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2007 (3) TMI 215 - HC - Income TaxTDS u/s 194I - Security deposit paid to the landlord under the agreement to lease - whether not in the nature of rent? - HELD THAT:- If it had been the security amount, then, firstly, it would have been in the nature of "refundable amount" at the time of the termination of the lease. Secondly, there would have been no reduction in the security amount, after every six months and thirdly, as per clause 14 of the lease agreement, the assessee is "obliged to refund the unadjusted portion, if any, of advance/security deposit," which means that this amount was adjustable against rent and the same was adjusted also, and thus this amount was in the nature of advance rent. Since, this amount paid by the assessee was not fully "refundable deposit amount" thus this amount was in fact the advance rent and as per the provision of section 194-I of the Act, the assessee was required to deduct tax at the source from the payment of such advance rent at the time of its assessment. Accordingly, we hold that the Tribunal was wrong in law in holding that the amount (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 Act and, accordingly, the appeal filed by the Revenue is accepted. The substantial question of law is answered in the negative, in favour of the Revenue and against the assessee.
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