2022 (12) TMI 1009 - AT - Income Tax

Appeal allowed, disallowance under section 40(a)(ia) set aside for non-TDS on temp accommodation payments. Delay condoned. Decision on 20/12/2022.

The Tribunal allowed the appeal, setting aside the disallowance under section 40(a)(ia) as payments for temporary alternative accommodation were not ... TDS u/s 194I - payments made to various members of the society - disallowance u/s 40(a)(ia) - Assessee had made certain payments in respect of compensation for alternative accommodation given to various members of the Housing Society under the development agreement made with the society and the members - HELD THAT:- We find that issue in dispute is squarely covered by the decision of this Tribunal in assessee’s own case[2022 (4) TMI 1482 - ITAT MUMBAI ] as held that payments made by assessee under no circumstances can be construed to be coming within the meaning of “Rent” as provided under section 194I. Thus we are of the considered opinion that compensation paid by the assessee to the tenants towards alternative accommodation not being in the nature of rent as defined in section 194I, there is no requirement for deduction of tax under the said provisions. Therefore, the disallowance made under section 40(a)(ia) of the Act cannot be sustained - Appeal file by the assessee is allowed. Issues Involved:Delay in filing appeal, Disallowance under section 40(a)(ia) of the Income Tax Act, 1961, Applicability of section 194-I, Opportunity of hearing, Interest levied under section 234B/C.Analysis:1. Delay in filing appeal: The appeal in ITA No. 2592/Mum/2022 for A.Y. 2017-18 was filed with a delay of 395 days. The assessee explained the reason for the delay, citing oversight due to multiple appeals being disposed of on the same day by the Ld. CIT(A). The Tribunal, in the interest of substantial justice, accepted the reasons for the delay and condoned it, allowing the appeal for adjudication.2. Disallowance under section 40(a)(ia): The dispute arose from the disallowance of Rs. 41,81,760 under section 40(a)(ia) by the Ld. AO. The contention was that payments made to society members for temporary alternative accommodation during a redevelopment project did not attract TDS provisions. The Ld. CIT(A) upheld the disallowance, citing applicability of section 194I-A. However, the Tribunal found the issue to be covered in the assessee's favor by a previous decision and set aside the Ld. CIT(A)'s order, allowing the appeal.3. Applicability of section 194-I: The Ld. AO argued that payments made to society members constituted rent and were liable to TDS under section 194-I. The Tribunal, relying on precedent, determined that the payments were in the nature of compensation for alternative accommodation, not rent. Therefore, the provisions of section 194-I were deemed inapplicable, leading to the disallowance under section 40(a)(ia) being deleted.4. Opportunity of hearing: The assessee contended that the Ld. CIT(A) erred in not providing an opportunity of hearing to rebut the view taken regarding the applicability of section 194I-A. The Tribunal did not find it necessary to address this issue specifically, as the main dispute regarding the disallowance was resolved in favor of the assessee based on the interpretation of relevant provisions.5. Interest levied under section 234B/C: The assessee raised a ground regarding interest levied under section 234B/C, which the Ld. CIT(A) did not address. However, the Tribunal did not delve into this issue separately as the primary dispute related to the disallowance under section 40(a)(ia) and its resolution in favor of the assessee.In conclusion, the Tribunal allowed the appeal, setting aside the disallowance under section 40(a)(ia) based on the finding that the payments made for temporary alternative accommodation were not subject to TDS under section 194-I. The decision was supported by precedent, emphasizing the nature of the payments as compensation rather than rent. The delay in filing the appeal was condoned, and the Tribunal's decision was pronounced on 20/12/2022.