Case Law Details
Oravel Stays Pvt Ltd Vs ACIT (ITAT Delhi)
In a significant ruling, the Income Tax Appellate Tribunal (ITAT) Delhi has delivered a judgment in favor of Oravel Stays Pvt Ltd, challenging the order of the Commissioner of Income Tax (Appeals) – 38, Delhi dated 30.05.2019 for the Assessment Year 2015-16. The core issue revolved around the disallowance of Rs. 1,08,59,584 under section 40(a)(ia) of the Income-tax Act, 1961, concerning minimum guarantee expense of Rs. 3,61,98,948.
Detailed Analysis: Oravel Stays Pvt Ltd, the assessee, filed its return declaring a loss of Rs. 29,82,76,660 for the A.Y 2015-16, which was subsequently scrutinized by the Assessing Officer (AO). During the scrutiny, the AO noted that the assessee had not deducted tax at source on minimum guarantee expense, leading to a show-cause notice under section 40(a)(ia) of the Act.
The assessee argued that the payments towards minimum guarantee expense were not subject to TDS provisions under Chapter XVII-B, specifically sections 194-I (TDS on rent) and alternatively, 194-C (TDS on payments to contractors). However, the AO, disagreeing with the assessee’s contention, applied the disallowance.
On appeal, the CIT(A) agreed with the assessee that the payments did not constitute rent under section 194-I but upheld the disallowance, interpreting the payments as falling under the ambit of section 194-C, relating to payments to contractors for carrying out any work.
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