2017 (9) TMI 241 - AT - Income Tax

Seeking relief that assessee may not be treated as assessee in default u/s 201(1) - TDS u/s 194I - payment of lease rent - annual maintenance charges paid by the assessee to Yamuna development express authority - tds liability - demand under section 201 (1) and section 201(1A) - Held that - This issue is now squarely covered in favour of the revenue by the decision of Hon ble Delhi High Court in Rajesh Projects (India) (P.) Ltd. v. Commissioner of Income-tax (TDS)-II 2017 (2) TMI 1109 - DELHI HIGH COURT where in it has been held that amounts constituting annual lease rent, expressed in terms of percentage (e.g. 1%) of the total premium for the duration of the lease, are rent, and therefore subject to TDS. Since the petitioners could not make the deductions due to the insistence of GNOIDA, a direction is issued to the said authority (GNOIDA) to comply with the provisions of law and make all payments, which would have been otherwise part of the deductions, for the periods, in question, till end of the date of this judgment. Now if the assessee wishes to take benefit of the proviso to section 201 of the income tax act, then it is for the assessee to furnish necessary detail, so that assessee cannot be treated as assessee in default with respect to the amount of tax deductible. As the proviso added to section 201 is for mitigating any hardship therefore we set aside the issue to the file of the assessing officer with a direction to the assessee to furnish necessary detail is provided therein and to deposit necessary interest under section 201(1A) of the act in accordance with the law.- Decided in favor of revenue and partly in favor of assessee. TDS u/s 194A - payment of interest on deferred payment of EDC lease premium - payment of interest to YEIDA - Held that - As decided in CIT (TDS) Vs. Canara Bank 2016 (5) TMI 570 - ALLAHABAD HIGH COURT while deciding the issue on payment of interest to Noida has held that authorities constituted by the State Act are entitled to exemption of payment of tax at source u/s 194A of the Act.Therefore ,TDS u/s 194A is not required to be deducted on interest payment to Yamuna Development Authority - Decided in favor of assessee. TDS u/s 194H - deduction of tax at source on bank guarantee commission - withholding tax - assessee acting not as an agent but on principle-to-principle basis - Held that - The bank guarantee commission is not subject to withholding tax u/s 194H of the Act as it does not fall into Clause (i) of the Explanation of Section 194H. As decided by Hon ble Delhi High Court in case of CIT Vs. Living Media India Ltd dated 06.05.2008 - Decided in favor of assessee

Summary

Issues Involved:
1. Deduction of Tax at Source (TDS) on lease rent under Section 194I of the Income Tax Act, 1961.
2. TDS on interest on deferred payment of External Development Charges (EDC) lease premium under Section 194A.
3. TDS on bank guarantee commission under Section 194H.
4. TDS on interest on non-convertible debentures under Section 194A.

Detailed Analysis:

1. TDS on Lease Rent (Section 194I):
The Revenue contended that the lease rent paid by the assessee is covered under the provisions of Section 194I of the Income Tax Act, 1961, which mandates TDS on rent. The CIT(A) had deleted the demand, but the Revenue argued that the clauses in the lease deed clearly establish the assessee as a lessee. The Tribunal referred to the decision of the Hon’ble Delhi High Court in Rajesh Projects (India) (P.) Ltd. v. CIT (TDS)-II, which held that amounts constituting annual lease rent are subject to TDS under Section 194I. Consequently, the Tribunal allowed the Revenue's appeal on this ground. The Tribunal further directed the assessee to provide necessary details to the Assessing Officer to benefit from the proviso to Section 201, which mitigates hardship by allowing the deductor to furnish a certificate that the deductee has filed a return and paid tax thereon.

2. TDS on Interest on Deferred Payment of EDC Lease Premium (Section 194A):
The Revenue argued that the interest on deferred payment of EDC lease premium paid to YEIDA should be subject to TDS under Section 194A. However, the Tribunal noted that this issue is covered in favor of the assessee by the decision of the Hon’ble Allahabad High Court in CIT (TDS) Vs. Canara Bank, which held that authorities constituted by a State Act are entitled to exemption from TDS under Section 194A. Since YEIDA is constituted by a State Act, the Tribunal dismissed the Revenue's appeal on this ground.

3. TDS on Bank Guarantee Commission (Section 194H):
The Revenue contended that the bank guarantee commission paid by the assessee should be subject to TDS under Section 194H. However, the Tribunal upheld the CIT(A)'s decision, which followed the Hon'ble Delhi High Court's ruling in CIT Vs. Living Media India Ltd., stating that bank guarantee commission is not subject to TDS as it does not fall under the explanation of Section 194H. The Tribunal emphasized that the transaction is on a principal-to-principal basis, not an agency relationship. Therefore, the Tribunal dismissed the Revenue's appeal on this ground.

4. TDS on Interest on Non-Convertible Debentures (Section 194A):
For the assessment years 2012-13 and 2013-14, the Revenue appealed on the issue of TDS on interest paid on non-convertible debentures. The Tribunal noted that this issue is covered by the same principles applied in the case of TDS on interest on deferred payment of EDC lease premium. Since the interest payment to YEIDA is exempt from TDS under Section 194A, the Tribunal dismissed the Revenue's appeal on this ground.

Conclusion:
The Tribunal's judgment resulted in a mixed outcome. The appeals of the Revenue concerning TDS on lease rent were allowed, requiring the assessee to comply with Section 194I. However, the appeals concerning TDS on interest on deferred payment of EDC lease premium and bank guarantee commission were dismissed, upholding the CIT(A)'s deletion of demands. The Tribunal also dismissed the assessee's appeals regarding short deduction of tax on rent payments, reinforcing the applicability of Section 194I based on the Delhi High Court's decision. The Tribunal directed the Assessing Officer to grant the benefit of the proviso to Section 201 if the assessee provides the necessary details.