2012 (12) TMI 816 - AT - Income Tax

Prior period expenses paid to Delhi Stock Exchange - disallowance - Held that - For Listing fee for period upto 31.12.2004 of Rs.10,000/- and listing fee of Rs.5000/- each for 2005 and 2006 the assessee had made an application on 17.01.2002 for delisting of its securities from the Delhi Stock Exchange. The application was made on 17.01.2002. The assessee was under the bonafide belief that he has not to make any payment towards the listing fees. Revenue has also not brought on record anything which could show that the listing fee for these years was demanded in earlier years. In view of these facts, the listing fees paid for period upto 31.12.2004, 2005 & 2006 arose and crystallized during the year under consideration. In view of these facts, the total expenditure of Rs.50,000/- (i.e Fees for revocation of suspension of trading of shares of the assessee company w.e.f. 16/12/2004 on 7/6/2007 Rs. 10,000, listing fees upto 31/12/2004 Rs.10,000/-, for 2005 Rs.5,000/-, for 2006 Rs.5,000/- and processing fees of Rs.10,000/- on 30/8/2007 & condonation fees Rs.5,000/- and reinstatement fees Rs.5,000/- on 3/12/2007, as earlier short paid were allowable during the year under consideration as these expenses were first time arose and crystallized during this year. Similarly, the was allowable during the year under consideration itself as these expenses cannot be termed as prior period expenses - in favour of assessee. Non deduction of TDS - parking charges for reserved car parking - Disallowance u/s 40(a)(ia) - 194C v/s 194I - Held that - Car parking comes u/s 194I of the Income-tax Act, 1961 for the applicability of the TDS provisions. However, from the facts, it is found that there is nothing on record which shows that the parking space was earmarked for the assessee - copy of the letter from Bharat Hotels Limited dated 26.04.2007 also did not mention anything about earmarking of the parking slot, it only states that inside the main gate entrance of World Trade Centre. Such arrangements cannot be said as a letting out of land.. It can be only a contract between the two independent parties for allowing vehicle to be parked inside the premises. Therefore, the provisions of section 194I are not applicable. Such payments for contractual obligations can be covered by the provisions of section 194C. Since no tax has been deducted on the payment the provisions of section 40(1)(ai) are applicable - against assessee.

Summary

Issues:
1. Disallowance of expenses paid to Delhi Stock Exchange.
2. Disallowance of parking charges paid to Bharat Hotels Ltd.

Issue 1 - Disallowance of expenses paid to Delhi Stock Exchange:
The assessee made a payment to the Delhi Stock Exchange, with the Assessing Officer allowing only a portion and disallowing the rest as not related to the relevant assessment year. The CIT (A) upheld the disallowance, stating that the amount indeed pertained to earlier years based on documentary evidence provided by the appellant. The appellant argued that the expenses were allowable as they crystallized in the current year and were for business purposes. The ITAT held that certain expenses, such as fees for revocation of suspension of trading and condonation fees, were allowable as they arose and crystallized during the year under consideration. However, listing fees for prior years were also allowed as they were not demanded earlier and crystallized during the current year. Therefore, the total expenditure of Rs.50,000 was deemed allowable for the relevant assessment year.

Issue 2 - Disallowance of parking charges paid to Bharat Hotels Ltd:
The revenue disallowed Rs.60,000 paid to Bharat Hotels Ltd. as parking charges under section 40(a)(ia) of the Income Tax Act, stating it should have been subject to TDS under section 194C. The assessee contended that the payment was deemed rent for parking space, falling under section 194I, and not subject to TDS as the threshold limit was not met. The ITAT noted that there was no evidence showing the parking space was earmarked for the assessee, and the invoice from Bharat Hotels did not specify earmarking. As such, the ITAT held that the provisions of section 194I did not apply, and the payment was considered a contractual obligation falling under section 194C. Since no TDS was deducted, section 40(a)(ia) was applicable, and the disallowance was upheld. The ITAT dismissed the appeal on this ground.

In conclusion, the ITAT partially allowed the appeal, allowing the expenses paid to the Delhi Stock Exchange but upholding the disallowance of parking charges paid to Bharat Hotels Ltd.