Case Law Details
Ace Datamatics Pvt. Ltd Vs ITO (ITAT Delhi)
In the present case also the AO in para 4.2 of the assessment order observed that the payments received by Ambience group are split into two companies of same group on single contract one for rent and the other for maintenance charges. However, the AO noted that this arrangement has been made to avoid the higher deduction of TDS rate applicable to which we do not agree as when the receiver of rent and receiver of maintenance charges are different and distinct and the character of the payment is also different and distinct, then, on the payments towards maintenance charges has to be made after TDS @ 2% u/s 194C of the Act and not @ 10% u/s 194I of the Act. From the material available on record, it is clearly discernible that the assessee company has paid rent to the owner after deduction u/s 194 of the Act @ 10% and the payment for operation/maintenance was made directly to the service provider company after deduction of tax u/s 194C of the Act. Therefore, we are inclined to hold that in the present case the common area maintenance charges was not forming part of the actual rent paid to the owner by the assessee company. Payments of rent and common area maintenance charges have been made to distinct entities/companies, therefore, the authorities below were not right in creating the impugned liability payable by the assessee firm under the provisions of sub-sections (1) and (1A) of section 201 of the Act. Therefore, respectfully following the order of the coordinate Bench of the Tribunal in the case of Kapoor Watch Company Pvt. Ltd. (supra), the grievance/grounds of the assessee are allowed and the AO is directed to delete the impugned liability u/s 201(1) and 201(1A) of the Act.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal filed by the assessee is directed against the order dated 11.11.2019 of the CIT(A)-38, Delhi, relating to Assessment Year 2011-12.
2. The grounds of appeal raised by the assessee read as under:-
“1. The action of lower authorities in passing order section 201 (1) and creating the demand of Rs 6,46,732 under section 201 (1) and charging interest at Rs 5,87,277 under section 201(1 A) without giving adequate opportunity to the assessee to present its case is unjust, illegal, arbitrary, illusory and the order deserves to be quashed.
2. The action of learned CIT(A) in holding 10 percent TDS should have been deducted under section 194I instead of 2 percent deducted by the assessee under section 194C on payment of Rs 4,43,046 to Ambience Developers and Infrastructure and thus creating a demand of Rs 35,887 under section 201(1) and Rs 32,298 under section 201(1A) is unjust, illegal, arbitrary, illusory and the demand deserves to be quashed.
3. The action of the learned CIT(A) in holding 10 percent TDS should have been deducted under section 194I instead of 2 percent deducted by the assessee under section 194C on payment of Rs.4,25,324 to Ambience Developers and Infrastructure and thus creating a demand of Rs 32,688 under section 201(1) and Rs 28,275 under section 201(1A) is unjust, illegal, arbitrary, illusory and the demand deserves to be quashed.
4. The action of the learned CIT(A) in holding that 10 percent TDS should have been deducted under section 1941 on payment of Rs.51,48,628 which assessee has not done and thus creating a demand of Rs 5,14,863 under section 201(1) and Rs 4,65,951 under section 201(1A) is unjust, illegal, arbitrary, illusory and the demand deserves to be quashed.
5. The action of the learned CIT(A) in holding that 10 percent TDS should have been deducted under section 194A on payment of Rs.3,10,840 which assessee has not done and thus creating a demand of Rs 31,084 under section 201 (1) and Rs 29,840 under section 201(1A) is unjust, illegal, arbitrary, illusory and the demand deserves to be quashed.
6. The action of the learned CIT(A) in holding that 2 percent TDS should have been deducted on various payments amounting to Rs 16,10,096 and thus creating a demand of Rs 32,201 under section 201(1) and Rs 30,913 under section 201(1A) is unjust, illegal, arbitrary, illusory and the demand deserves to be quashed.
7. Appellant craves leave to add, alter, modify or delete any ground of appeal either before or at the time of hearing of the appeal.”
3. When the case was called for hearing, neither the assessee nor any authorized representative appeared nor any adjournment application has been filed. The notice issued for today’s hearing has been returned by the Postal Authorities with the remark, ‘No such person is found at the given address.’ However, on perusal of the record, we find that this appeal can be disposed of even in the absence of the assessee, after hearing the arguments of the ld. Sr. DR appearing on behalf of the Department. We, therefore, proceed to adjudicate the appeal accordingly.
4. From the grounds as reproduced hereinabove, we note that the sole issue for our adjudication is as to whether the AO as well as the ld.CIT(A) were correct and justified in holding that the TDS @ 10% should have been deducted u/s 194I of the Income-tax Act, 1961 (for short, ‘the Act’) instead of 2% deducted by the assessee u/s 194C of the Act on the payment to Ambience Developers and Infrastructure and creating demands u/s 201(1) and section 201(1A) of the Act.
5. The ld. Sr. DR supported the assessment as well as the first appellate order and submitted that the authorities below were right in imposing net liability of Rs.12,34,002/- payable by the deductor assessee firm under the provisions of subsections (1) and (1A) of section 201 of the Act. The ld. Sr. DR further submitted that the authorities below have also rightly concluded that the TDS on the impugned payment was to be deducted @ 10% u/s 194 I of the Act instead of 2% deducted by the assessee u/s 194C of the Act.
6. On careful consideration of the rival contentions emerged from the record, we are of the considered view that identical issue was placed before the ITAT Delhi ‘D’ Bench in the case of Kapoor Watch Company Pvt. Ltd. and the coordinate Bench of the Tribunal by order dated 05.01.2021 in ITA No.889/Del/2020, for AY 2011-12, held as follows:-
“7. We have heard both the parties and perused the material available on record. Ground Nos. 1 and 1.1 are general in nature hence not adjudicated upon. As regards to Ground Nos. 2, 2.1, 2.2 and 3, it is pertinent to note that the assessee company has paid the rent to owner after deduction of TDS u/s 194-I of the Act and the payment for operation/maintenance was made directly to the services providers after deduction of TDS u/s 194C of the Act. There is a Tri-party Agreement which was on record before the Assessing Officer as well as before the CIT(A). These facts were never disputed by the Assessing Officer as well as the CIT(A). The only dispute that arises by revenue that assessee company should deduct TDS on payment made directly to operation/maintenance services providers u/s 194-I of the Act instead of Section 194C of the Act by relying on the judgment of the Hon’ble High Court of Punjab & Haryana in case of Sunil Kumar Gupta vs. ACIT 389 ITR 38 wherein the Hon’ble Court held that maintenance charges must form a part of the rent while calculating the annual value of property u/s 23(1) of the Act for the purpose of Section 22 of the Act. However, in the present assessee company’s case, the common area maintenance charges was not forming the part of the actual rent paid to the owner by the assessee company. There is a separate agreement between the Owner, Tenant and service provider for common area maintenance which is distinguishing fact and thus, the decision of the Hon’ble Punjab and Harayana High Court will not be applicable in the present case. Therefore, the CIT(A) was not right in confirming the order of the Assessing Officer. Hence, appeal of the assessee is allowed.”
7. In the present case also the AO in para 4.2 of the assessment order observed that the payments received by Ambience group are split into two companies of same group on single contract one for rent and the other for maintenance charges. However, the AO noted that this arrangement has been made to avoid the higher deduction of TDS rate applicable to which we do not agree as when the receiver of rent and receiver of maintenance charges are different and distinct and the character of the payment is also different and distinct, then, on the payments towards maintenance charges has to be made after TDS @ 2% u/s 194C of the Act and not @ 10% u/s 194I of the Act. From the material available on record, it is clearly discernible that the assessee company has paid rent to the owner after deduction u/s 194 of the Act @ 10% and the payment for operation/maintenance was made directly to the service provider company after deduction of tax u/s 194C of the Act. Therefore, we are inclined to hold that in the present case the common area maintenance charges was not forming part of the actual rent paid to the owner by the assessee company. Payments of rent and common area maintenance charges have been made to distinct entities/companies, therefore, the authorities below were not right in creating the impugned liability payable by the assessee firm under the provisions of sub-sections (1) and (1A) of section 201 of the Act. Therefore, respectfully following the order of the coordinate Bench of the Tribunal in the case of Kapoor Watch Company Pvt. Ltd. (supra), the grievance/grounds of the assessee are allowed and the AO is directed to delete the impugned liability u/s 201(1) and 201(1A) of the Act.
8. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 04.11.2022.
