NICHE INTERNATIONAL,MUMBAI vs. ACIT CIR 15(2), MUMBAI

आदेश / O R D E R PER RAJESH KUMAR, A. M: This appeal by the assessee is directed against the order dated 02.01.2013 of Commissioner of Income Tax (Appeals)-26, Mumbai (Hereinafter called as the CIT(A)) for assessment year 2008-09. The assessee has raised the following grounds of appeal:-

(A.Y. 2008-09) M/s Niche International Vs.A.C.IT

The learned CIT (A) under the facts and circumstances of the case ought to have accepted the claim of your appellant

2. The learned CIT (A) has erred in law as well as in facts by confirming and upholding the order of the A.O. in part by directing him to restrict the disallowance of Rs. 2,40,000 only U/S 40(a)(ia) when the A.O. treated two separate expenses as a single expense U/S 194(I) and disallowed the amount in proportion to short fall.

2.1 The learned CIT (A) has erred in law as well as in facts by bi-furcating expenses in two part for the short deduction of tax at source as a result he confirmed disallowance of Rs.2,40,000 though, endorsed the view of the A.O. that entire payment of different nature is to be treated as rent U/S 194(1).

The learned CIT (A) under the facts and circumstances of the case ought not to have directed to restrict the disallowance to an extent of Rs. 2,40,000 when the different expenses entirely treated as a single expenses U/S 194(I) and therefore, he could have allowed deduction of entire expenses in case of short deduction of tax as no provision of disallowance u/S/40(a)(ia) is applicable in respect of short deduction of tax.

(A.Y. 2008-09) M/s Niche International Vs.A.C.IT The learned CIT(A) ought not to have dismissed the ground of your appellant because of stay granted on operation of ITAT order since, the stay is applicable to the party concerned in that appeal.

Therefore, under the facts and circumstances of the case it is prayed that necessary relief as may be deemed fit and proper under the facts and circumstances of the case be granted.

Without prejudiced to the above

The A.O ought to have restricted his power to disallowance of expenses for non deduction of tax at source without interpreting the provision and its' applicability to transaction when separate machinery for the purpose is existed.

Therefore, under the facts and circumstances of the case it is prayed that necessary relief as may be deemed fit and proper under the facts and circumstances of the case be granted.”

2. The common issue raised in all the grounds of appeal is against the confirmation of addition of Rs.2,40,000/- by the CIT(A) by ignoring the fact that the AO had wrongly applied the provision of section 40(a)(ia) of the Act in respect of rent paid to two persons @ Rs. 1,20,000/- each for two offices taken on rent .

(A.Y. 2008-09) M/s Niche International Vs.A.C.IT 3. The facts in brief are that the assessee filed its return of income on 28.09.2008 declaring total income of Rs.31,27,620/-. During the year the assessee paid rent of Rs. 2,40,000/- for two offices no 605 and 606 rented from Shri Roochir Sanghvi and Shi Rooshabh Sanghvi and rent was paid @ Rs. 1,20,000/- for each office. The case of the assessee was selected under CASS and statutory notices u/s 143(2) and 142(1) of the Act were duly issued and served on the assessee. The ld. AO framed the assessment u/s 143(3) vide order dated 20.12.10 by making additions u/s 40(a)(ia) of Rs.4,36,800/- on account of non deduction of TDS on rent and short deduction of TDS on service charges u/s 194I of the Act for the reasons that the TDS should have been deducted @ 10% under the provision of 194(I) of the Act and the assessee knowing the split the total amount into rent and service charges in order to circumvent the provisions of TDS.

(A.Y. 2008-09) M/s Niche International Vs.A.C.IT 5. We have considered the rival submissions and perused the material on record.

We find that the assessee had paid rent to two persons from whom the assessee had taken two offices namely 605 and 606 on rent and rent for each office was Rs.1,20,000/- and was accordingly paid Rs. 1,20,000/- to Mr. Ruchir Sanghvi for office no 605 and Rs. 1,20,000/- to Mr. Rushab Sanghvi for office no 606 which is below the limit as provided by the provisions of section 194I of the Act for deduction of tax at source. The provisions of section 194I are reproduced below.

“194-I. Any person, not being an individual or a Hindu undivided family, who is responsible for paying to [a resident] any income by way of rent, shall at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, [deduct income-tax thereon at the rate of-

[(a) two percent for the use of any machinery or plant or equipment; and (b) ten percent for the use of any land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings:]]

Provided that no deduction shall be made under this section where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be (A.Y. 2008-09) M/s Niche International Vs.A.C.IT credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed [one hundred and eighty thousand rupees]:”