2016 (1) TMI 1184 - AT - Income Tax

TDS u/s 194I - Disallowance u/s.40(a)(ia) - non deduction of tds on amount paid for maintenance of Nala Park Garden/Osho Teerth Garden where advertisement board of the assessee company are displayed - Held that - Since in the instant case the assessee has paid an amount of ₹ 15 lakhs to Shunyo Foundation for maintenance of Nala Park Garden which belongs to Osho Ashram and the park is open to the public at large and since the assessee does not have any possessory control over the said land, therefore, the provisions of section 194I, is not applicable to the facts of the present case. The amount of ₹ 15 lakhs paid by the assessee is for publicity and is an allowable expenditure on account of commercial expediency. Merely because the assessee has displayed the said advertisement board to display the Osho Time Magazines and books that are printed and published by the assessee, the same in my opinion cannot be a ground to invoke the provisions of section 194I for the amount paid to Shunyo Foundation, which incurs the expenditure for maintenance of that park. The Assessing Officer, has wrongly invoked the provisions of section 194I - Decided in favour of assessee.

Summary

Issues:
Disallowance of Rs. 15 lakhs u/s.40(a)(ia) for violation of provisions of section 194I.

Analysis:
1. The appeal was against the disallowance of Rs. 15 lakhs u/s.40(a)(ia) by the Assessing Officer and upheld by the CIT(A) for the Assessment Year 2005-06.
2. The Assessing Officer observed that the assessee company paid Rs. 15 lakhs as sponsorship to Shunyo Foundation for maintaining Nala Park Garden, where the company's advertising boards were displayed. The AO contended that the company should have deducted tax u/s.194I, which it failed to do, leading to the disallowance.
3. The CIT(A) upheld the disallowance, stating that the payment was essentially for displaying magazines and books, not maintenance, and the company benefited from advertising in the park. The CIT(A) dismissed the appeal, emphasizing the need for tax deduction u/s.194I.
4. The Tribunal considered the arguments and legal provisions. It noted that the company did not have possessory control over the public garden and cited a Bombay High Court case emphasizing the element of possession for rent under section 194I.
5. The Tribunal found that since the company paid for maintenance of a public garden open to all without possessory control, section 194I did not apply. The payment was deemed for publicity and commercial expediency, not rent, leading to the allowance of the appeal and the deletion of the addition.
6. The Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to delete the disallowance, concluding that the payment to Shunyo Foundation was not subject to section 194I.

This detailed analysis highlights the key arguments, legal interpretations, and the final decision of the Tribunal in favor of the assessee, providing a comprehensive understanding of the judgment.