2020 (10) TMI 415 - AT - Income Tax

TDS u/s 194I - Addition u/s 40(a)(ia) - non-deduction of TDS on rent paid to Royal Yacht Club - benefit of circular CBDT circular No.5 of 2002 dated 30-07-2002 - CIT(A) confirmed the addition by holding that the assessee has paid accommodation charges for the hotel accommodation which is on regular basis from the club without deduction of TDS - HELD THAT - Accommodation was booked by the assessee in the club not on a regular basis but on casually and occasionally as and when the foreign consultants visits the assessee in connection with assessee s business. We are quite convinced with the arguments of Assessee that this accommodation is occasional/ casual as no specific accommodation is earmarked and the same is made available to the assessee on the availability basis. In our opinion, the case is squarely covered by the decision of Red Chillies Entertainment Pvt. Ltd. 2017 (3) TMI 333 - ITAT MUMBAI as held nothing has been brought before us to show that assessee had entered into any prior contract with the hotels for any specific room or rooms for any specific rates or rooms for any specific period. The rooms were hired on as and when available basis at the regular tariff rates subject to the discounts as agreed at the time of booking of rooms. Under these circumstances, the assessee deserves to be given the benefit of the circular No.5 of 2002 dated 30-07-2002 issued by the Board providing that under these circumstances, TDS will not be required to be made u/s 194I. - Decided in favour of assessee.

Summary

Issues:
Confirmation of addition under section 40(a)(ia) for non-deduction of TDS on rent paid to Royal Yacht Club.

Analysis:
The appeal by the assessee was against the order of the CIT(A) concerning Assessment Year 2013-14. The main issue raised was the confirmation of the addition of ?468,543 by the CIT(A) under section 40(a)(ia) for non-deduction of TDS on rent paid to the Royal Yacht Club. The assessee argued that the payment made was not rent but accommodation charges for non-resident consultants who visited for auctions. The assessee contended that the accommodation was booked on a casual/occasional basis and not regularly. The assessee also referred to Circular No. 5 dated 30th July 2012 issued by CBDT to support their case. The Assessing Officer disallowed the amount for non-deduction of TDS, which was confirmed by the CIT(A) based on the regular booking of the accommodation. The CIT(A) held that the provision of section 194(I) applied as the accommodation was taken on a regular basis. However, the appellate tribunal noted that the accommodation was booked casually and occasionally as per the business requirements when foreign consultants visited. The tribunal relied on a similar case precedent where TDS was not required for hotel expenses incurred on an as-and-when-available basis. The tribunal emphasized that the Circular clarified that TDS is applicable when accommodation is taken on a regular basis with specific earmarked rooms, which was not the case here. Consequently, the tribunal allowed the appeal, setting aside the disallowance made by the CIT(A) and the Assessing Officer.

In conclusion, the tribunal allowed the appeal of the assessee, emphasizing that the accommodation was not taken on a regular basis, as required by section 194(I) for TDS applicability. The tribunal's decision was based on the casual and occasional nature of the accommodation booking for business needs, aligning with the Circular's guidelines. The tribunal's ruling overturned the CIT(A) and Assessing Officer's decision, deleting the disallowance of the amount in question.