Case Law Details
MES Medical College Hospital Vs CBDT (Kerala High Court)
Kerala High Court held that lessee is liable to deduct TDS u/s. 194-I of the Income Tax Act, however, there is a dispute for ownership of the property. Then, in such case lessee is directed to deduct TDS and deposit under his TAN as unclaimed challan.
Facts- The petitioner had taken on lease a building after entering into a lease agreement with the 3rd respondent. After taking on lease the building, the 3rd respondent informed the petitioner that the property had been transferred into the name of his wife, the 4th respondent. Accordingly, the petitioner entered into a new lease agreement with the 4th respondent on 21-04-2022. It appears that respondent Nos.5, 6 and 7 filed a suit before the Subordinate Judges Court, Manjeri for recovery of possession, arrears of rent, damages etc. claiming that they are the rightful owners of the property. Pursuant to an order issued by the court, the petitioner started depositing the rent payable in the court.
The petitioner submits that the petitioner is willing to deposit the rent for the subsequent periods also before the court as directed by the court. The petitioner is before this Court on account of the provisions contained in Section 194-I of the Income Tax Act, 1961, which requires the petitioner to deduct TDS on the rent paid by it and deposit the same with the Income Tax Department. It is submitted that on account of the dispute between respondent Nos.3 and 4 on one side and respondent Nos.5, 6 and 7 on the other, the petitioner is in a situation that it cannot deduct and pay TDS as the payee is not readily identifiable.
Conclusion- Held that the petitioner can be permitted to continue with the deposit of rent before the court, after deducting TDS. Insofar as the TDS amount is concerned, the petitioner will remit the amount to the Income Tax Department under his TAN as unclaimed challan subject to the decision of the court. The person who is entitled to the benefit of credit to the extent of TDS deposited may either claim the amount after the dispute over ownership is decided by the court, in which event the petitioner may also be required to file a revised TDS return. If there is any statutory time limit for claiming the benefit of the tax deducted and so paid by the petitioner in the manner indicated above, it is open to the persons who may be aggrieved by non-receipt of the credit (to the extent of tax deducted) to apply to the competent authority under the provisions of Section 119(2)(b) of the Income Tax Act, 1961.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The petitioner has brought a peculiar problem to the notice of this Court. The petitioner had taken on lease a building after entering into a lease agreement with the 3rd respondent. After taking on lease the building, the 3rd respondent informed the petitioner that the property had been transferred into the name of his wife, the 4th respondent, by Ext.P2 settlement deed. Accordingly, the petitioner entered into a new lease agreement with the 4th respondent on 21-04-2022. It appears that respondent Nos.5, 6 and 7 filed a suit before the Subordinate Judges Court, Manjeri (hereinafter referred to as the ‘court’) for recovery of possession, arrears of rent, damages etc. as O.S.No.129/2022 claiming that they are the rightful owners of the property. Pursuant to an order issued by the court, in I.A.No.7 of 2024, the petitioner started depositing the rent payable in the court. The petitioner deposited Rs.26,00,000/-(Rupees Twenty Six Lakhs) being the arrears of rent till that date, and continues to pay the rent by depositing the amount before the court.
2. The learned counsel for the petitioner submits that the petitioner is willing to deposit the rent for the subsequent periods also before the court as directed by the court. The petitioner is before this Court on account of the provisions contained in Section 194-I of the Income Tax Act, 1961, which requires the petitioner to deduct TDS on the rent paid by it and deposit the same with the Income Tax Department. It is submitted that on account of the dispute between respondent Nos.3 and 4 on one side and respondent Nos.5, 6 and 7 on the other, the petitioner is in a situation that it cannot deduct and pay TDS as the payee is not readily identifiable. In other words, it is submitted that on account of the dispute between respondent Nos.3 and 5 on one side and respondent Nos.5, 6 and 7 on the other, the petitioner is unable to remit the amount of TDS in the name of any one person/persons.
3. The learned Senior Standing Counsel for respondent Nos.1 and 2 has filed a statement where amongst other things, it is stated as follows:
3(b). Alternatively, the deductor can be directed to deduct the tax every month and deposit the remaining amount of rent with the Court. The tax deducted so can be remitted into the Govt account through the TAN of the deductor. The deductor can keep the amount in his TAN as unclaimed chalan without giving credit to any PAN. Once the outcome of O.S. No 129/2022 has been reached, the deductor can then give credit to the actual owner/owners of the rental building. It can be assumed that the deductor being a medical college will be filing 26Q statements every quarter owing to contract and other payments. Therefore, the deductor is at the leisure to revise the TDS returns filed any time and give credit to the actual owner of the rented building. However, this poses a challenge that the final judgement in O.S. No 129/2022 to be passed within such a period where the actual payee can file their return within the time limits specified in 139(8A) or 119(2)(b).
4. Despite service of notice, there is no appearance for respondent Nos. 3 to 7. Having heard the learned counsel for the petitioner and the learned Senior Standing Counsel for respondent Nos.1 and 2, I am of the view that the petitioner can be permitted to continue with the deposit of rent before the court, after deducting TDS. Insofar as the TDS amount is concerned, the petitioner will remit the amount to the Income Tax Department under his TAN as unclaimed challan subject to the decision of the court. The person who is entitled to the benefit of credit to the extent of TDS deposited may either claim the amount after the dispute over ownership is decided by the court, in which event the petitioner may also be required to file a revised TDS return. If there is any statutory time limit for claiming the benefit of the tax deducted and so paid by the petitioner in the manner indicated above, it is open to the persons who may be aggrieved by non-receipt of the credit (to the extent of tax deducted) to apply to the competent authority under the provisions of Section 119(2)(b) of the Income Tax Act, 1961.
Writ petition is disposed of accordingly.
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