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TMI Blog2017 (3) TMI 198X X X X Extracts X X X X X X X X Extracts X X X X ..... pment, which was paid for the alternate accommodation of the members, during the year under consideration, for non-deduction of tax under u/s. 194-1 without considering the facts and legal provision that there don't exist any Landlord- Tenant or Lesser-Lessee relationship for tax required to be deducted on the payment of compensation to such Members. 1.2. The Ld. CIT(A) erred in not considering nor discussing the submission made before him that amount paid to society members is considered as displacement charge and taxed under the head Income from Other Sources, relying on the decision of Shri Jatinder Kumar Madan Vs ITO ITA No.: 69211Muml2010 AY 2006-07, dated 25.4.2012, wherein the displacement charges are taxed as income from other sources and not rent under the income from house property. 1.3. The Ld. CIT(A) erred in disallowing the above amount under section 40(a)(ia) of the Act without considering nor discussing on the facts and legal provision of said Act that the Appellant has "paid" the amount during the year under consideration and is not "payable" at the end of the year, relying on the decision of CIT Vs. Vector Shipping Services(P) Ltd. CC No(s). 806812014 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Rs. 65,86,800 paid to the members of the society under redevelopment, for the purpose of arranging alternative accommodation of the members during the year under consideration on the ground that the assessee failed to deduct tax at source u/s 194I of the Act. 4. During the course of hearing, Ld. Counsel stated that the issue is covered in favour of the assessee on the basis of recent decision of coordinate bench of the Tribunal in the case of Sahana Dwellers Pvt Ltd vs Income Tax Officer (ITA No. 5963/Mum/2013 dated 24-02-2016 wherein, in the identical circumstances, it was held that TDS was not required to be deducted u/s 194I of the Act. 5. Per contra, the Ld. DR relied upon the orders of the lower authorities. 6. We have gone through the orders passed by the lower authorities as well as the order relied upon by the Ld. Counsel before us. 7. The brief background is that it was noted by the AO that assessee had paid compensation of Rs. 65,86,000/- during the year whereupon TDS provisions were attracted u/s 194I and since assessee failed to deduct TDS, the amount of expenses was disallowed u/s 40(a)(ia). In appeal before Ld.CIT(A), it was submitted in detail by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by them on account of rent payable by them for alternative accommodation and in accordance with such terms assessee initially paid compensation of Rs. 5,000 per month to each tenant which was subsequently revised from time-to-time as the assessee could not construct the building within the stipulated time period for various reasons. From the aforesaid facts, it is very clear that the concerned persons to whom the assessee had made the payment are neither tenants of the assessee nor the assessee has in reality paid rent on behalf of them. Only because the assessee was not able to provide alternative accommodation to these tenants the assessee had to pay compensation for enabling the tenants to meet the expenditure to be incurred by them towards rent payable whether they are actually paying rent or not. This is for the simple reason that tenants were displaced from the property where they were staying for construction of new building. On a perusal of section 1941 of the Act, it is seen that under clause (i) rent has been defined as under:- "Explanation. -For the purposes of this section,- (i) "rent" means any payment, by whatever name called, under any lease, sub-lease, tena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid as rent, the contract of rent/lease would be between the members and their respective landlords from whom these members would take premises (alternative accommodation) on rent/lease, and then the amount payable by these members to their respective landlords may be liable for deduction of TDS u/s 194-I, if applicable upon them. As far as assessee is concerned, there was no transaction, much less, transaction of rent between the assessee and the new landlords of members of the society. Therefore, it would be highly unjustified to treat this amount as payment of rent and to make it liable for deduction of tax at source u/s 194-I. Under these circumstances, invoking of provisions of section 40(a)(ia) is unjustified. Thus, the disallowance made by the lower authorities is illegal and therefore, directed to be deleted. Ground 1 is allowed. 9. Ground 2.1 was not pressed by the Ld. Counsel, therefore, it is dismissed. 10. Ground 2.2 : In this ground, the assessee is aggrieved with the action of lower authorities in making addition of Rs. 3,05,870/- on account of difference in closing balance of Rs. 25,47,880 of the assessee and closing balance of Rs. 3,05,870 of Ms. Rakhi Sawant, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not be done for want of proper evidences at his level and also for the reason that in subsequent years these amounts representing difference have been brought to tax. Therefore, holistic view needs to be taken to avoid double taxation of the same amount. 16. We have gone through the entire facts and circumstances of the case and find force in the arguments made before us. Therefore, we send these grounds back to the file of the AO, who shall take into account the details and evidences as may be brought on record by the assessee and also the fact that whether these amounts have been brought to tax in subsequent years. If it is found that the impugned amounts have been brought to tax in subsequent years, then no addition is required to be made in the year before us. Further, if these differences are properly explained and it is established by the assessee that the impugned difference is not giving rise to any taxable as income in the year before us, then also no addition should be made. With these directions, these grounds are sent back to the file of the AO and may be treated as allowed, for statistical purposes. 17. Now we shall take up the appeal for A.Y.2011-12. This appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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