194 I

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This query is : Resolved

Arun Sushilkumar Bhakkad (Querist)

14 April 2010 Is it required to have fixed number of rooms booked per month in case of hotel boarding and lodging to make section 194-I applicable?

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)

14 April 2010 YES. IT IS REQUIRED TO HAVE FIXED NO. OF ROOMS BOOKED. YOUR QUERY WILL BE CLARIFIED BY FOLLOWING JUDGEMENTS:-

 Where the assessee-hotel received payments from corporate customers under an agreement for use of the rooms in the hotel by such customers on regular basis, such payments would squarely fall within the term ‘rent’ as defined under the Explanation to section 194-I, and would hence attract deduction of tax at source. If such deduction results in any hardship or financial burden to the assessee, the proper remedy is to apply to the Assessing Officer under section 197 for the issue of certificate for deduction at lower rate or nil rate - Krishna Oberoi v. Union of India [2002] 257 ITR 105/123 Taxman 709 (AP.).

 The CBDT have clarified that, while section 194-I would be attracted to payments received for providing hotel accommodation on a regular basis under lease/licence agreements, the said provision would not apply to cases where only ‘rate contract’ agreements are entered into, under which only room tariffs are fixed, because, where an agreement is merely in the nature of a rate contract, it cannot be said to be accommodation ‘taken on regular basis’ - Circular No. 5/2002, dated 30-7-2002.