TMI Blog2005 (10) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... er the tax should be deducted at the rate of 20 per cent or at the rate of 15 per cent on the rent payable to the members of the appellant. Facts 2. All the appellants are deriving rental income from properties rented out to Life Insurance Corporation. The tenants deducted tax in respect of rental payment at the rate of 15 per cent. The Assessing Officer held that applicable rate of deduction is 20 per cent and passed orders holding the appellants as assessee-in-default under section 201(1) and levied interest under section 201(1A). Learned CIT(A) held that though assessment in respect of each co-owner is to be made under section 26 of the Act, yet since the payee is not an individual or HUF but an Association of Persons, the rate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly to each of the payee/co-owners separately. The payers and payees are, however, advised not to enter into sham agreements to avoid TDS provisions." He accordingly contended that rent receivable by the members of appellant are to be treated as individual income in terms of section 26 of the Act as co-owners. As the property is owned by the members and all of them are being assessed in individual status, the appropriate rate is only 15 per cent. In view of provisions of section 26, the co-owners of the property cannot be construed as AOP. Since the recipients are co-owners and status of the co-owners is individual, the rate applicable is 15 per cent and not 20 per cent. All the members of AOP has furnished their individual returns and tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case, it is seen that though the immediate payee is an association, yet the property is owned by various co-owners, whose shares are definite and identifiable. In the case of M/s. Vijaya Enterprises, there are 26 co-owners. Only two co-owners have share of 10 per cent in such property and rent payable in this regard is exceeding Rs. 1,20,000. In the case of Pal Associates, the property is owned by 36 co-owners. Nine co-owners are receiving rent in a sum exceeding Rs. 1,20,000. All these co-owners have filed their return of income declaring income from property in their respective hands. The same is assessed in their individual hands in terms of section 26 of the Act. The credit for TDS is also granted to each of them in proportion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operative Development Bank Ltd. [1982] 137 ITR 230 (MP) CIT v. Divisional Manager, New India Assurance Co. Ltd. [1983] 140 ITR 818 (MP) CIT v. Shri Synthetics Ltd. [1985] 151 ITR 634 (MP) Gwalior Rayon Silk Co. Ltd. v. CIT [1983] 140 ITR 832 (MP) CIT v. MP Agro Morarji Fertilizers Ltd. [1989] 176 ITR 282 (MP) We accordingly hold that since the ultimate payee is individual or HUF, who are co-owners of the property and whose shares are definite and ascertainable, the appropriate rate of deduction of tax at source is 15 per cent and not 20 per cent under section 194-I. Thus, the tenants are not to be treated as assessee-in-default under section 201(1). Consequently, no interest is to be levied under section 201(1A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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