TDS not applicable on Hotel Rent in absence of any contract

Issue of non-deduction of tax at source on the hotel expenses incurred by the assessee: It was held by the AO that assessee should have deducted tax at source u/s 194I for ‘rent’ of hotel expenses incurred during shooting done at various locations. Ld. CIT(A) agreed with the contention of the assessee partly and held that bills for the hotel expenses also include expenses on account of food on which TDS should not be made and, therefore, he reduced the amount of food expenses from the bills of hotels and also in those cases where the expenses on hotel stay did not exceed aggregate amount of Rs.1,20,000/- as prescribed u/s 194I. Therefore, he provided relief to the assessee. However, for all those hotels, where the stay expenses after deduction of the food expenses was more than 1,20,000, it was held by him that TDS was required to be deducted u/s 194I on the whole of such amount.

During the course of hearing before us, Ld. Counsel of the assessee relied upon the CBDT circular No. 5 of 2002 dated 30-07-2002 wherein it was clarified that where earmarked rooms are let out for specified rate and specified period, only then, they will be construed to be accommodation made available on regular basis whereas the facts of the assessee’s case are that there was no prior contract with the hotels. The rooms were hired on as and when available basis, corresponding to the date of shooting. There was no contract for any specific rates or period and thus TDS was not required to be made u/s 194I.

We have gone though the orders passed by the lower authorities and facts brought before us on the basis of bills of hotels and other evidences. It is noted that nothing has been brought before us to show that assessee had entered into any prior contract with the hotels for any specific room or rooms for any specific rates or rooms for any specific period. The rooms were hired on as and when available basis at the regular tariff rates subject to the discounts as agreed at the time of booking of rooms. Under these circumstances, the assessee deserves to be given the benefit of the circular issued by the Board providing that under these circumstances, TDS will not be required to be made u/s 194I. Therefore, it is held that no TDS was required to be made in this case. As a result, these grounds are allowed and this appeal is partly allowed.