AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 186
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....R 39.25,74,528 under section axis) of the Income Tax Act, 1961 (the Act) in respect of minimum guarantee expense. 1.1 That the CIT(A) erred on facts and in law in holding that the arrangement entered in by the appellant requiring payment of minimum guarantee charges to hotel owners/operators was in the nature of 'rent' falling within the scope of section 194I of the Act. 1.2 That the CIT(A) erred in holding that the case of the appellant fell within the scope of CBDT Circular No. 5/2002 of 30.07.2002, without appreciating that Circulars are not at all binding on appellate authorities. 1.3 That the CIT(A) erred on facts and in law in cherry picking and misconstruing the terms of the contract entered into by the appellant with independent hotel owners/operators and incorrectly concluding that the appellant has a rightful claim to use the premises on regular basis. 1.4 That the CIT(A) erred in adjudicating the appeal in gross violation of principles of judicial propriety in so far as the order passed by CIT(A) in the appellant's own case for the preceding assessment year 2015-16, wherein provisions of section 194I was specifically held t....
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....(va) of the Act and section 43B of the Act is retrospective in nature. 5. That the CIT(A) erred on facts and in law upholding the interest charged by the assessing officer under section 234D of the Act. 6. That the CIT(A) erred on facts and in law in upholding the initiation of penalty proceedings under section 271(1)(c) of the Act by the assessing officer. The Appellant craves leave to add and/or alter, amend, modify or rescind the grounds hereinabove before or at the time of hearing before the Hon'ble ITAT." 2.1 The assessee has raised following grounds of appeal in ITA No. 452/Del/2023, AY 2020-21: "1. That the Commissioner of Income-tax (Appeals)-24, New Delhi [CIT(A)'] erred on facts and in law by upholding the order passed by Deputy Commissioner of Income Tax, Circle 76(1), New Delhi ('assessing officer) under section 201(1)/201(1A) of the Income tax Act, 1961 ('the Act"). 2. That the Ld. CIT(A) erred on facts and in law in disregarding the scheme of demerger approved by Hon'ble National Company law Tribunal (NCLT) wherein the Indian hotel business was demerged from the Appellant to another entity. 2....
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....#39;assessee in default' since non-deduction of tax at source was on account of bona fide view taken by the Appellant. 4. That the CIT(A) erred on facts and in law in arbitrarily confirming the levy of interest under section 201(1A) of the Act by the assessing officer. 5. That the CIT(A) erred on facts and in law in upholding the initiation of penalty proceedings under section 271C of the Act by the Additional Commissioner of Income tax, Range 76, New Delhi. The Appellant craves leave to odd and/or alter, amend, modify or rescind the grounds hereinabove before or at the time of hearing before the Hon'ble ITAT." ITA No. 452/Del/2023, AY 2020-21: 3. The relevant facts giving rise to these appeals are that the assessee, engaged in operating online platform for providing OYO Rooms at various hotels, guest houses, etc. throughout India. The appellant assessee, for doing its business, has entered into agreement(s)/arrangement(s) with various hostels, guest houses, etc. for facilitating reservation/booking of hotel rooms through the appellant assessee's OYO platform. Survey operations under section 133A of the Income Tax Act, 1961 ('Act') were carr....
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.... the agreement, the assessee appellant has assured minimum revenue benchmark, which hotels/guest houses may/will receive or likely/expect to receive from the appellant assessee e-platform. In case, the benchmark is exceeded, then the hotel/guest house is required to pay service fee to the appellant assessee otherwise the appellant assessee is required to pay the service fee in case of shortfall in achieving the benchmark. The agreement further provides that in case the rooms are sold at price lesser than the agreed amount between the appellant assessee and hotels, the difference/loss has to be borne by the appellant assessee. 6. The Ld. Sr. Counsel submitted that the appellant assessee had provided only the service of securing booking of rooms in hotels and guest houses through its e-commerce platform maintained and run by it. The rooms could be booked by anyone and the bill would be raised in the name of customer occupying the room. It was further submitted that the appellant assessee, vide its e-platform and agreement entered with hotels, had not booked any room exclusively for its use but had enabled various customers to book rooms through its e-platform as evident from the a....
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....S liability arose in section 194I of the Act only when the payer assessee pays rent/credit such rent in the recipient accounts 'for the use of (either separately or together)' any building, machinery, plant, equipment, furniture, fittings etc.... Hence, in the case in hand, the Ld. Assessing Officer (TDS) had to establish that the guarantee fee paid to hotel/guest house was for the appellant assessee's use. He submitted that the guarantee fee or by whatever name called had not been paid for the use of ....; hence, provisions of section 194I of the Act did not get attracted in the present case. In support of his contention, the Ld. Sr. Counsel placed reliance on the decision of Hon'ble Supreme Court in the case of Japan Airlines company Ltd. 377 ITR 372 and also on the decision of Hon'ble Delhi High Court in the case of Apeejay Surrendera Park Hotels Ltd. (2016) 287 CTR 161, the decision of Hon'ble Andhra Pradesh High Court in the case of Krishna Oberoi 257 ITR 105 and on decisions of Tribunal in cases of Johnson Watch Company Pvt. Ltd. ITA No. 1738/Del/2020 (Delhi), Sahana Dwellers (P.) Ltd. [2016] 67 taxmann.com 202 (Mumbai). 10. Further, the Ld. Sr. Counsel drew our attention ....
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....e question of tax deduction at source would not normally arise (except where he is covered under section 44AB as mentioned above) since it is the employee or such individual who makes the payment and the company merely reimburses the expenditure. Furthermore, for purposes of section 194-I, the meaning of 'rent' has also been considered. "'Rent' means any payment, by whatever name called, under any lease . . . or any other agreement or arrangement for the use of any land. . . ." [Emphasis supplied]. The meaning of 'rent' in section 194-I is wide in its ambit and scope. For this reason, payment made to hotels for hotel accommodation, whether in the nature of lease or licence agreements are covered, so long as such accommodation has been taken on 'regular basis'. Where earmarked rooms are let out for a specified rate and specified period, they would be construed to be accommodation made available on 'regular basis'. Similar would be the case, where a room or set of rooms are not earmarked, but the hotel has a legal obligation to provide such types of rooms during the currency of the agreement. 3. However, often, there are instances, where corporate employers, tour op....
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....ality, we find merit in the arguments/contentions/submission of the Ld. Sr. Counsel that the assessee has not any exclusive and absolute right to use the hotel/guest house rooms as per the agreement. The said rooms are available to all for booking through the e-platform of the appellant assessee. 14. The definition of 'rent' for the purpose of section 194I of the Act reads as under: "rent" means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any,- (a) land; or (b) building (including factory building); or (c) land appurtenant to a building (including factory building); or (d) machinery; or (e) plant; or (f) equipment; or (g) furniture; or (h) fittings, whether or not any or all of the above are owned by the payee;" 15. The phrase 'for the use of (either separately or together)' refers to lessee who pays the rental for use of ...... who is required to deduct tax at the time of payment or credit of rent in the lessor's account. Here, in the present case, the lessee is the appella....
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.... fee paid to various hotels/guest houses for not meeting the contractual obligations for unsold rooms (booking of minimum number of rooms not met through e-platform of the appellant assessee) and loss from sold rooms (booking of rooms at a lesser price than the minimum agreed room tariff through e-platform of the appellant assessee) in accordance with the terms and conditions of the agreement is not rent as per section 194I of the Act as the same has been paid for not using any room for itself but for the default on the part of appellant assessee to secure the number of bookings of rooms at a minimal tariff (for unsold rooms and loss from sold rooms). Ordered accordingly. Consequentially, we hold that the Ld. Assessing Officer (TDS) is not justified to treat payments aggregating to Rs. 31,25,07,038 as rent liable for TDS under section under section 194I of the Act. Hence, the TDS liability upheld by the Ld. CIT(A) vide impugned order is hereby deleted. The assessee gets consequential relief. Thus, Grounds numbered 3 to 3.4 are allowed accordingly. 19. The second issue that whether the TDS demand be continued to be raised in TAN No. DLO04346G even after demerger of the business, ....