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of <h1>ITAT rules payment as revenue-sharing, not subject to TDS.</h1> <h3>M/s Sri Parameswari Projects Pvt. Ltd. Versus Income Tax Officer Ward-3 Srikakulam</h3> M/s Sri Parameswari Projects Pvt. Ltd. Versus Income Tax Officer Ward-3 Srikakulam - [2020] 79 ITR (Trib) 529 (ITAT [Viskha]) Issues:Addition under section 40(a)(ia) of the Income Tax Act, 1961 for failure to deduct tax at source.Analysis:The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding the addition of a specific amount under section 40(a)(ia) of the Income Tax Act, 1961. The Assessing Officer found that the assessee made a payment under the head 'Distributor Hire Charges' without deducting tax at source as required by law. The AO considered this payment a contractual obligation and disallowed the expenditure under section 40(a)(ia) of the Act. The CIT(A) upheld this addition, leading to the appeal before the ITAT.During the appeal hearing, the assessee argued that the payment was not a contractual payment or rent but rather a revenue-sharing arrangement between the film distributor and the theatre owner. The assessee relied on previous assessments where similar additions were deleted by the CIT(A) and no such additions were made in subsequent years. The AO failed to establish that the payment was contractual or rental in nature, and it was clarified that the payment was made by the theatre owner, not received by the assessee as rent. Therefore, the ITAT concluded that the AO did not prove the payment attracted TDS requirements or that the assessee was in default for not deducting tax at source.The ITAT set aside the CIT(A)'s order, deleted the addition made by the AO, and allowed the appeal of the assessee. The decision was based on the understanding that the payment was a revenue-sharing arrangement, not subject to TDS provisions, as it was not a contractual or rental payment. The ITAT emphasized that the department failed to establish the nature of the payment as contractual or rental, leading to the unsustainable nature of the CIT(A)'s order.
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