2017 (11) TMI 1140 - AT - Income Tax

Non deduction of tds - agreement with Vodafone for extending certain space facility for which the company agreed to pay rent and besides that deposit for security purpose - Held that - The assessee entered into an agreement with Vodafone for extending certain space facility and the said company agreed to pay the rent of ₹ 60,000/- per month besides security deposit. According to the assessee out of ₹ 11,61,000/- received from Vodafone, ₹ 7,20,000/- was received towards rent which was offered to tax and the remaining amount was received towards security. The authorities below have treated the remaining amount as revenue receipt for the reason that the assessee had claimed TDS of ₹ 1,16,100/- in computation of income. As per the AO the authorized representative of the assessee failed to explain as to why the company Vodafone deducted the tax at source on the entire payment if the part of it was towards security. On the other hand the Ld. CIT(A) affirmed the action of AO holding that the assessee has failed to reconcile the balance with the liability shown in the balance sheet to substantiate its plea. So, in our considered view before making addition of the amount in question, AO should have verified the facts to establish that the entire amount was revenue receipt. Under these circumstances we are of the considered view that further verification of the facts by the AO in the light of the contention of the assessee is necessary. Hence, we set aside the findings of the Ld. CIT(A) and restore the issue back to the file of AO to decide the same afresh - Appeal filed by the assessee allowed for statistical purposes.

Summary

Issues:
1. Addition on account of alleged refundable security deposit accepted against future damage - No revenue implication - No addition.
2. Levy of Penal Interests.

Analysis:
1. Addition on account of alleged refundable security deposit:
The appellant, a cooperative housing society, had income from interest sources and filed a return declaring total income. During scrutiny, the AO made an addition based on AIR information revealing an amount received from Vodafone, which the appellant did not fully offer for tax. The appellant contended that the deposit taken as security should not have revenue implications and disputed the addition. The Ld. CIT(A) confirmed the addition, leading to the appeal before the Tribunal. The Tribunal observed discrepancies in the balance sheet items and the appellant's failure to reconcile the balance with liabilities. The AO and CIT(A) treated the remaining amount from Vodafone as revenue receipt due to claimed TDS. However, the Tribunal found the need for further verification by the AO to establish the entire amount as revenue receipt. Consequently, the Tribunal set aside the CIT(A)'s decision and remanded the issue to the AO for fresh consideration, emphasizing providing a reasonable opportunity to the appellant for presenting their case.

2. Levy of Penal Interests:
The appellant denied liability for penal interest, but this issue was not extensively discussed in the judgment as the primary focus was on the addition related to the alleged refundable security deposit. The Tribunal's decision primarily revolved around the first issue, and the appeal was allowed for statistical purposes, indicating a limited discussion on the levy of penal interests. The Tribunal's detailed analysis and decision mainly centered on the disputed addition, highlighting the need for proper verification and consideration of the appellant's contentions by the AO.