2014 (12) TMI 1323 - AT - Income Tax

TDS u/s. 194-I - rent paid to Kolkata Port Trust (KPT) - Held that - We are of the view that in the instant case no tax was deductible at source under section 194-I read with section 204 comprised in Chapter XVII-B from the rent paid by the assessee to KPT. This is because such rent was not to be included in the taxable total income of the KPT and was, therefore, not chargeable under the provisions of the Act. In the instant case, KPT was not required to pay any tax and in turn the assessee cannot be treated to be in default within the meaning of section 201(1). Accordingly, we are of the view that no disallowance ought to have been made under section 40(a)(ia) of the Act. In the instant case no tax was deductible at source under section 194-I read with section 204 comprised in Chapter XVII-B from the rent paid by the assessee to KPT. This is because such rent was not to be included in the total income of the KPT and was, therefore, not chargeable under the provisions of the Act. In the case law referred by Ld. Sr. DR the fact relating to the claim of exemption of the income of KPT was not before Tribunal or that issue was not raised but in the instant case, KPT was not required to pay any tax and in turn cannot be treated to be in default within the meaning of section 201(1). Accordingly, we are of the view that no disallowance ought to have been made under section 40(a)(ia) of the Act. - Decided in favour of assessee

Summary

Issues:
Disallowance of expenditure for non-deduction of TDS u/s. 194-I of the Income-tax Act, 1961 on rent paid to Kolkata Port Trust (KPT).

Analysis:
The appeal by the assessee was against the order of CIT(A), confirming the disallowance of expenditure for non-deduction of TDS u/s. 194-I of the act on rent paid to KPT. The AO disallowed the expenditure debited on account of rent by invoking section 40(a)(ia) of the Act. The assessee argued that as KPT is a Public Charitable Trust registered u/s. 12AA of the Act, no TDS was required. The Tribunal noted that KPT was assessed as a charitable institution and its income was exempt from tax. The obligation to deduct tax from payments to residents is only for sums chargeable under the Act. The Tribunal referenced relevant sections and case law to support the view that no tax was deductible from the rent paid to KPT as it was not chargeable under the Act.

The Tribunal further explained that as KPT was not required to pay any tax for the relevant assessment year, the assessee could not be treated as in default under section 201(1) of the Act. Referring to case law, the Tribunal emphasized that the disallowance under section 40(a)(ia) was not justified. The Tribunal differentiated the present case from a previous decision where a similar issue was decided in favor of the revenue, highlighting the specific circumstances of the case at hand. Ultimately, the Tribunal allowed the appeal of the assessee, stating that no disallowance should have been made under section 40(a)(ia) of the Act.

In conclusion, the Tribunal ruled in favor of the assessee, emphasizing that no tax deduction was required on the rent paid to KPT as it was not chargeable under the provisions of the Act. The decision was based on the charitable status of KPT and the specific legal provisions governing tax deduction at the source.