2022 (3) TMI 1273 - AT - Income Tax

Appellant's TDS Liability Upheld for Lease Rent Payments

The ITAT upheld the CIT(A)'s decision that the appellant was liable to deduct TDS on lease rent payments to the Noida Authority under Section 194-I of the ... TDS u/s 194I - TDS on the payments made by the assessee to Greater Noida Authorities - assessee paid lease rentals on 30.10.2010 and failed to deduct TDS - HELD THAT:- The matter deductibility of TDS on the payments made to Greater Noida Authorities has been examined by the Hon'ble Supreme Court in the case of M/s. New Okhla Industrial [2018 (8) TMI 1374 - SUPREME COURT] wherein it was held that 'deduction at source is on payment of rent under Section 194-I, which is clearly the statutory liability'. - Decided in favour of Revenue. Issues Involved:1. Liability to withhold tax on payment of lease rent to the Noida Authority.2. Nature of lease rent payment (capital or revenue).3. Applicability of Section 194-I of the Income Tax Act, 1961.4. Reliance on precedents and judgments by higher courts.5. Interpretation of 'rent' under Section 194-I.6. Exemption under Section 10(20) and Section 194A(3)(iii)(f) of the Income Tax Act.Issue-wise Detailed Analysis:1. Liability to Withhold Tax on Payment of Lease Rent to the Noida Authority:The primary dispute revolves around whether the assessee is liable to withhold tax on payments made to the Noida Authority as lease rent. The Assessing Officer (AO) held that the lease rent paid by the appellant to the authorities falls under the provisions of Section 194-I of the Income Tax Act, 1961, and the appellant's failure to deduct tax necessitates proceedings against them.2. Nature of Lease Rent Payment (Capital or Revenue):The appellant argued that the lease rent paid was capital in nature and not revenue. They relied on various authorities to support their claim that the payment was not covered under Section 194-I. However, the CIT(A) noted that the Noida Authority itself claimed that the land was leased and not sold, and the lease agreement included all conditionalities of a lease. Therefore, the payment was considered revenue and not capital.3. Applicability of Section 194-I of the Income Tax Act, 1961:The CIT(A) and subsequently the ITAT referred to the Supreme Court judgment in the case of M/s. New Okhla Industrial vs. CIT, which held that deduction at source is mandatory on payment of rent under Section 194-I. The Supreme Court's decision clarified that the statutory liability under Section 194-I applies to such lease payments.4. Reliance on Precedents and Judgments by Higher Courts:The appellant cited the Supreme Court order in Enterprising Enterprises Vs. DCIT and the Allahabad High Court judgment in (2015) 379 ITR 14 (All.), but the CIT(A) found these references unhelpful. The Supreme Court order was not considered a precedent, and the Allahabad High Court judgment did not pertain to Section 194-I. The ITAT upheld the CIT(A)'s decision, relying on the Supreme Court's detailed analysis in M/s. New Okhla Industrial vs. CIT.5. Interpretation of 'Rent' under Section 194-I:The definition of 'rent' under Section 194-I is broad, encompassing any payment under a lease or similar arrangement for the use of land, buildings, machinery, etc. The CIT(A) and ITAT concluded that the lease payments made by the appellant to the Noida Authority fit within this definition, thus necessitating TDS deduction.6. Exemption under Section 10(20) and Section 194A(3)(iii)(f) of the Income Tax Act:The Noida Authority contended that it is a local authority under Section 10(20) and its income is exempt. However, the Supreme Court in M/s. New Okhla Industrial vs. CIT ruled that Noida is not a 'local authority' under the amended Section 10(20) and is not entitled to exemption. The ITAT, following this ruling, dismissed the appellant's reliance on the exemption.Conclusion:The ITAT upheld the CIT(A)'s order, affirming that the appellant was liable to deduct TDS on lease rent payments to the Noida Authority under Section 194-I. The appeal was dismissed, and the judgment of the Hon'ble Apex Court was deemed conclusive in settling the matter.