable by the assessee firm under the provisions of subsections (1) and (1A) of section 201 of the Income Tax Act 1961.
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