2022 (4) TMI 1482 - AT - Income Tax

TDS u/s 194IA - compensation for temporary alternative accommodation paid to the Society members - Payment on transfer of certain immovable property other than agricultural land - HELD THAT - As decided in in case of M/s. Sahana Dwellers Pvt. Ltd 2016 (3) TMI 591 - ITAT MUMBAI on a plain reading of the aforesaid definition of rent, it becomes clear that the payment made by the assessee does not come within the purview of rent as prescribed in the said provision as the assessee is not making such payment for use of any land, building, etc. On the contrary, if the facts involved are considered as a whole the payment made by the assessee is nothing else but in the nature of compensation. Tribunal in case of Jitendra Kumar Madan 2012 (5) TMI 316 - ITAT MUMBAI while considering the nature of payment received for alternative accommodation by the recipients held such payments at their hand as income from other sources instead of income from house property. That being the case, the payment made by the assessee also being in the nature of compensation for alternative accommodation cannot be treated as rent. Such compensation cannot be treated as rent for the simple reason that not only the assessee is not using any land and building but it may also be a fact that persons to whom such payments have been made may not be incurring any expenditure on account of rent. In any case of the matter, payments made by assessee under no circumstances can be construed to be coming within the meaning of Rent as provided under section 194I. Thus, we are of the considered opinion that compensation paid by the assessee to the tenants towards alternative accommodation not being in the nature of rent as defined in section 194I, there is no requirement for deduction of tax under the said provisions. Therefore, the disallowance made u/s 40(a)(ia) of the Act cannot be sustained. Consequently, we delete the addition made on that account. Grounds raised by the assessee are allowed.

Summary

Issues:
1. Disallowance/addition under section 40(a)(ia) of the Income-tax Act, 1961.
2. Applicability of section 194-IA to compensation for temporary alternative accommodation.
3. Opportunity of hearing and rebutting different views.
4. Interest levied under section 234B/C.

Analysis:

Issue 1: Disallowance/addition under section 40(a)(ia)
The appellant contested the disallowance of Rs. 41,81,760 under section 40(a)(ia) due to non-deduction of TDS on rent expenses paid to society members. The AO held that TDS was required as per the re-development agreement terms. The appellant argued it was compensation, not rent, thus not subject to TDS. CIT(A) upheld the disallowance citing section 194-IA introduced in 2013. The ITAT referred to similar cases and ruled in favor of the appellant, stating the payment was compensation, not rent, hence no TDS deduction required.

Issue 2: Applicability of section 194-IA
CIT(A) applied section 194-IA to the compensation paid, requiring TDS deduction. The ITAT disagreed, citing the nature of the payment as compensation, not rent, and thus not falling under section 194-IA. The ITAT relied on precedent and set aside CIT(A)'s order, deciding in favor of the appellant.

Issue 3: Opportunity of hearing and rebutting views
The appellant argued that CIT(A) did not provide an opportunity to rebut the view on section 194-IA applicability. The ITAT did not find section 194-IA applicable and ruled in favor of the appellant based on precedent.

Issue 4: Interest levied under section 234B/C
The appellant's ground regarding interest levied under section 234B/C was not addressed by CIT(A). However, the ITAT's decision in favor of the appellant rendered this issue moot.

In conclusion, the ITAT allowed the appeal, ruling in favor of the appellant based on the nature of the payment as compensation, not rent, and the inapplicability of section 194-IA. The decision was supported by precedent and the lack of opportunity to rebut the differing view on section 194-IA. The disallowance under section 40(a)(ia) was overturned, and the interest issue was rendered irrelevant by the ITAT's decision.