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Income Tax Appellate Tribunal, A BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, MUMBAI SHRI PRAMOD KUMAR, VICE PRESIDENT SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No. 7030/MUM/2017 (ASSESSMENT YEAR: 2010-11) Life Insurance Corporation of India, Central Office, F & A Department, Yogakshema, 3rd Floor, West Wing, Jeevan Bima Marg, Mumbai - 400021 [PAN: AAACL0582H] …………… Appellant ITO(TDS)-2(3), Mumbai, Vs K. G. Mittal Ayurvedic Hospital Bldg., Charni Road, Mumbai - 400002 ……………… Respondent Appearances For the Appellant/Assessee : Shri Vijay Mehta For the Respondent/Department : Shri Milind Chavan Date of conclusion of hearing : 10.06.2022 Date of pronouncement of order : 06.09.2022 O R D E R Per Rahul Chaudhary, Judicial Member: 1. By way of the present appeal the Appellant has challenged the order, dated 28.09.2017, passed by the Ld. Commissioner of Income Tax (Appeals)-59, Mumbai [hereinafter referred to as „the CIT(A)‟] for the Assessment Year 2010-11, whereby the Ld. CIT(A) had partly allowed the appeal filed by the Appellant against the Order, dated 29.02.2012 passed under section 201(1)/201(1A) of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟).
The Appellant has raised the following grounds of appeal: “ 1. On the facts and circumstances of the Appellant's case and in law the Ld. CIT(Appeals) erred in confirming the action of the
ITA No. 7030/Mum/2017 Assessment Year: 2010-11 Assessing Officer in holding that the appellant has not deducted tax at source u/s 194I of the Act on payment of lease premium amounting to Rs 5,29,82,168/ - as per the grounds stated in the order or otherwise. 2. On the facts and circumstances of the Appellant's case and in law the Ld. CIT(Appeals) erred in confirming the action of the Assessing Officer in levying interest u/s 201(1A) on non deduction of tax at source on payment of lease premium amounting to Rs. 5,29,82,168/- as per the grounds stated in the order or otherwise. 3. On the facts and circumstances of the Appellant's case and in law the Ld. CIT (Appeals) erred in confirming the action of the Assessing Officer in holding that the appellant has not deducted tax at source u/s 194C of the Act on payment of construction expenses amounting to Rs 2,77,386/- as per the grounds stated in the order or otherwise. 4 On the facts and circumstances of the Appellant's case and in law the Ld. CIT(Appeals) erred in confirming the action of the Assessing Officer in levying interest u/s. 201(1A) on non deduction of tax at source on payment of construction expenses amounting to Rs 2,77,386/- as per the grounds stated in the order or otherwise. 3. The Appellant crave leaves to add, amend, alter, modify and or withdraw any of the above grounds of appeal, which are without prejudice to one another. The appellant prays this Hon'ble Tribunal to delete the non payment assessed by the Ld. A.O and confirmed by the Ld. CIT(A) and/or allow the appropriate relief admissible under the Act.” 3. A survey action under Section 133A of the Act was carried out on the Appellant on 09.09.2011 wherein it was found that the Appellant has not deducted tax from payments which were in the nature of rent and therefore, had breached the provisions of Section 194I of the Act. Vide letter dated 16.02.2012, the
ITA No. 7030/Mum/2017 Assessment Year: 2010-11 Assessee was asked to show cause why the amount of INR 137.66 Crores should not be treated as lease rent and why the Appellant should not be treated as an Assessee is default in terms of Section 201(1) of the Act. Since no response was received from the Appellant, the Assessing Officer passed order under Section 201(1)/201(1A) of the Act on 29.02.2012 holding that Appellant was liable to deduct tax at source under Section 194I of the Act on the sum of INR 137.66 Crores and, therefore the Assessing Officer raised the demand under Section 201(1) of the Act levying interest under Section 201(1A) of the Act for a period of 35 months @ 1% p.m.
Being aggrieved, the Appellant preferred appeal the CIT(A) and filed additional evidence. The Appellant also raised additional grounds before CIT(A) contending that the Appellant was not granted adequate opportunity of being heard. The CIT(A) admitted the additional evidence rendering infructuous the aforesaid additional ground. After examining the additional evidence and taking into consideration the remand report the CIT(A) granted substantial relief as the CIT(A) confirmed the order of the Assessing Officer only in respect of the following payments aggregating to INR 5.29 Crores: S.No. Property One time lease Yearly Rent payment 1 Divisional Office, Jaipur 1,17,37,440/- at Lal Kothi 2 Divisional Office, Jaipur 2,78,66,304/- 30,96,256/- at Sector-5, Pratap Nagar 3 Divisional Office, Jaipur 34,20,230/- 68,40,460/- at Sector-28, Pratap Nagar Total 4,30,23,974/- 99,36,716/-
ITA No. 7030/Mum/2017 Assessment Year: 2010-11 Further, the CIT(A) also upheld the decision of the Assessing Officer holding that the Appellant had defaulted in deducting tax under Section 194C of the Act from the contractual payments amounting to INR 2,77,386/- incurred in respect of construction of compound wall at Divisional Office, Vizag.
Not being satisfied, the Appellant has preferred the present appeal on the ground reproduced in paragraph 2 above.
Ground No. 3 and 4 6. Ground No. 3 and 4 pertain to the order of lower authorities holding that the Appellant has failed to deduct tax under Section 194C of the Act in respect of payment of INR 2,77,386/- held to be payments to contractors.
With respect of non-deduction of tax of INR 2,77,386/- under Section 194C of the Act from the payments made to the contractors, the Ld. Authorised Representative for the Appellant submitted that Assessing Officer had not given any specific findings. He submitted that during the appellate proceedings before CIT(A), it was explained that the said amount was spent for the construction of compound wall at the Divisional Office at Vizag and tax at source has been deducted under Section 194C of the Act. However, the CIT(A) decline to grant relief holding that the documents submitted by the Appellant were not reliable since the same were handwritten sheets prepared by the employees of the Appellant. He submitted that the Appellant has now submitted additional evidence in the form of ledger accounts supporting the handwritten sheets showing deduction of tax at source. Per contra, Ld. Departmental Representative submitted that
ITA No. 7030/Mum/2017 Assessment Year: 2010-11 the Appellant had failed to provide necessary proof to support the claim for deduction of tax at source from the payments of INR 2,77,386/- and relied upon by the order of CIT(A) in this regard.
We have considered the rival submissions and perused the material on record. We note that the accounts of the Appellant are audited, and the Appellant has placed on record ledger accounts supporting the contention that the tax was deducted at source from the payment of INR 2,77,386/- under Section 194C of the Act. In view of the additional/corroborative evidence placed on record by the Appellant in support of the handwritten sheets filed before the CIT(A) showing deduction of tax at source under Section 194C of the Act, we remand the issue back to the file of CIT(A) for fresh adjudication on merits after taking into account the aforesaid additional/corroborative evidence and after giving the Appellant the reasonable opportunity of being heard.
Ground No. 1 and 2 9. Ground No. 1 and 2 are directed against the order of lower authorities holding that the Appellant has failed to deduct tax under Section 194I of the Act from the payment of INR 5.29 Crores held to be in the nature of rent.
Ld. Authorised Representative for the Appellant appearing before us submitted that the payment of INR 5.29 Crores was not in the nature of rent and reiterated the submissions made before CIT(A). He further submitted that the aforesaid payments were made to Jaipur Development Authority and Rajasthan Awas Mandal (Rajasthan Housing Board). Both the
ITA No. 7030/Mum/2017 Assessment Year: 2010-11 aforesaid organizations were duly registered under Section 12AA of the Act and therefore, the receipts of the aforesaid amount were not liable to tax in their respective hands. Thus, the Appellant was not under obligation to deduct tax from the same. Without prejudice to the aforesaid contention, the Ld. Authorised Representative for the Appellant submitted that the payments were made in earlier years and not during the relevant previous year. As per the provision of Section 194I of the Act the liability to deduct tax at source arise at the time of credit in the books or at the time of making the payment, whichever is earlier. Since, during the year under consideration neither of the aforesaid conditions are satisfied, the provisions of Section 194I of the Act are not attracted and therefore, the Appellant was not under obligation to deduct tax at source arises during the year under consideration.
In response, Ld. Departmental Representative submitted that the CIT(A) had granted substantial relief to the Appellant. After examining the nature of all the payment the CIT(A) had arrived at a conclusion that the same in the nature of rent and were therefore subject to tax withholding under Section 194I of the Act. The fact that the recipient of such payments is not liable to be tax is of no consequence. He further submitted that no other grounds/contentions were raised before the CIT(A) and relied upon the order passed by Assessing Officer and CIT(A) in support his contentions.
We have considered the rival submissions and perused the material on record including the judicial precedents relied upon by the Ld. Authorised Representative for the Appellant. Circular No. 35/2016 dated 13.10.2016 [F. No. 275/29/20105-
ITA No. 7030/Mum/2017 Assessment Year: 2010-11 IT(B) issued by Central Board of Direct Taxes [CBDT] stipulates that no tax deduction at source is required under section 194I of the Act where such payments for the acquisition of long-term capital leasehold rights over immovable property partakes the character of a lump sum lease payment or one time upfront charges, not adjustable against periodic rent. The CIT(A) after examining the terms of different lease agreements and communications returned a factual finding that Lease Premium was specified separately and One Time Lease Payments were remissions for payment of rent. Therefore, the One Time Lease Payment represented annual lease rent amount. We concur with the aforesaid factual findings returned by the CIT(A). In our view, CIT(A) was justified in confirming the order passed by the Assessing Officer that the provisions of Section 194I of the Act would be attracted in case of payments of INR 5.29 Crores holding the same to be in the nature of rent. We note that the CIT(A) has after analyzing the terms of conditions of lease deeds/agreements and the nature of payments arrived at a finding that the payment of INR 5.29 Crores is in the nature of rent. We, therefore, declined to interfere with the order of the CIT(A) in this regard.
Section 194I of the Act creates an obligation to withhold tax on a person who is responsible for paying to a resident any income by way of rent. Unlike Section 195 of the Act, Section 194I does not used expression „chargeable under the provisions of this Act‟. The chargeability of income in the hands of the recipients under the provisions of the Act is not a condition precedent for the applicability of the tax withholding
ITA No. 7030/Mum/2017 Assessment Year: 2010-11 provisions contained in Section 194I of the Act. The provisions of Section 194I of the Act are attracted if the payment is in the nature of income. Whether such payment is exempt or chargeable to tax in the hands of the recipient is not relevant for the person under obligation to withhold tax in terms of Section 194I of the Act. Therefore, the contention of the Appellant that the payments which have been held to be in the nature of rent would not be chargeable to tax in the hands of the recipients and therefore, the Appellant is not under obligation to withhold tax from the tax under Section 194I of the Act is rejected.
The Appellant has also contended that the Appellant was not under obligation to withhold tax during the relevant previous/financial year as per Section 194I of the Act. Both, actual payments and credit in the books of accounts were made in preceding financial year. The Appellant has contended that the payments were made during the financial years 2007-08 and 2008-09 which has been reflected in the ledger accounts. As rightly pointed out by the Ld. Departmental Representative this contention has been raised for the first time before the Tribunal and therefore, we remand this issue back to the file of CIT(A) for examining whether liability to withhold tax under Section 194I of the Act arose during the year under consideration after taking into account the date of payment and the date of credit in the books of accounts of INR 5.29 Crores. In view of the aforesaid directions this issue is also remanded to the file of the CIT(A) for adjudication after giving the Appellant the reasonable opportunity of being heard. Ground No. 1 and 2 raised by the
ITA No. 7030/Mum/2017 Assessment Year: 2010-11 Appellant are partly allowed.
In result, the present appeal is partly allowed.
Order pronounced on 06.09.2022.
Sd/- Sd/- (Pramod Kumar) (Rahul Chaudhary) Vice President Judicial Member म ुंबई Mumbai; दिन ुंक Dated : 06.09.2022 Alindra, PS
ITA No. 7030/Mum/2017 Assessment Year: 2010-11 आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त(अपील) / The CIT(A)- 4. आयकर आय क्त / CIT 5. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file.
आिेश न स र/ BY ORDER, सत्य दपि प्रदि //True Copy// उप/सह यक पुंजीक र /(Dy./Asstt. Registrar) आयकर अपीलीय अदिकरण, म ुंबई / ITAT, Mumbai