2016 (11) TMI 528 - AT - Income Tax

TDS u/s.194-I - non tds on rent expenses - wrong provisions adopted - Held that - Payment to ACBPL does not fall under the Rent expenses because ACBPL is a business developer appointed by the assessee and as per the agreement ACBPL is providing multiple services relating to stock market and working on behalf of the assessee and more so, most of the expense incurred on the office premises of ACBPL are reimbursed by the assessee. Certainly, such kind of arrangement does not fall within the ambit of rent expenses and, therefore, assessee has rightly deducted TDS by bifurcating the payments made to ACBPL under the head brokerage, fees for providing technical services and reimbursement of expense and has duly deducted TDS on all these payments under the correct provisions of Income Tax Act. Similarly, payment incurred on lease line expenses and VSet charges also do not fall under the category of rent expenses because the machineries and equipments used for providing these services are shared by many stock-brokers and, therefore, the assessee has rightly deducted TDS u/s.194-C. We are, therefore, of the view that the ld.AO erred in observing that the assessee has not deducted TDS u/s.194-I of the Act as the assessee has deducted and deposited TDS under the correct provisions of the Act, i.e. u/s.194-J & 194- C respectively and, therefore, no disallowance is called u/s.40(a)(ia) of the Act. - Decided in favour of assessee

Summary

Issues:
- Disallowance of expenses under section 40(a)(ia) of the Income Tax Act, 1961 for non-deduction of TDS on rent paid to specific entities.
- Appeal by Revenue against the order of CIT(A) regarding deletion of additions of certain amounts under section 40(a)(ia).

Analysis:

Issue 1: Disallowance of Expenses under Section 40(a)(ia) for Non-Deduction of TDS on Rent Paid

The appellant, a limited company engaged in shares and stock broking, faced scrutiny assessment for Asst. Year 2009-10. The Assessing Officer disallowed expenses under section 40(a)(ia) totaling to &8377; 85,51,845/- due to non-deduction of TDS on rent payments to specific entities. The CIT(A) partially allowed the appeal, leading to the Revenue's appeal before the Tribunal. The Tribunal analyzed the nature of payments made, focusing on whether they constituted rent or other charges. The Tribunal referred to precedents and held that the appellant had correctly deducted TDS under relevant provisions of the Act. The Tribunal emphasized that the payments were not solely for rent but included various services, leading to the conclusion that no disallowance was warranted under section 40(a)(ia).

Issue 2: Appeal Against Deletion of Additions under Section 40(a)(ia)

The Revenue challenged the CIT(A)'s decision to delete additions of &8377; 70.18 lacs and &8377; 11.51 lacs under section 40(a)(ia) related to management charges and lease line rent payments. The Tribunal noted that the grounds raised were similar to a previous case for Asst. Year 2008-09, where the Tribunal had ruled in favor of the assessee. Citing the previous decision, the Tribunal upheld the CIT(A)'s order, emphasizing that the appellant had correctly deducted TDS under the relevant provisions of the Act. The Tribunal dismissed the Revenue's appeal, affirming the deletion of the additions under section 40(a)(ia).

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the additions under section 40(a)(ia) based on the correct deduction of TDS by the appellant. The Tribunal relied on precedents and the nature of payments to determine that no disallowance was warranted.