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2012 (8) TMI 525 - AT - Income TaxTDS on rent - demand and interest being raised u/s 201(1) and 201(1A) determining TDS remitted by the assessee on lease rent of Rs. 9 Crores p.a. as against the lease rent of Rs. 6 Crores p.a. paid by the assessee - assessee made provision for 9 crores in books of ccount for lease rentals on ground of non determination of rent at 6 crores or 9 crores in view of differences amongst the members of the land lord s family - added back entire sum of Rs. 9 crores debited to its P/L A/c for year ended 31.03.07 and offered the same to tax - lease agreement dt.1.12.2007, agreed for 6 crores p.a. - assessee reversed the provision for lease rent to the extent of Rs. 3 Crores and remitted the TDS applicable on the actual lease rent of Rs. 6 Crores with interest for delayed remittance Held that - It is the income which determines the extent or amount of tax to be deducted at source. Income sought to be taxed by taxing statutes is always the real income. In the instant case, it is clear that the lease rent for the relevant period was fixed at Rs. 6 Crores p.a.. Assessee has only claimed Rs. 6 Crores as an expenditure and that too in the period relevant to AY 08-09 when the rent payable was agreed upon. Land lord was also entitled to receive only Rs. 6 Crores as lease rent for the period relevant to AY 2007-08. Contention that TDS ought to be made on Rs. 9 Crores and not on Rs. 6 Crores, is both absurd and untenable. Difference of Rs. 3 Crores on which Revenue is seeking TDS and also interest thereon is not anybody s expenditure or income. Further, contention that following the Mercantile System of Accounting, the lease rent falls due every month by virtue of a contractual obligation and hence the period of delay should be reckoned from the date on which the rent falls due for each of the months, does not hold good as the provision of section 194-I very clearly state that the liability to deduct TDS arises only and only when an assessee makes payment of rent or when the assessee debits rent as an expenditure in the books of accounts, whichever is earlier - Decided in favor of assessee.
Issues Involved:
1. Dispute over the determination of TDS and interest on delayed payment of TDS based on lease rent amount. 2. Interpretation of provisions under section 194-I of the Income Tax Act, 1961. 3. Assessment of actual lease rent for TDS deduction and interest calculation. 4. Consideration of accounting standards and real income for tax deductions. 5. Evaluation of the timing of TDS remittance and accounting entries. Analysis: Issue 1: Dispute over TDS Determination and Interest Calculation: The case involved a disagreement between the Revenue and the assessee regarding the amount of TDS to be deducted on lease rent. The Revenue contended that TDS should be calculated on Rs. 9 Crores, while the assessee argued for Rs. 6 Crores. The Revenue also challenged the interest calculation based on the higher amount. The CIT(A) granted partial relief to the assessee, which led to the Revenue appealing before the Tribunal. Issue 2: Interpretation of Section 194-I: The main contention revolved around the interpretation of section 194-I of the Income Tax Act, 1961, which deals with TDS on rent payments. The Revenue argued that TDS should be based on the higher amount provided in the profit and loss account, while the assessee maintained that TDS should be calculated on the actual agreed-upon rent of Rs. 6 Crores per annum. Issue 3: Assessment of Actual Lease Rent for TDS Deduction: The Tribunal analyzed the facts and found that the actual lease rent agreed upon between the assessee and the land lords was Rs. 6 Crores per annum. The Tribunal emphasized that the real income and expenditure should determine the TDS amount, rather than mere book entries. It was established that the assessee had acted in good faith by adding back the entire sum of Rs. 9 Crores to its income and paying tax on the same. Issue 4: Consideration of Accounting Standards and Real Income: The Tribunal highlighted the importance of considering actual lease agreements and real income for tax deductions. It was clarified that the TDS should be based on the agreed-upon rent of Rs. 6 Crores, as reflected in the lease agreement, rather than on a provision made in the books of account for prudence. Issue 5: Evaluation of Timing of TDS Remittance and Accounting Entries: The Tribunal examined the timing of TDS remittance and accounting entries to determine the correct amount for TDS deduction. It was noted that the assessee had reversed the provision for lease rent and remitted TDS on the actual agreed-upon amount after reaching an agreement with the land lords, demonstrating compliance with tax regulations. In conclusion, the Tribunal upheld the order of the CIT(A) and dismissed the Revenue's appeal, emphasizing the importance of considering actual lease agreements and real income for TDS deductions and interest calculations under the Income Tax Act.
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