Section 194-I of the Income Tax Act
Income-tax Act, 2025: s.393
Section 194-I of the Income-tax Act, 1961 corresponds to section 393 (Tax to be deducted at source) of the Income-tax Act, 2025.
Read section 393 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 194-I is Sultan Bros. (P) Ltd. v. CIT (51 ITR 353), cited in 148 of the 307 judgments on BharatTax that turn on this section.
Leading authorities on Section 194-I
Income derived from letting out property is classified as business income only if the letting activity constitutes a business from a businessman's perspective, rather than mere exploitation of property by an owner. The company's object clause is not the sole determinative factor in this assessment.
Income from sources not falling under any other head of income under Section 14 of the Income Tax Act is taxed under the residuary head 'income from other sources'. If income cannot be taxed under Section 45 (capital gains), it cannot be taxed at all.
If an assessee company's main business object is to acquire and rent out properties, the rental income derived is taxable as 'Profits and gains of business or profession', rather than 'Income from house property', as the nature of the activity constitutes a business.
Service tax paid to the Government of India is not 'on account of' the provision of services for mineral oil exploration and production, and thus does not form part of the aggregate taxable amount under Section 44BB(2)(a) and (b).
Disallowance under Section 14A of the Income-tax Act, 1961 cannot exceed the actual amount of exempt income earned by the assessee during the relevant previous year. This principle applies to assessment years prior to the amendment by Finance Bill 2022.
Income received by an assessee from leasing or letting out assets, whether categorized as lease amount, rent, or license fee, is a mixed question of law and fact to determine if it falls under 'Profits and gains of business or profession'. No precise test exists, and the determination must consider the perspective of a businessman, the specific facts, and the true interpretation of the letting agreement.
For computing profits under the presumptive taxation scheme of section 44BB, gross revenue excludes service tax collected and deposited by the assessee but includes mobilization/demobilization fees for offshore services.
Amounts paid to distributors who purchase goods on their own account and sell them in their territory, acting as independent contractors on a principal-to-principal basis, do not constitute commission or brokerage. Therefore, the assessee is not liable to deduct TDS under Section 194H on such transactions.
Rental income earned by letting out a property predominantly as bare letting is assessable under the head 'Income from house property', even if the assessee is the owner.
The tax department cannot speculate to deny the benefit of tax deducted at source by the employer to the petitioner.
