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TDS ON COMPENSATION ON CHARGES

This query is : Resolved 
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13 June 2009 Q. If the owner of the Commercial property has entered into leave and Licence Agreement with the Licencee for 5 years and the lock in period is 3 years and has given a Deposit equal to 6 months rent to the owner .the licencee used the property only for one year and decided to terminate the agreement . As on date the rent outstanding is 4 months and the licencee asked the owner to adjust the same against the refundable deposit and the balance two months deposit shall be treated as a compensation for early termination of the agreement before the lock in period of 3 years.

Query:

Is whether the TDS is applicable on the compensation amount adjusted as above?
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M Prabhakar Menon

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M Prabhakar Menon (Expert)
14 June 2009 Please see Circular No 718 dt 22-8-1995 which says that any deposit given by a tenant which is adjustable against future rent in the nature of advance rent will be subject to TDS u/s194-I
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