2023 (11) TMI 856 - AT - Income Tax

Assessee Not Liable for TDS on Rentals Below Rs. 1,80,000; Tribunal Deletes Demand and Interest Imposition.

The Tribunal allowed the appeal, concluding that the assessee was not liable for TDS on rental payments below the threshold of Rs. 1,80,000 as per Section ... Tax deduction at source obligation under Section 194I - assessee-in-default liability under Section 201(1) and 201(1A) - disallowance under Section 40(a)(ia)Tax deduction at source obligation under Section 194I - aggregate / per-payee threshold for TDS - Assessee not liable to deduct TDS on rental payments which, on a per-payee basis, did not exceed the threshold limit - HELD THAT: - The Tribunal examined the payment particulars filed by the assessee (location, landlord name, PAN and amounts) and found that payments made to each payee were below the statutory threshold of Rs. 1.80 lakhs. On that factual basis the tribunal concluded that the legal obligation to deduct tax at source under the relevant provision did not arise in respect of those payments. The fact that the assessee had suffered a disallowance under Section 40(a)(ia) for failure to produce documentary evidence did not, by itself, convert the assessee into an assessee-in-default where TDS was not in law required because each payment was below the threshold. The Tribunal accepted the particulars as sufficient to reach a reasonable conclusion that no TDS liability arose. [Paras 5]Demand raised under Section 201(1) in respect of the aggregate rental payments deleted as the assessee was not liable to deduct TDS.Assessee-in-default liability under Section 201(1) and 201(1A) - consequential interest under Section 201(1A) - Interest and demand under Section 201(1A) confirmed on amounts where no legal TDS obligation arose were not sustainable - HELD THAT: - The demand computed under Sections 201(1) and 201(1A) included interest consequent to alleged non-deduction. Having held that no TDS obligation arose because individual payments were below the threshold and noting that payees possessed PAN, the Tribunal found that treating the assessee as in default and levying interest was unsustainable. The Tribunal recognised that the assessee had already suffered a disallowance under Section 40(a)(ia) for evidentiary lapse, but treated that disallowance as a separate consequence which did not justify converting the factual absence of a TDS obligation into a default attracting interest. [Paras 5]Interest and consequential demand under Section 201(1A) deleted as consequential to the deletion of the primary TDS demand.Final Conclusion: The appeal is allowed: the Tribunal deleted the demand and interest under Sections 201(1) / 201(1A) for Assessment Year (AY) 2016-17, holding that no TDS obligation arose as each rental payment to payees was below the threshold and the particulars furnished were adequate to that conclusion. Issues Involved:The issues involved in the judgment are:1. Whether the assessee was liable for deduction of TDS u/s. 194-I on rental payments below Rs. 1,80,000 to various parties.2. Whether the imposition of interest u/s. 201(1A) on the amount of TDS not deducted was justified.Issue 1:The appeal by the assessee for Assessment Year 2016-17 arose from an order of the Commissioner of Income Tax (Appeals) regarding the demand raised against the assessee for want of TDS on rental payments below Rs. 1,80,000. The assessee contended that the AO erred in treating the sum paid as liable for TDS u/s. 194-I and in imposing TDS u/s. 201. The AR argued that the rental payments did not exceed the threshold limit, and accepting disallowance u/s 40(a)(ia) did not make the assessee liable for TDS u/s 201(1). The Tribunal found that the details of rental payments were below the threshold limit, and the assessee was not obligated to deduct TDS. Therefore, the demand was deleted, and the appeal was allowed.Issue 2:The AO passed an order u/s 201(1) / 201(IA) holding that the assessee did not deduct TDS on aggregate payment and raised a demand including interest. The CIT(A) directed a revision of the demand to the extent of default. The Tribunal observed that the assessee had paid rent to various parties, and while tax was deducted on some payments, it was not deducted on others below the threshold limit. The Tribunal found that the assessee was not liable for TDS on these payments as they were below the prescribed limit. Despite the disallowance u/s 40(a)(ia), the details provided were deemed sufficient to conclude that the assessee was not in default. Therefore, the demand was deleted, and the appeal was allowed.Separate Judgment:The appeal was heard by Hon'ble Shri Manoj Kumar Aggarwal, AM, who delivered the order pronouncing the deletion of the impugned demand and allowing the appeal of the assessee.