TaxTMI 
TaxTMI 
2007 (3) TMI 215
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion of law has been framed by us for consideration : "Whether the Income-tax Appellate Tribunal was correct in law in holding that the amount of Rs. 1,50,24,000 (termed as security deposit) paid by the assessee to its landlord under the agreement to lease dated March 10, 1995, was not 'rent' as defined in the Explanation to section 194-I of the Income-tax Act, 1961." 3. The brief facts of this case are that the assessee-company entered into an agreement with M/s. ABCO Footwear Care to take on lease the premises bearing No. 328/1, Village Bijwasan, New Delhi at a monthly rent of Rs. 6,26,000. The lease agreement also provided for payment of security deposit amounting to Rs. 1,50,24,000 which was to be reduced every six m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g and, therefore, was clearly in the nature of rent as defined in section 194-I of the Act. The definition of "rent" defined in Explanation (i) to section 194-I of the Act, is wide and includes payment by whatever name called and paid under any arrangement for use of land or building and as such there is no justification on the part of the assessee for not deducting tax at source. 8. On the other hand, it has been argued by learned counsel for the respondent that clause 14 of the agreement provides for refund of the unadjusted portion of the security deposit paid by the assessee and as such the tax was not deductible unless the rent has become due to the landlord. 9. Section 194-I of the Act which is relevant for deciding the present ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the pro visions of this section shall apply accordingly." Clause (i) of the Explanation to section 194-I coins a definition of the expression\qrent\q, so as to mean- -any payment, by whatever name called, under any- -lease, -sub-lease, -tenancy or -any other agreement or arrangement for the use of any land or any building (including factory build ing), together with- -furniture, -fittings and -the land appurtenant thereto, whether or not such building is owned by the payee. The definition for the purpose of this Act of the nomenc....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... security deposit which shall stand reduced every six months when the rent becomes due and payable in accordance with clause 3.1, by an amount of Rs. 25,04,000 by appropriation of the said amount of Rs. 25,04,000 towards the rent due and payable for six months i.e. Rs. 37,56,000. The balance amount i.e., Rs. 37,56,000 less Rs. 25,04,000 being Rs. 12,52,000 shall be paid by REEBOK to ABCO after deduction at source of any applicable taxes on the rent due and payable. (b) The parties have agreed that they may by mutual agreement adjust and apply, the said amount of Rs. 1,50,24,000 differently. Unless the parties reach such an agreement by March 31, 1995, the provisions of clause 3.2.(a) shall prevail." 14. Upon termination of the l....