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TMI Blog2017 (5) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... is an entity governed by section 12A of the Act had obtained certificate u/s 197 of the Act for non-deduction of tax at source on rental receipts from the tenants. Since, the income of the recipient M/s. TTD is exempt from tax and also fact that the recipient has obtained no deduction certificate u/s 197 of the Act, the assessee not obliged to deduct tax at source on the impugned payments - appeal dismissed - decided against Revenue. - I.T.A.No.130, 131 & 132/Vizag/2013 - - - Dated:- 28-4-2017 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri M.N. Murthy Naik, DR For The Respondent : Shri K.J.D. Srinivas, AR ORDER PER BENCH: These three appeals filed by the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee submitted that the A.O. was erred in treating the assessee as an assessee in default u/s 201(1) of the Act, despite the fact that the recipient of rent M/s. TTD is exempt from deduction of tax at source on rental payments by virtue of certificate obtained u/s 197 of the Act, from the assessing officer. The assessee further submitted that the Directors of the company had obtained a license from M/s. TTD for running hotel at Tirumala hills and the license has been assigned to the company for operating the hotel. The company is carrying on the business of running and maintenance of hotel in the said premises at Tirumala hills and the income from which has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the payer of the impugned amount need not have to deduct tax at source in so far as such payments are concerned, as such tax had already been discharged by recipient himself. Accordingly, opined that the assessee was not an assessee in default in so far as the impugned deduction of tax is concerned for all the assessment years are concerned. Aggrieved by the CIT(A) order, the revenue is in appeal before us. 5. The Ld. D.R. submitted that on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that there was no TDS liability on the payments made to TTD in the hands of the assessee company. The D.R. further submitted that the Ld. CIT(A) ought not to have relied upon the decision of Hon ble Supreme Couir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the materials available on record and gone through the orders of the authorities below. The A.O. held the assessee as an assessee in default u/s 201(1) of the Act, towards rental payments made to M/s. TTD, on the ground that the impugned payments are in the nature of constructive payments made to the directors of the company for use of license, which falls under the meaning of rent as defined u/s 194I of the Act. According to the A.O., though the assessee has directly made payments to M/s. TTD, the license is in the name of the individual directors in turn, which was assigned to the company for operating hotel, therefore, the said arrangement between the directors and the company is in the nature of sub-leasing which falls within the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of tax at source on rental receipts from the tenants. Since, the income of the recipient M/s. TTD is exempt from tax and also fact that the recipient has obtained no deduction certificate u/s 197 of the Act, the assessee not obliged to deduct tax at source on the impugned payments. No matter, whether the payment has been made by the assessee directly or paid on behalf of the directors, as long as the recipient income is exempt and also the recipient had got a certificate u/s 197 of the Act, for non-deduction of tax at source on the impugned payment, the assessee need not to deduct tax at source on such payments. 9. The CIT(A) after considering the relevant facts has rightly directed the A.O. to delete additions made towards short deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urce from payers, in as much as TTD is concerned, nothing unusual has happened. But, in so far as the AO is concerned, wherever the appellant has remitted rents to TTD on behalf of the two directors, the appellant is bound to make TDS and thus, in so far as the amounts remitted by it on behalf of the individual directors are concerned, the AO held the appellant company as an assessee in default and made an order under section 201(1) and 201(1A) for all the three impugned assessment years under challenge. When the receipts in the hands of TTD are not taxable as it is tax exempt in terms of exemption granted to it under section 12A and that TTD has obtained 197 certificates for receipts without deduction of tax at source and the Apex Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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