HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A No. 219 OF 2003 17-09-2014 BETWEEN M/s. Ashish Silk Mills (P) Limited, 21-1-61/2, Rikabgunj, Hyderabad, represented by its Managing Director, Mr. Raj Kumar, S/o. Sri Gopichand, Aged about 50 years …Appellant And The Income Tax Officer (TDS), Ward 5(6), Hyderabad …..Respondent HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A No. 219 OF 2003
JUDGMENT: (per the Hon'ble Sri Justice L. Narasimha Reddy)
This appeal is preferred by the assessee against the order dated 27-02-2003 passed by the Hyderabad Bench ‘A’ of the Income Tax Appellate Tribunal (for short, ‘the Tribunal’) in ITA No. 752/Hyd/1998.
Briefly stated, the facts are that the appellant is a company undertaking the activity in textiles. It took the premises on lease at the rent of Rs.1,50,000/- per month. As provided for under the lease deed, it paid advance rent for a period of six months, aggregating to Rs.9,00,000/-. In the returns submitted for the assessment year 1997-98, no mention was made about the deduction of tax at source, on the amount of Rs.9,00,000/-, as provided for under Section 194-I of the Income Tax Act, 1961 (for short, ‘the Act’). Therefore, proceedings under Section 201 of the Act were initiated. The defence pleaded by the appellant was that the amount of Rs.9,00,000/- was paid as deposit and since it is not towards the rent, there was no occasion to effect the deduction of tax at source. That plea was not accepted and through order dated 10-02-1997, the assessing officer held that the appellant is liable to pay tax as well as the interest thereon. The application filed for rectification under Section 154 of the Act was rejected. Thereupon the appellant filed an appeal before the Commissioner of Income Tax (Appeals) and that was rejected on 12-08-1998. Hence, it filed ITA No. 752/Hyd/1998, which in turn, was also dismissed.
Heard Sri S. Ravi, learned Senior Counsel for the appellant and Sri S.R. Ashok, learned Senior Counsel for the respondent.
It is a matter of record that the appellant took some premises on lease at the rent of Rs.1,50,000/- per month. It is not in dispute that it paid a sum of Rs.9,00,000/- in lumpsum to the lessor. Though the amount is called as deposit, it ultimately represented the advance rent for a period of six months. Once it has partaken the character of rent, the appellant was under an obligation to effect deduction of tax at source. That having not been done, it has exposed itself not only to liability to pay the corresponding tax but also interest.
There may be some possibility for a lessee to plead that the advance paid at the commencement of the lease is refundable at the conclusion and in such an event, deduction of tax at source may not be effected. In the instant case, that possibility does not exist on account of the fact that the lease itself was terminated within a short time and the amount of Rs.9,00,000/- was adjusted towards the rent.
Viewed from any angle, there is no way that the appellant could have avoided its liability under Section 201 of the Act. All the authorities held against the appellant and we do not find any basis to take a different view.
The appeal is accordingly dismissed. There shall be no order as to costs.
L. NARASIMHA REDDY, J CHALLA KODANDA RAM, J 17-09-2014 ks