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Shanti Education Society Versus The DCIT (TDS) , Jaipur

2016 (8) TMI 472 - ITAT JAIPUR

Tds u/s 194I - failure to deduct tax at source on payment made to RIICO - assessee in default u/s 201(1) - development charges paid by the assessee to Rajasthan State Industrial Development and Investment Corporation Limited (RIICO) towards allotment of land on lease of 99 years - Held that:- As decided in case of M/s. Gupta Fabtex (P) Ltd. vs. DCIT (TDS) [2016 (1) TMI 664 - ITAT JAIPUR] lease document has used the "Development charges" and "Economic rent" to be payable by the assessee. As the d .....

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ecided in favour of assessee - Payment to M/s Rajasthan Technical University (RTU) on account of affiliation fee on which TDS was not deducted - appellant has claimed that the income of RTU is exempt under section 10(23C)(iiiab) - Held that:- The CBDT Circular No 4/2002 dated 16.7.2002 has been issued in the context of self-declaration by entities/institutions whose income is exempt under section 10 of the Act. In the said circular, the CBDT has clarified that in case of those funds or autho .....

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, there is no requirement to deduct tax at source. In light of above, the AO is directed to verify from the concerned AO of RTU as well as independently from RTU whether the income of RTU is exempt under section 10(23C)(iiiab) of the Act. If the AO finds the same to be in order, the AO is directed not to treat the assessee in default u/s 201(1) of the Act and thereby not to recover any tax and interest u/s 201(1A) on payments to RTU. - Decided in favour of assessee for statistical purposes. - IT .....

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the action of the ld. AO in treating the assessee as assessee in default u/s 201(1) for the alleged failure to deduct tax at source on payment made to RIICO and thereby confirming the action of charging interest of ₹ 23,70,599/- u/s 201(1A) of the IT Act, 1961. The Action of the ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the demand of ₹ 23,70,599/- allegedly raised. 2. In the facts and circumstances of th .....

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ing of total area of 131028.63 sq.meters at Ramchandrapura Industrial Area, Sitapura Exten. Jaipur from RIICO for a total consideration of ₹ 49,34,82,560/-. For acquiring the said land a lease agreement with RIICO was executed dated 26/07/2011 for a lease period of 99 years. The appellant society paid total amount of ₹ 16,60,27,673/- on account of lease rent payment, development charges and interest on development charges etc. As per ld. AO on these payment, TDS was to be deducted u/ .....

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t 1961. The demand raised u/s 201(1A) was however determined at ₹ 23,70,599/-. 2.1 LR AR submitted before the Assessing officer that the lease agreement executed with RIICO for a period of 99 years was to acquire the ownership rights in the industrial land. The payment so made was not for merely use of the land but larger interest comprising bundle of rights was acquired and , therefore, it was not rent and was not liable for TDS U/s 194-I. The ld. AO did not agree with the contentions of .....

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he ld. CIT(A) upheld the order of the ld. AO for the following reasons:- (i) The clauses of the lease agreement denote that land was given to the assessee on lease and was not transferred by sale. Although the assessee acquired benefit of enduring nature for 99 years and rightly capitalized the expenditure, yet the payment was in the nature of rent liable to TDS. (ii) RIICO itself was not owner of the said land as the Government had allotted the land to RIICO on leasehold basis for a period of 9 .....

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d. vs. DCIT (TDS), Jaipur in ITA No. 647 & 648/JP/2013 for the assessment year 2011-12 and 2012-13. 2.3 The ld. DR relied on the orders of the authorities below. 2.4 We have heard the rival contentions and perused the materials available on record. It emerges from the record that on similar issue the Coordinate Bench in the case of M/s. Gupta Fabtex (P) Ltd. vs. DCIT (TDS) has decided the issue in favour of the assessee by following observations. Even if the aforesaid decision of ITAT Chenna .....

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fore in our view development charges can'not be read as rent within the purview of the section 194 I. further lease document has provided the consequences of non-payment of the development charges by the assessee, if the assessee failed to pay the development charges, as mentioned in the agreement, the possession was liable to be taken over by the RIICO, therefore the development charges can not be considered as rent. 2.2 In view of the similar facts and circumstances of the assessee's c .....

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As per AO, such payment was in the nature of professional fee and that the RTU is formed by way of a State Act and not by way of Central Act and therefore it was not covered u/s 196 of IT Act. The AO also noted that the assessee has failed to produce any evidence which may prove that RTU was exempt from Income tax and that before making such payment the appellant was to obtain necessary document from the deductor in support of the fact that such entity was exempt from Income Tax. On the other h .....

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Y. 2008-09 wherein income is shown as exempt u/s 10(23C)(iiiab). The appellant also filed a copy of report of the office of AG in which at page no.30 at para 9, it is mentioned that RTU is exempt u/s 10(23C)(iiiab). 2.4 The ld CIT(A) has given his findings as under: First of all the issue as to whether on the payments made to RTU, TDS was to be deducted or not is to be decided. It may be noted that the appellant society is a University and for academic reasons affiliated to RTU. Therefore the pa .....

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contractual nature, there was no valid basis for non-deduction of tax in as much as M/s RTU was not covered u/s 196 as also that there was no evidence to prove that RTU was covered u/s 10(23C)(iiiab). However during the appellate proceedings as an additional evidence the appellant filed xerox copy of Income Tax Return for A.Y. 2008-09 as also some finding/observation of AG Audit. In the Xerox copy of Income Tax return for A.Y. 2008-09, M/s RTU has claimed its income as exempt u/s 10(23C)(iiiab). .....

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come of M/s RTU being finding of auditors of AG department it may be mentioned that their findings may not be a valid basis for treating the income of M/s RTU to be exempt u/s 10(23C)(iiiab) of the Act. The important point to be noted is that the payment was made during A.Y. 2012-13 and the document to be relied upon for claim of exempted income of M/s RTU should also be pertaining to that period only. Therefore prima facie when the payment was made to M/s RTU, the appellant was required to dedu .....

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are not applicable on payment to RTU. Ld AR further drawn reference to CBDT Circular No 4/2002 dated 16.7.2002 to support his contention that the TDS provisions are not applicable as the income of the assessee is exempt under section 10(23C)(iiiab) of the Act. 2.5 We have heard the rival contentions and perused the material available on record. The CBDT Circular No 4/2002 dated 16.7.2002 has been issued in the context of self-declaration by entities/institutions whose income is exempt under sec .....

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