In a recent ruling, the Kolkata bench of Income Tax Appellate Tribunal opined that the amount of rent paid to a charitable trust which is duly registered under s. 12AA of the Income Tax Act, 1961 is not deductible at source since it cannot be included in the total income of the Trust. The Tribunal was deciding an appeal filed by the assessee by challenging the disallowance of Rs.37,98,048/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) under section 40(a)(ia) on account of assessee’s failure to deduct tax at source from the rent paid to Calcutta Port Trust.
The assessee in the instant case is company engaged in the real estate business, filed its return for the relevant AY by declaring total income at Rs.1,74,18,919/-. However, the Assessing Officer completed the assessment by making addition of Rs.37,98,048/-u/s 40(a)(ia) towards payment of rent made by the assessee to Calcutta Port Trust without deduction of tax at source.
On appeal, the CIT(A) sustained the above addition by finding that the assessee could not produce non-deduction of tax certificate from Calcutta Port Trust. Therefore, the assessee preferred a second appeal before the Appellate Tribunal.
The Tribunal placed reliance on the decision of the co-ordinate bench of the Tribunal in the case of M/s. Gourishankar Bihani. In this case, the Tribunal has delivered a decision in favour of the assessee by finding that Kolkata Port Trust is a charitable institution entitled for registration under section 12AA of the Act. No tax was deductible at source under section 194-I read with section 204 comprised in Chapter XVII-B from the rent paid by the assessee to KPT for the reason that such rent was not to be included in the taxable total income of the KPT and was, therefore, not chargeable under the provisions of the Act.
The Tribunal, by applying the ration of the above decision in the present case held that the disallowance made by the Assessing Officer under section 40(a)(ia) and confirmed by the ld. CIT(Appeals) on account of rent paid to Calcutta Port Trustis liable to be deleted.
Read the full text of the order below.
