Provision of section 194I is applicable only where there is relation ship of lesee and lessor

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
I have carefully considered the assessment order and the submissions made by the ld. AR in this regard. As per the facts of this case, the appellant company is a 100% subsidiary of the holding company M/s McCann-Erickson (India) Pvt. Ltd. M/s McCann Erickson has taken on rent office premises in Delhi and Mumbai vide separate lease deeds with the landlords. M/s McCann has permitted common use of the above premises by the appellant company. The full rent for the premises have been paid directly by the holding company to the landlords after deducting tax at source u/s 194-1 of the Act. During the year under consideration, the appellant has paid Rs.56,23,456/- to M/s McCann towards its portion of rent on account of the above use of office premises. The AO has disallowed the above payment u/s 40(a)(ia) by holding that TDS should also have been deducted by the appellant company on the above amount u/s 194-1 of the Act. In this regard, it is argued by the Id. AR that the above arrangement has been in existence for the last 10- 15 years and has been accepted by the department without making any additions. It is argued that the AO has wrongly presumed that the lease deed does not permit use of the above premises by subsidiary company, whereas actually the said lease deeds do permit the appellant to allow use of the said premises by its subsidiaries and group entities. Copy of the lease deeds are furnished by the Id. AR which had also been furnished before the AO during assessment proceedings. It is argued that in any case TDS on the full amount has been made by the parent company as per law and the reimbursement of a part of it by the appellant company is not separately exigible to TDS in terms of the amended clause (i) of Explanation to section 194-1 of the Act. It is further argued that the relation between the holding company and the appellant is not that of a lesser and lessee and hence the said payment cannot be subject to TDS u/s 194-I.

Citation :
ACIT, Circle 15 (1), New Delhi. (APPELLANT) Vs. M/s. Result Services Pvt. Ltd., 8, Balaji Estate, Guru Ravi Dass Marg, Kalkaji, New Delhi. (PAN: AAACR0505N)(RESPONDENT)