TaxTMI 
TaxTMI 
1999 (12) TMI 100
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.... payments had been made by the assessee to the four landlords : 1 . M/s. Laxmi Shelter (P.) Ltd. Rs. 8,50,000 on 30-1-1995 -do- Rs. 50,000 on 2-3-1995 2. M/s. Shree Shelter (P.) Ltd. Rs. 8,50,000 on 30-1-1995 3. M/s. Ganesh Awas (P.) Ltd. Rs. 8,50,000 on 30-1-1995 -do- Rs. 75,000 on 25-2-1995 4. M/s. Siddhi Homes (P.) Ltd. Rs. 8,50,000 on 30-1-1995 -do- Rs. 3,00,000 on 4-3-1995 -------------------------- Rs. 38,25,000 -------------------------- The Assessing Officer noted that the above advance payment of rent to the extent of Rs. 3 8,25,000 exceeded the limit of Rs. 1,20,000 in excess of which tax was required to be deducted by the assessee under section 194-I of the Act. For lack of non-deduction of tax at source in this regard, an order was originally passed by the Assessing Officer determining the short deduction of tax to the extent of Rs. 8,79,750 and demanding the said amount under section 201(1A) and furthermore levying interest under section 201(1) of an amount of Rs. 2,96,915. In the first appeal, this order passed by the Assessing Officer was set aside to the Assessing Officer for examining the matter afresh before framing the fresh order. Accordingly, the impug....
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....suant to the tenancy agreement dated 1-4-1995. As regards the transfer entries in the books of the assessee passed on 31-3-1995 it was submitted on behalf of the assessee that there was nothing to indicate that this sum had been paid as advance rent as contemplated by the Assessing Officer. It was furthermore argued that the tenancy agreement as well as the transactions in respect of rent started only on 1-4-1995 and hence the order of the Assessing Officer relating to the financial year 1994-95 was misconceived. It was furthermore argued that even the advances were of the nature of refundable advances and although a small part of the advances paid had been adjusted against the rents for certain months, the entire balance amount of advances were ultimately refunded back to the assessee by the landlords on termination of the agency in January 1998. 6. The CIT(A) noted that the definition of 'rent' as provided in section 194-I was wide enough to include advance of rent. He relied on the Circular No. 715 dated 8-8-1995 issued by the CBDT clarifying the question No.22 put to it that if the deposit made by the tenant is adjustable against future rent, the said deposit would be in the n....
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....vance. The said advance amount shall not carry any interest." Clause (a) provides that monthly rent shall be adjusted every month from the said advance of Rs. 12,00,000. Clauses (s) and (t) provide for refund of advance money lying with the landlords in the event of termination of the tenancy agreement either at the instance of the landlords or of the tenant. 8. Thereafter, the ld. counsel for the assessee takes us through the dictionary meaning of the word "rent" and on that basis argues that rent being of the nature of periodical payments cannot cover any advance payment of rent. Our attention has also been drawn to the discussions made in the commentary authored by Shri H.R. Khanna on "The Transfer of Property Act (7th Edn.)" with regard to section 50 of the said Act, at page 219 of the above-mentioned commentary. It is discussed therein that in order to get the benefit of section 50, the tenant must have paid the rent, as rent, and not in advance, for a payment in advance is treated as a loan. The ld. counsel for the assessee thus strongly argues that the advance payment in the instant case was of the nature of a loan and cannot be considered as forming 'rent' for the purpose....
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....d the legislative history of the provisions and furthermore that if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted : 1. CIT v. N.C. Budharaja & Co. [1993] 204 ITR 412, at 434 2. CIT v. Vegetable Products Ltd. [1973] 88 ITR 192/195 (SC) 3. CIT v.Sodra Devi [1957] 32 ITR 615, at 632&633 (SC) On the other hand, the learned DR strongly relies on the orders of the Assessing Officer and the CIT (Appeals). He reiterates the departmental reliance on the clause (a) of the Tenancy Agreement relating to adjustability of the deposit against rent. He has also pointed out that, in fact, such adjustment did take place. In this connection, the learned DR has placed reliance on a judgment of the Calcutta High Court in the case of Smt. Bishaka Sarkar v. Union of India [1996] 219 ITR 327. In this case, it has been held that rent cannot be split up and the entire rent paid to the co-owners would come within the expression "other cases" and the provisions relating to deduction of tax at source would apply to the aggregate amount of rent payable to all the co-owners. 12. We are unable to agree with the contention of the ....
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....d by the tenancy agreement and the subsequent acts of the parties concerned, it would, therefore, be necessary to come to the conclusion that the deposits were actually refundable in nature. Had the tenancy agreement continued for a long time, then the question of refund would not have arisen is not of much consideration. 'Advance rent' actually means rent paid in advance for a fixed period. There may be a written or verbal agreement between the landlord and the tenant that rent in respect of some period should be paid, instead of contemporaneously, at some earlier point of time. 'Advance rent' cannot certainly be equated with deposit made in connection with tenancy which may again be adjusted against rent in full or in part. Unless there is a specific provision for declaring the deposit to represent the rent in advance for certain future period, the question of considering the deposit as advance rent cannot at all come in. In the instant case, the monthly rent was only Rs. 3,000 whereas the amount of deposit was a very large one like Rs. 12,00,000. If this amount of Rs. 12,00,000 has got to be treated as advance rent it would cover a period of more than 33 years. it is inconceivab....