No Section 194I TDS on rental payments below threshold limit

FULL TEXT OF THE ORDER OF ITAT CHENNAI

1. Aforesaid appeal by assessee for Assessment Year (AY) 2016-17 arises out of the order of learned Commissioner of Income Tax   (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 24-05-2023 in the matter of an order passed by Ld. Assessing Officer [AO] u/s. 201 (1) / 201(1A) of the Act on 21-03-2023 raising certain demand against the assessee for want of TDS on rental payments. The grounds taken by the assessee are as under:

1. That the Ld. AO was not justified in treating sum paid below Rs.1,80,000/- as Rent for various properties to 70 odd persons as liable for deduction of TDS u/s.194-I, there by treating the assessee in default and levying TDS u/s.201 on the aggregate payment. The Ld. CIT(A) went wrong in drawing conclusion on different footings even though legally the appellant was not liable for TDS. The order is perverse and liable to be set aside. [Tax Effect: Rs.11,29,214]

2. That Ld. AO was not justified in imposing interest u/s.201(1A) on the amount of TDS not deducted, which should have been deducted by wrongly invoking the provisions and Ld. CIT(A) also erred in confirming the wrong action of AO. Though levy of interest is consequential, but it should be deleted. [Tax Effect: Rs.10,84,045]

2. The Ld. AR advanced arguments and placed on record the details of rental payments made by the assessee. It was the submission of Ld. AR that the rental payment, in each of the case, did not exceed the threshold limit of Rs.1.80 Lacs and therefore, the assessee was not obligated to deduct tax at source (TDS) against these payments. The Ld. AR also averred that merely because the assessee has accepted disallowance made u/s 40(a)(ia), the same could not necessarily make assessee as assessee-in-default u/s 201(1) of the Act. The Ld. Sr. DR submitted that the demand has been raised for want of adequate details and lack of supporting documents. The Ld. Sr. DR also submitted that disallowance u/s 40(a)(ia) and proceedings u/s 201(1) are different proceedings. Having heard rival submissions and upon perusal of case records, our adjudication would be as under.

3. The assessee being resident corporate assessee is stated to be engaged in transport of goods. An assessment was made u/s 143(3) for this year wherein it transpired that the assessee paid godown rent to various parties. The assessee paid rent of Rs.42.36 Lacs and deducted Tax at source u/s 194I. However, no tax was deducted on rental payment of Rs.112.92 Lacs on the ground that the payment to each of the party was below threshold limit of Rs.1.80 Lacs. Since the assessee could not furnish the supporting documents, Ld. AO made applicable disallowance of 30% u/s 40(a)(ia).

4. As a consequence of above assessment, Ld. AO passed another order u/s 201(1) / 201(IA) and held that the assessee did not deduct tax at source on aggregate payment of Rs.155.29 Lacs and accordingly, raised demand of Rs.30.43 Lacs which include interest of Rs.14.90 Lacs. Upon further appeal, Ld. CIT(A) directed Ld. AO to revise the demand to the extent of default i.e., Rs.112.92 Lacs. Still aggrieved, the assessee is in further appeal before us.

5. Upon perusal of payment details as placed on page nos. 30 & 31 of the paper book, it could be seen that the assessee has furnished the complete details of rental payment i.e., Godown Location, address of the Godown, name & PAN of landlord and payment made to each of them. We find that the payment to each of these parties is less than threshold limit of Rs.1.80 Lacs and therefore, the assessee was not liable for TDS on these payments considering the provisions of Sec.194I. Keeping in mind the nature of assessee’s business, the assessee may be temporality hiring the godown and may not be successful in furnishing adequate documentary evidences to the satisfaction of lower authorities.

For that lapse, the assessee has already suffered disallowance u/s 40(a)(ia). But, nevertheless, the details as furnished before lower authorities are sufficient to make a reasonable conclusion that the assessee was not liable for TDS on these payments. Accordingly, the assessee could not be treated as assessee-in-default u/s 201(1) / 201(IA) of the Act particularly when all the payees are having PAN.

Therefore, by deleting the impugned demand, we allow the appeal of the assessee.

6. The appeal stand allowed in terms of our above order.

Order pronounced on 18th October, 2023.