2017 (7) TMI 1144 - AT - Income Tax

TDS u/s 194I - amount paid towards land rent to AAI - non deduction of tds - funds were not in control of the assessee and the amounts deducted directly from its running accounts bills and the AAI being Govt. Enterprise having been disclosed the said TDS in its accounts - assessee in default - Held that - The assessee is not in default for non-deduction of TDS as the payment alleged to have been paid to AAI was in turn offered by AAI as income in its account and paid the tax. In view of the ratio laid down by the Hon ble High Court of Delhi in the case of NIIT (2009 (9) TMI 42 - DELHI HIGH COURT) we hold that the amounts alleged to have been paid to AAI does not constitute rent therefore the application of provisions under section 194I does not arise at all. Even otherwise we are in agreement with the opinion rendered by the CIT(A) in placing reliance in the case of Hindustan Coca Cola Beverage (2007 (8) TMI 12 - SUPREME COURT OF INDIA ) assessee cannot be held in default as the recipient AAI is a Govt. Public Sector Enterprise which is stated to have offered this receipt to tax. The burden lies on the AO to verify whether the said AAI offered the payment received from the assessee to tax or not. - Decided against revenue TDS u/s 194A - Non-deduction of TDS on interest payments - whether reimbursement of actual expenses made to the Co venture are not subjected to TDS and not covered by section from 194A ? - Held that - In the present case ITD Cementation India Ltd. is a sister concern of the assessee. The said sister concern arranged loan from IDBI to the assessee and the impugned amount is to be paid to IDBI towards bank guarantee commission bank charges and interest by the sister concern and the same were reimbursed by the assessee to its sister concern. There is no element of income in such payments. Therefore we see reason to interfere in the order of CIT(A) and it is justified.- Decided against revenue

Summary

Issues Involved:
1. Deletion of TDS and interest charge under Section 194I of the Income Tax Act, 1961.
2. Deletion of TDS and interest charge under Sections 194A/194H of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

Issue 1: Deletion of TDS and interest charge under Section 194I of the Income Tax Act, 1961

The revenue challenged the CIT(A)'s decision to delete the charge of TDS and interest amounting to ?28,86,995 under Section 194I. The assessee, a joint venture awarded a contract by the Airport Authority of India (AAI) for constructing a new airport terminal, was found to have paid ?2,16,90,806 towards land rent to AAI without deducting TDS. The AO treated the assessee as in default for not deducting TDS, considering the payments as rent.

The assessee argued that the payments were not for exclusive use of land or building but were part of a composite contract for construction, and thus, not liable for TDS under Section 194I. The CIT(A) concurred, noting that the amounts were deducted directly by AAI from the running account bills and that the payments were disclosed by AAI, a government enterprise, in its accounts. The CIT(A) relied on the Supreme Court's decision in Hindustan Coca Cola Beverage (P) Ltd. and the Delhi High Court's decision in CIT vs NIIT, which held that composite agreements cannot be broken up to apply Section 194I.

The Tribunal upheld the CIT(A)'s decision, agreeing that the payments did not constitute rent under Section 194I and that the assessee could not be held in default as the recipient, AAI, had offered the payment to tax. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the revenue's ground.

Issue 2: Deletion of TDS and interest charge under Sections 194A/194H of the Income Tax Act, 1961

The revenue also challenged the deletion of an addition of ?13,44,512 on account of non-deduction of TDS on interest payments. The AO found that the assessee had paid ?1,05,49,032 to ITD Cementation India Ltd., a co-venturer, as reimbursement of expenses including bank guarantee commission, bank charges, and interest, without deducting TDS. The AO treated the assessee as in default.

The assessee contended that these were reimbursements of actual expenses and not subject to TDS, relying on various ITAT decisions and the Calcutta High Court's decision in Dunlop Rubber Co. Ltd. The CIT(A) agreed, noting that the payments were reimbursements and not for services rendered, and thus not liable for TDS. The CIT(A) placed reliance on the ITAT decisions in Grand Prix Fab Pvt. Ltd. and Utility Powertech Ltd., which held that reimbursement of expenses does not attract TDS.

The Tribunal upheld the CIT(A)'s decision, finding that the payments were indeed reimbursements and not for services, and thus not subject to TDS under Sections 194A/194H. The Tribunal saw no reason to interfere with the CIT(A)'s order and dismissed the revenue's ground.

Conclusion:

In conclusion, the Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decisions on both issues. The payments made by the assessee were not considered rent under Section 194I, and the reimbursements to the co-venturer were not subject to TDS under Sections 194A/194H. The Tribunal found the CIT(A)'s orders justified and saw no infirmity in them.