Payment of Lease Rentals on Annual basis would attract TDS u/s 194-I of Income Tax Act: ITAT [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that the payment of lease rentals on annual basis would attract TDS under section 194-I of the Income Tax Act, 1961.

Ajnara India Ltd, the assessee is a company engaged in the business of development, and construction of real estate and infrastructure projects. The assessee acquired a plot from NOIDA Authority on a perpetual lease for the development of a residential and commercial project and made payments during the year on account of annual lease rent without deduction of tax at source.

The Assessing Officer (“AO”) held that the lease rental amounts paid by the assessee attracted TDS provisions under section 194-I of the Income Tax Act, 1961 (“Act”).  The AO passed order under section 201(1)/201(1A) on 29.03.2014 raising demand of Rs. 18,62,868/- under section 201(1) and interest thereon under section 201(1A) of the Act.

The CIT(A) held that even if the assessee is not an assessee-in-default, it cannot be absolved from interest liability under section 201(1A) and directed the AO, in view of the provisions of First Proviso to section 201(1) of the Act, to modify the demand after ascertaining that the deductee, namely NOIDA Authority has taken into account such payments by the assessee for computing its income. He further directed the AO to re-calculate the interest under section 201(1A) from the date on which tax was deductible till the date of filing of Return by the deductee.

 It was observed that the CIT(A) examined the Lease Deed Agreement between the assessee and NOIDA Authority filed before him during the appellate proceedings and concluded that reading of the Lease Deed Agreement, CBDT Circular dated 13.10.2016 and provisions of section 194-I of the Act bring out the difference between payment of premium, one-time lease rent and annual lease rent.

A Coram comprising of shri N K Billaiya, Accountant Member and Ms Astha Chandra, Judicial Member viewed that the said payments attracted TDS liability under section 194-I of the Act and upheld the order of the CIT(A). The ITAT held that the assessee is liable for interest under section 201(1A) of the Income Tax Act and dismissed the appeal of the assessee.

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