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2011 (4) TMI 1164 - AT - Income TaxDisallowance u/s. 14A - Held that:- Rule 8D should not be applied and the AO has to adopt a reasonable basis or method consistent with all relevant facts and circumstances and after affording reasonable opportunity to the assessee to place all germane material on the record. We, therefore, remit the issue to the A.O for fresh consideration as stated above whether CIT(A) erred in confirming the disallowance u/s.40(a)(ia) by treating society maintenance charges as being akin to rent – whether CIT(A) failed to appreciate that payments towards common expenses are not subject to TDS hence the question of disallowance u/s. 40(a)(ia) does not arise - According to the AO the assessee ought to have deducted tax at source on the payment of maintenance charges to the society as the payment by the assessee to the society was in the nature of contract and, therefore, the provisions of section 194C was applicable. Under section 40(a)(ia) of the Act where assessee has an obligation to deduct tax at source before making payment and payment of maintenance charges to the society by the assessee was in the nature of payment to contractor for carrying out any work attracting the provisions of section 194C of the Act – Held that:- payment of maintenance charges by the owner of the premises to the society can by no stretch of imagination be said to be a payment to contractor for carrying out work on behalf of the owner of the premises. These payments were made to defray common cause. There is no contract for maintenance between the society and the owner of the premises. It is a payment to common fund to be used for the benefit of the owners of the premises. The payment by the member of the society is governed by the principle of mutuality and the society does not derive any income, impugned addition cannot be sustained and the same is directed to be deleted, ground accordingly allowed, appeal of the assessee is partly allowed
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