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Income Tax Appellate Tribunal, KOLKATA ‘D’ BENCH, KOLKATA
Before: Sri J. Sudhakar Reddy & Sri S.S. Viswanethra Ravi]
Appearances by: Shri Rip Das, FCA, appeared on behalf of the assessee. Shri A. Bhattacharya, Addl. CIT, appearing on behalf of the Revenue Date of concluding the hearing : May 16th, 2018 Date of pronouncing the order : July 4th, 2018 O R D E R Per J. Sudhakar Reddy :-
This is an appeal filed by the assessee directed against the order of the Commissioner of Income Tax (Appeals)-1, (hereinafter the ‘Ld. CIT(A)’), dt. 27/10/2016, passed u/s 250 of the Income Tax Act, 1961 (hereinafter the ‘Act’), relating to Assessment Year 2012-13.
There is a delay of 13 days in filing of this appeal. A petition for condonation has been filed. After perusing the petition we are convinced that the assessee was prevented by sufficient cause from filing this appeal on time. Hence, we condone the delay and admit appeal admitted.
The assessee is company and is in the business of investments in shares and securities and financing activities and derives rental income. The short point
Assessment Year: 2012-13 M/s. Central Business Services Ltd for our adjudication is as to whether the ld. CIT(A) was right in holding that security deposit received by the assessee, on renting of its premises to “India Infoline Ltd. (IIFL)”, is not income.
We have heard rival contentions.
The Assessing Officer at para 4 page 2 of his order stated that he assessee received security deposit of Rs.27,06,728/-, against rent from M/s. IIFL. M/s. IIFL, vacated the premises on 31st March, 2011. The assessee made a claim before the Hon’ble High Court for appointment of an arbitrator for paying arrears in rent. The Assessing Officer was of the view that the security deposit held by the assessee should be treated as arrears at rent. He brought the same to tax. On appeal, the ld. First Appellate Authority deleted the addition. 5.1. Further the assessee had made an application u/s 144A of the Act, before the JCIT, Range-3, in respect of TDS which was deducted by ONGC Ltd. while making payment of security deposit of Rs.50,28,750/- to the ssessee for taking the premises of the assessee on lease. The TDS amount was Rs.5,25,672/-. The total security deposit given by ONGC was Rs.93,13,448/-, for three months @ Rs.16,76,250/-, per month, which was to be adjusted pro rata against the rent payable by ONGC for the last three month of the lease period. The JCIT, directed the Assessing Officer to treat this amount as advance rent. The Assessing Officer brought the same to tax accordingly. Aggrieved, the assessee carried the matter in appeal. The ld. First Appellate Authority deleted the addition on the ground that the rent is not for the impugned Assessment Year and that the amount is a security deposit.
Aggrieved the revenue is in appeal before us.
After hearing rival contentions, we find that the matter of arrears of rent receivable from M/s. IIFL, was before the Hon’ble High Court. Moreover, the tenants have vacated the premises on 31/03/2011 and the amount in question cannot be brought to tax in the impugned Assessment Year 2014-15. Similarly, in the case of ONGC Ltd, as per lease conditions, deposit of a sum of Rs.58,28,750/-, was made with the assessee. This was an interest free security deposit. Just because TDS was deducted on the same, the amount in question does not become advance rent. Moreover, the lease was for a period of four years and the agreement
Assessment Year: 2012-13 M/s. Central Business Services Ltd was executed w.e.f. 11/10/2011. The security deposit would only be adjusted during July, 2015 to September, 2015. While so, the amount in question cannot be brought to tax in the impugned Assessment Year 2012-13. 7.1. The ld. Counsel for the assessee, rightly relied on the decision in the case of DCIT vs. Prince Rubber & Plastics [2004] 1 SOT 85 (ASR.), wherein it is held that advance tax could not be brought to tax in the year of receipt as the income from house property could only computed on the basis of annual lettable value of the property. The Delhi ‘A’ Bench of the Tribunal, in the case of P.S. Cars (P.) Ltd. v. Income-tax Officer [2005] 4 SOT 143 (Delhi), wherein it has been held as follows:- “Section 194-I of the Income-tax Act, 1961 - Deduction of tax at source - Rent - Assessment year 1995-96 - Assessee had taken on rent a premises - It paid a sum of Rs. 2,22,000 to lessor as interest-free deposit and claimed that said deposit was a security deposit and it was adjustable against rent only at end of lease period and 3 months’ notice was required to be given for vacating premises - Assessing Officer held that said deposit was nothing but rent paid in advance by assessee and, therefore, assessee was liable to deduct tax at source under section 194-I from security deposit - Whether since on reading lease deed as a whole intention of parties appeared to be that deposit would be adjusted only when assessee had finally decided to vacate premises for ever, deposit placed by assessee was not rent paid in advance but, in fact, was a security deposit - Held, yes - Whether merely because rent was taken as basis, deposit did not lose its character as a deposit - Held, yes - Whether, therefore, said deposit did not fall within definition of term ‘rent’ as given in clause (i) of Explanation to section 194-I - Held, yes - Whether, therefore, assessee was not liable to deduct tax at source under section 194-I from security deposit - Held, yes”
Respectfully following the propositions of law laid down by these Co- ordinate Benches of the ITAT we uphold the order of the ld. First Appellate Authority, and dismiss the appeal of the revenue.
In the result, appeal of the assessee dismissed.