A two-judge bench of the Allahabad High Court has held that the TDS under Section 194I of the Income Tax Act, 1961 must be deducted by the tenant before remitting such rent.
The bench comprising Justices Bharati Sapru and Vivek Varma was hearing an appeal where the Revenue Department challenged the action of ITAT in deleting the penalty of Rs.7,55,18,885/- imposed u/s 271-C being sum equal to amount of tax which the assessee failed to deduct on lease rent and interest paid to Yamuna Expressway Industrial Development Authority amounting to Rs.7,55,18,885/- u/s 194-I & 194-A.
The ITAT had held that there was sufficient/reasonable cause as contemplated u/s 273-B for the assessee’s failure to deduct tax at the source without upsetting/reversing the finding recorded by AO in the penalty order passed u/s 271-C.
The bench held that “the Tribunal has deleted the penalty imposed on assessee giving it the benefit of the provisions of section 273-B, which provides that in case of a reasonable cause, penalty otherwise, exigible u/s 271-C could not be imposed. The Tribunal came to the conclusion that in the facts of the case, no addition of tax at source could make prior to the year of survey and no other order against the assessee required deduction of tax at source at that time when the assessee made payment of lease rental, was existing. The judgment of Delhi High Court with regard to lease money being treated as rent was only delivered on Feb 16, 2017, casting an obligation on the assessee to make a deduction of tax at source on these rents also.”
The bench further noted the Apex Court decision in the case of New Okhla Industrial Development Authority (No.2) Versus Commissioner Of Income Tax (Appeals) And Others wherein it was held that the word ‘rent’ means any payment by whatever name called under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land and came to the conclusion that lease money or annual rent is rent within the meaning of section 194-I.
“In view of the same, this Court is of the opinion that the matter requires fresh consideration by the Tribunal,” the bench said.
Subscribe Taxscan Premium to view the Judgment
