MIRKANA ENGINEERING P LTD.,NEW DELHI vs. ITO, NEW DELHI

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ITA 6307/DEL/2012Status: DisposedITAT Delhi06 June 2017AY 2009-103 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the Assessing Officer had not properly examined the details of rent payments and the applicability of Section 194I. The Tribunal also noted that parking charges might be covered under Section 194I, not 194C, and that many rent payments were below the threshold for TDS. Therefore, the matter was set aside to the AO for fresh examination.

What were the facts?

The assessee disallowed rent expenses of Rs. 37,000/- for parking charges and Rs. 13,48,546/- for other rent payments. The CIT(A) confirmed these disallowances under Section 40(a)(ia) for non-deduction of TDS.

What were the issues?

Whether disallowance of rent expenses under Section 40(a)(ia) was justified without proper examination of TDS applicability and payment details. Whether parking charges fall under Section 194C or 194I.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 194C,Section 194I

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Income Tax Appellate Tribunal, DELHI BENCH “E”: NEW DELHI

Before: SHRI R.P.TOLANI, HON’BLE & SHRI PRASHANT MAHARISHI

For Respondent: Shri Rajesh Kumar, Sr. DR
Hearing: 06/06/2017Pronounced: 06/06/2017

Assessee by : Sh. Sanjeev Kumar, CA Revenue by: Shri Rajesh Kumar, Sr. DR Date of Hearing 06/06/2017 Date of pronouncement 06/06/2017 O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed assessee against the order of the ld CIT(A)-IX, New Delhi dated 03.09.2012 for the Assessment Year 2009-10, raising following grounds of appeal:- “1. The Order of the learned CIT (A) - IX is bad in law and on the facts of the case. The disallowance of rent of Rs. 37000/- and Rs. 1348546/- u/s 40(a)(ia) is contrary to law and facts of the case.

2. That contention of the learned CIT(A) that the payment of parking charges are held to be a payment for contract liable for deduction of tax at source as per the provisions of section 194C and not u/s 1941 as the nature of payment is not attain to rent since the assessee does not get any right over the parking space, is factually incorrect. Without prejudice to our submissions in this regard, the payment of Rs. 37,400/- still does not attract deduction of tax u/s 194C and therefore is not eligible for addition u/s 40(a)(ia).

3. The learned CIT has failed to appreciate that a tabulation was duly filed during the course of the appeal reflecting that payments of rent for Rs. 9,02,749/-were not subject to deduction of tax u/s 194I by virtue of proviso to clause (b) of section 1941 and not exceeding Rs. 120,000/- p.a. Also the details and copies of the TDS certificates for Rs. 4,51,715/- overlooked by the A.O. were filed. Consequently the disallowance of Rs.13,48,556/- (incorrectly stated by the Ld. CIT(A)- IX as Rs. 13,54,464/-) is incorrect and contrary to the provisions of law.”

Page 2 of 3 2. The brief facts of the case is that the assessee is a private limited company, who filed its return of income on 29.09.2009 declaring total income of Rs. 4012080/-. Subsequently, the assessment u/s 143(3) of the Act was passed on 11.11.2011 determining total income of Rs. 6100379/-. Subsequently, order u/s 154 of the Act was passed on 02.12.2011 by the Assessing Officer wherein, the expenses claimed under the head ‘rent paid’ by the assessee company of Rs. 37000/- for parking charges was disallowed. The assessee preferred appeal against the above order before the ld CIT(A), who adjudicated vide para No. 8 on the issue of disallowance u/s 40(a)(ia) read with Section 194I of the Act holding that tax is required to be deducted on parking charges u/s 194C of the Act. Further, with respect to the other sum of rent paid of Rs. 1354464/- the disallowance was confirmed. Consequently, he confirmed the disallowance of Rs. 37400/- and Rs. 1354464/- u/s 40(a)(ia) read with Section 194I of the Act. The assessee being aggrieved with the order of the ld CIT(A) has preferred appeal before us.

3.

The ld AR contested that parking charges are not covered u/s 194C but u/s 194I of the Act and as the sum was less than Rs. 120000/- no tax was required to be deducted thereon. With respect to the other sum of Rs. 1354464/- he submitted that these payment are made to different persons and less than Rs. 120000/- per annum. Therefore, no tax is required to be deducted on such sum u/s 194I of the Act. For this purpose, he referred to the detailed reconciliation submitted at page No. 37 of the paper book. He further referred to the reconciliation submitted at page No. 3 of his paper book stating that the AO was also overlooked TDS certificate amounting to Rs. 45175/- on which tax is already deducted.

4.

The ld DR relied upon the orders of the lower authorities and submitted that as the assessee has not deducted tax at source on rent payment same is rightly disallowed.

5.

We have carefully considered the rival contentions and also perused the orders of the lower authorities. The brief issue is that the assessee has paid rent of Rs. 5333933/- and out of which tax was deducted on Rs. 4431184/- by the assessee. However, the ld Assessing Officer examined the rent account and disallowed Rs. 1354464/- holding that tax is also required to be deducted on this sum. While disallowing the ld Assessing Officer has not given any opportunity to the assessee but has merely disallowed the sum based on the verification of rent account. In the assessment, the AO has mentioned that the assessee has paid rent to four parties, however, on looking at the details submitted by the assessee page No. 37 the assessee has paid rent to almost 30 parties. Furthermore, according to the

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