9911796707
TMI Blog2004 (5) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the assessee, it was noticed that it had paid a sum of Rs. 2,22,000 to the lessor as interest-free deposit. The ITO (TDS) was of the view that the said deposit was nothing but rent paid in advance by the assessee. In this connection, the ITO referred to cl. 4 of the lease agreement. It was explained by the assessee that the security deposit was adjustable against rent only at the end of the lease period for which 3 months' notice was required to be given for vacating the premises. The ITO considered this to be an afterthought and levied the impugned penalty on account of the failure on the part of the assessee to deduct tax at source under s. 194-I of the Act from the security deposit. 3. The CIT(A) was also of the view that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence the penalty should be cancelled. 4. The learned Departmental Representative, relying on the orders of the lower authorities, submitted that the payment of Rs. 2,22,000 was nothing but payment of advance rent and the same had always remained with the lessor. It was contended that this was a device adopted by the assessee to defraud the Revenue. 5. We have duly considered the rival contentions and the material on record. As per s. 194-I of the Act any person other than individual and HUF, who is responsible for paying to a resident any income by way of rent, is liable to deduct tax at source at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or issue of cheque or draft or by any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntire deed as a whole, the intention of the parties appears to be that the deposit will be adjusted only when the lessee finally decides to vacate the premises forever. Simply because the lease was on year-to-year basis, renewable every year, it did not imply that every year the lessor should refund the deposit and the lessee should again place the deposit with the lessor. In other words, if the lease period was renewed from year-to-year, the parties had thought it to be impracticable to refund and place back the deposit every year. To simplify it further, on renewal of lease, the deposit was deemed to have been refunded and placed again with the lessor. Therefore, in our considered view, the deposit placed by the lessee was not rent paid i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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