TaxTMI 
TaxTMI 
2017 (5) TMI 74
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....n the name and style of 'Sandeepa' & 'Srivatsa' by availing the license taken from Tirumala Tirupathi Devasthanams (TTD), Board in the name of Directors of the assessee company. A survey u/s 133A of the Income Tax Act, 1961 (hereinafter called as 'the Act') was carried out in the business premises of the assessee on 22.12.2010. During the course of survey, it was noticed that the assessee has been paying rent to TTD, but failed to deduct tax at source on rental payments. When this was put to the assessee, the assessee has submitted that the TTD has obtained no deduction certificate u/s 197 of the Act, from the department for nondeduction of tax at source on rent payments and hence, the assessee has not deducted tax at source. The A.....
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....d to the personal account of the directors in the books of the company. The assessee further submitted that the license has been granted in the name of the directors and rental receipts has been issued in the name of the directors, therefore, the A.O. was completely erred in holding that the payments made by the assessee company to the TTD are constructive payments made to the directors of the company, which falls within the meaning of rent as defined u/s 194I of the Act. 4. The CIT(A) after considering the relevant explanations of the assessee, observed that the TTD is an entity governed by the provisions u/s 12A of the Act, and also it has obtained a certificate u/s 197 of the Act, for non-deduction of tax at source on rental payments,....
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....granted in the name of the directors of the company, whereas the rent has been paid by the assessee to the directors. Though the assessee has directly paid the rent to M/s. TTD, the payments are in the nature of constructive payments made to the directors of the company for use of the license held by them, therefore, the CIT(A) was erred in holding that the assessee not as an assessee in default u/s 201(1) of the Act. 6. On the other hand, the Ld. A.R. for the assessee strongly supported order of the CIT(A). The A.R. further submitted that the company has paid rent to M/s. TTD on behalf of the directors as the directors had license in their individual capacity and M/s. TTD has issued receipts in the name of the directors, therefore, the ....
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....nt in the books of the company, therefore, the company not obliged to deduct tax at source u/s 194I of the Act on the impugned payments. The assessee further contended that the license has been granted in the name of the directors and M/s. TTD has obtained certificate u/s 197 of the Act in the name of the directors of the company and hence, the directors have made the payments without deduction of tax at source u/s 194I of the Act on impugned payments. The assessee neither availed license from the TTD nor paid rent on its own, therefore, the A.O. was erred in holding the assessee as an assessee in default u/s 201(1) of the Act. 8. Having heard both the sides and considered materials on record, we find that the directors of the company ha....
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....der consideration besides perusing the case laws relied upon. It is borne out of records that the two directors of the appellant company obtained bids to run the restaurants for TTD Devastanam and obtained most of the services from the appellant company on which there is no dispute. The directors have to pay rent to TTD for utilizing the infrastructure of the TTD for the said purpose on which deduction under section 1941 is applicable on which also there is no dispute. But, however the TTD is an entity governed by the provisions of section 12A and that the TTD has obtained 197 certificates to get payments without deduction of TDS, The directors have not affected TDS while paying monthly rents to TTD. Here it may be noted that at times the m....