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2023 (12) TMI 329 - AT - Income TaxAddition u/s 40(a)(ia) - non deduction of TDS on expenses relating to rent reimbursed to holding company - AR submitted that the assessee is paying rent to its holding company and in respect of premises taken by the holding company on rent paid is claimed as reimbursement since several years. This position has been accepted by the department in the proceedings and subsequent assessment years and never disputed even when the provision for TDS inserted on the statute since 1994 by inserting section 194-I of the I.T. Act, 1961 was in Act w.e.f. 01.06.1994 - HELD THAT - The assessee is a subsidiary of holding company entered into lease agreement and applicable tax deducted at source by depositing thereon. As the assessee was occupying part of the said rented property and reimbursing its holding company towards rent partially. In the present case, the assessee is paying rent to the holding company as reimbursement since last couple of years. This position has been accepted by the department all through and it has been never disputed even when provisions for TDS were inserted on statute since 1994, section 194-I of the Act was inserted in Act w.e.f. 01.06.1994. Similarly, this position was not disputed even after amendment in section 40(a)(ia) of the Act by the Taxation Law (Amendment) Act, 2006 which is w.e.f. 01.04.2006. On this issue, there is no material change in the facts and circumstances of the case as well as the law during the year under consideration. AR placed before us the copy of lease deed which provided for use of the premises by subsidiary companies. The actual payments are made by the lessee (holding company) to the lessor and necessary tax was deducted there from. Further, the holding company also did not debit the whole rent to its books of account. It has only debited the rent which pertains to the part of the premises occupied by assessee. In such a situation, in our considered opinion, there is no lessor and lessee relationship between the holding company and the present assessee where the provisions of section 194-I are applicable. Keeping in view, on the facts of the case and following the decision rendered in the case of ACIT, Circle-15(1) vs M/s. Result Service Pvt. Ltd. 2012 (7) TMI 217 - ITAT DELHI - Accordingly, we direct the AO to delete the addition made u/s 40(a)(ia) - Appeal of the assessee allowed.
Issues involved:
- Disallowance of rent expenses Disallowance of rent expenses: The appeal was against the sustaining of the addition of Rs. 15,98,400/- made under section 40(a)(ia) of the Income-tax Act, 1961. The assessee had claimed expenses on rent without deducting TDS as required under the Act. The AO disallowed the expenses on the grounds of non-compliance with TDS provisions. The assessee contended that the rent paid to its holding company was reimbursement for premises taken on rent by the holding company, a position accepted by the department in previous years. The lease deed between the subsidiary and holding company provided for the use of premises by the subsidiary, with actual payments made by the holding company after deducting necessary tax. The holding company did not debit the entire rent to its books, only debiting the portion relating to the premises occupied by the assessee. The Tribunal found no lessor and lessee relationship between the holding company and the assessee, therefore ruling that the provisions of section 194-I were not applicable. Citing a similar precedent, the Tribunal directed the AO to delete the addition under section 40(a)(ia) and allowed the appeal of the assessee. *Decision:* The Tribunal allowed the appeal, directing the deletion of the addition made under section 40(a)(ia) of the Act.
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