DCIT, CIRCLE-3(3), MUMBAI V. M/S TEAMLLEASE SERVICES PVT. LTD., MUMBAI

ITA 4429/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4001 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 03-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Section: 143(3)

Judgement Text

1 TEAMLEASE SERVICES PVT LTD ITA NO. 4 429 /M UM /2013 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E , MUMBAI , , BEFORE SHRI B R BASKARAN , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER ITA NO. 4 429 /MUM/201 3 (ASSESSMENT YEAR 200 9 - 1 0 ) DCIT, CIRCLE 3(3), ROOM NO. 609, 6 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 020 VS TEAMLEASE SERVICES PVT LTD , OFFICE NO.6, 3 RD FLOOR, C WING, LAXMI TOWER, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI 400 051 PAN: AABCT 5458 K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A K NAYAK RESPONDENT BY : SHRI N ISHIT GANDHI /DATE OF HEARING : 13 - 04 - 201 6 /DATE OF PRONOUNCEMENT : 13 - 04 - 2016 ORDER , . : - PER AMIT SHUKLA, J. M. : T HE AFORESAID APPEAL HAS BEEN FILED BY THE REVE NUE AGAINST IMPUGNED ORDER DATED 11.02. 2013 PASSED BY COMMISSIONER OF INCOME - TAX (APPEALS) CIT(A) - 7 , MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) FOR THE ASSESSMENT YEAR 200 9 - 1 0 . IN THE GROUNDS OF APPEAL, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1 . WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A), ERRED IN HOLDING THE AMOUNT OF RS.48,61,421/ - WAS NOT SENT AS ENVISAGED UNDER SECTION 194I AND THAT THE PROVISIONS OF SECTION 40(A)(IA) WERE WRONGLY INVOKED BY THE 2 TEAMLEASE SERVICES PVT LTD ITA NO. 4 429 /M UM /2013 PAYMEN T ON VACATION OF PREMISES BEFORE THE LOCK - IN - PERIOD WOULD BE TOWARDS THE RENT FOR THE BALANCE LOCK - IN - PERIOD. 2. THE BRIEF FACTS ARE THAT, THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF LEASING OF EMPLOYEES AND MANPOWER RECRUITMENT. FOR THE PURPOSE O F ITS BUSINESS, IT HAS TAKEN VARIOUS OFFICE PREMISES ON RENT IN DIFFERENT CITIES. THE RENT AGREEMENTS STIPULATE THAT PREMISES HAVE BEEN TAKEN ON LEASE RENT FOR A PARTICULAR AGREED PERIOD. DURING THE YEAR, THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.48,61,421/ - WHICH WAS FORFEITED FROM THE RECOVERABLE SECURITY DEPOSIT MADE AT THE TIME OF LEASE AGREEMENT BY THE LANDLORDS ON THE GROUND THAT, THE ASSESSEE HAD VACATED THIS PREMISES BEFORE THE EXPIRY OF LOCK - IN - PERIOD, AS SPECIFIED IN THE AGREEMENT. THE SECURITY DEP OSITS FORFEITED HAVE BEEN WRITTEN OFF AS BUSINESS LOSS BY THE ASSESSEE. I N RESPONSE TO THE SHOW CAUSE NOTICE, AS TO WHY DISALLOWANCE UNDER SECTION 40(A)(IA) SHOULD NOT BE MADE FOR NON - DEDUCTION OF TDS AS IT IS IN THE NATURE OF RENT UNDER SECTION 194I, THE ASSESSEE SUBMITTED THAT, THESE ARE GENUINE EXPENSES / LOSSES INCURRED DURING THE YEAR DURING THE COURSE OF THE BUSINESS AND ALSO RELIED UPON VARIOUS CASE LAWS AS NOTED BY THE AO AT PAGE 3. HOWEVER, THE AO HELD THAT, SECURITY DEPOSIT FORFEITED BY VARIOU S LANDLORDS IN NOTHING BUT COMPENSATION TOWARDS RENT FOREGONE BY THEM FOR THE BALANCE LOCK - IN PERIOD, THEREFORE, IT IS CLEARLY IN THE NATURE OF RENT. SINCE ASSESSEE HAD NOT DEDUCTED TDS UNDER SECTION 194I , THEREFORE , T HE PAYMENT HAS TO BE DISALLOWED UNDER SECTION 40(A)(IA). 3. BEFORE THE CIT(A), THE ASSESSEE AFTER EXPLAINING THE NATURE OF ITS BUSINESS AND ALSO THE REQUIREMENT FOR TAKING VARIOUS PREMISES ON LEASE RENT FOR THE PURPOSE OF ITS BUSINESS, SUBMITTED THAT A TOTAL RENT PAID DURING THE YEAR WAS RS.7 ,18,06,630/ - WHICH WERE PAID TO 46 LAND OWNERS FOR TAKING OFFICE PREMISES ON LEASE S ALL OVER THE 3 TEAMLEASE SERVICES PVT LTD ITA NO. 4 429 /M UM /2013 COUNTRY . ON EACH AND EVERY RENT PAYMENT, THE ASSESSEE HAS DEDUCTED TDS UNDER SECTION 194I AS PER THE DETAILS APPEARING ON TAX AUDIT REPORT IN FORM 3CD. DURING THE YEAR UNDER APPEAL, THERE WAS HUGE RECESSION IN THE MARKET AND CONSEQUENTLY ASSESSEES BUSINESS WAS ALSO AFFECTED AND AS A RESULT, THE ASSESSEE HAS TO CLOSE DOWN SOME OF ITS OFFICES IN ORDER TO CUT THE COST S . H E NC E, THE OFFICES WERE CLOSED DOWN BEFORE T HE AGREED LOCK - IN - PERIOD . T HE LAND L O R D S HAVE FORFEITED THE SECURITY AMOUNT FOR THIS EARLY VACATING THE PROPERTY. THUS, THE SAID FORFEITURE OF AMOUNT WAS WRITTEN OFF AND WAS CLAIMED AS BUSINESS LOSS. IT WAS ALSO SUBMITTED THAT, IN ANY CASE, IT WAS GENUINE B USINESS EXPENSES WHICH SHOULD BE ALLOWED UNDER SECTION 37. RELIANCE WAS ALSO PLACED ON VARIOUS DECISIONS. THE ASSESSEES WRITTEN SUBMISSION ALONG WITH CASE HAS BEEN INCORPORATED BY THE CIT(A) FROM PAGES 3 TO 7 OF THE APPELLATE ORDER. THE COPIES OF LEASE AG REEMENT WITH 8 PARTIES WITH WHOM THE ASSESSEE HAS TO LOSE DEPOSIT DUE TO LOCK - IN - PERIOD ARE AS UNDER: SR. NO. NAME OF THE LANDLORD OFFICE LOCATION DEPOSIT AMOUNT WRITTEN OFF RS. 1 PRASHANTH R PAI GOA 9,000 2 PUNAM NAHATA KOLKATTA 41,417 3 UMESH KUMAR SAHU NAGPUR 3,455 4 KANNAN CHENNAI 533,408 5 RELIANT POWER PVT LTD CHANDIGARH 11,369 6 DEENA ANANT SHAH MUMBAI 2,832,423 7 M L GARG DE L HI 1,395,630 8 BARKHA VIKAS PRICHA NAGPUR 34,719 SUB - TOTAL(A) 4,861,421 4. THE LD. CIT(A) AGREED WITH THE CONTENTION OF THE ASSESSEE AND NOTED THAT, IT HAD PAID A HUGE AMOUNT OF RS.7,18,066,030/ - TO VARIOUS PARTIES FOR RENT OF OFFICE PREMISES ON WHICH THE ASSESSEE HAS ALSO DEDUCTED TDS UNDER SECTION 194I AND ADMITTEDLY DEPOSITED WITH THE GOVERNMENT TREASURY. THE SECURITY DEPOSIT FORFEITED BY LEASEHOLDS IS ALSO IN NOT DISPUTE. THE AOS CONCLUSION THAT FAILURE FOR NON - DEDUCTION OF TAX EITHER UNDER SECTION 194I WOULD ENTAIL DISALLOWANCE UNDER SECTION 40(A)(IA) IS NOT CORRECT AND ACCO RDINGLY, HE DELETED THE SAID DISALLOWANCE. WHILE COMING TO HIS 4 TEAMLEASE SERVICES PVT LTD ITA NO. 4 429 /M UM /2013 CONCLUSION, THE LD. CIT(A) RELIED UPON THE DECISION OF ITAT IN THE CASE OF GRIDCO LTD. VS ACIT IN ITA NO. 404/CTK/2011 VIDE ORDER DATED 17.11.2011 AND ACIT (TDS) VS ANUPAM INDUSTRIES IN ITA NO. 2926/AHD/2009 ORDER DATED 10.08.2011. 5 . BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE FURTHER RELIED UPON THE FOLLOWING DECISIONS IN SUPPORT OF THE CONCLUSION DRAWN BY THE LD. CIT(A): (I) ENTERPRISE INTERNATIONAL LTD VS ITO [2001] 77 ITD 179; (II) P S CARD P LTD VS ITO [2005] 4 SOT 143. 6 . ON THE OTHER HAND, LD. DR RELYING UPON THE ORDER OF THE AO SUBMITTED THAT THE FORFEITURE OF SECURITY DEPOSIT WAS NOTHING BUT IN LIEU OF RENT FOR THE BALANCE PERIOD FOR WHICH LEASE AGREEMENT WAS ENT ERED INTO. THUS, IT IS IN THE NATURE OF RENT FOR WHICH PROVISIONS OF SECTION 194I APPLIES. ACCORDINGLY, ORDER OF THE AO MAKING DISALLOWANCE UNDER SECTION 40(A)(IA) SHOULD BE AFFIRMED. 7 . AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ON PERUSAL OF THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER, IT IS NOTED THAT, ASSESSEE IS A PRIVATE SECTOR EMPLOYER IN INDIA WHEREBY IT PROVIDES MANPOWER ESPECIALLY TEMPORARY STAFF TO VARIOUS CORPORATE AND MULTINATIONAL COMPANIES. FOR THIS PURPOSE, IT HAS TAKEN VARIOUS PREMISES FOR ITS OFFICI AL / BUSINESS PURPOSE IN VARIOUS CITIES OF THE COUNTRY. AS PER THE TERMS OF THE LEASE AGREEMENT, THERE WERE CERTAIN LOCK - IN - PERIOD FOR WHICH THE ASSESSEE HAD TO TAKE THE PREMISE ON RENT. IF THE ASSESSEE VACATES BEFORE THE LOCK - IN - PERIOD THEN ASSESSEE WAS R EQUIRED TO PAY THE BALANCE AMOUNT FOR THE REMAINING PERIOD, AS MENTIONED IN THE LEASE AGREEMENT . D UE TO BUSINESS EXIGENCY AND ECONOMIC RECESSION, THE ASSESSEES BUSINESS HAD SUFFERED HEAVILY. ACCORDINGLY, THE ASSESSEE TOOK A BUSINESS DECISION TO CLOSE DOWN SOME OF ITS OFFICES IN ORDER TO CUT THE COST S TO SAVE MORE BUSINESS LOSS. THE ASSESSEE HAD TO VACATE THE PREMISES BEFORE THE LOCK - IN - PERIOD , A CCORDINGLY, TH E SE LA NDL O R DS 5 TEAMLEASE SERVICES PVT LTD ITA NO. 4 429 /M UM /2013 HAVE FORFEITED THE SECURITY AMOUNT TOWARDS ADJUSTMENT OF THE RENT FOR THE BALANCE LOC K - IN - PERIOD. THIS ADJUSTMENT OF FORFEITURE OF ACCOUNT HAS BEEN WRITTEN OFF BY THE ASSESSEE. AS PER THE REVENUE, IT SHOULD BE TREATED AS PAYMENT TOWARDS RENT AND ACCORDINGLY, TDS UNDER SECTION 194I SHOULD HAVE BEEN DEDUCTED. WE ARE UNABLE TO APPRECIATE THE STAND OF THE REVENUE, BECAUSE THE SECURITY DEPOSIT IS A REFUNDABLE DEPOSIT AND IT DOE S NOT LOSE S ITS CHARACTER AS AN ADVANCE. FORFEITURE OF SUCH A DEPOSIT CANNOT RECKONED AS A RENT AS DEFINED IN EXPLANATION 1 TO SECTION 194I. THIS DEPOSIT CAN BE REFUND ED PHYSICALLY AT THE TIME OF VACATING THE PREMISE OR CAN BE ADJUSTED IN CASE THERE IS A DEFAULT BY THE TENANT FOR COMPOSITE BREACH OF THE AGREEMENT ENTERED INTO. EVEN IF IT IS ADJUSTED AGAINST RENT PAYABLE BY THE ASSESSEE, IT CANNOT ASSUM ES THE CHARACTER O F A RENT , ALBEIT IT WOULD TANTAMOUNT TO ADJUSTMENT OF THE DEPOSIT ONLY. THIS VIEW HAS BEEN UPHELD BY THE VARIOUS BENCHES OF THE TRIBUNAL AS HAS BEEN REFERRED BY THE LD. COUNSEL. THUS, WE DO NOT FIND ANY MERITS IN THE GROUNDS RAISED BY THE REVENUE. ACCORDINGLY, THE FIND GIVEN BY CIT(A) IS AFFIRMED. 9 . IN THE RESULT, APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH AP R IL , 2016. SD/ - SD/ - ( ) ( ) (B R B ASKARAN ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 13 TH APRIL, 2016 /COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT(A) - 7 , MUMBAI. 6 TEAMLEASE SERVICES PVT LTD ITA NO. 4 429 /M UM /2013 4 ) THE COMMISSIONER OF INCOME TAX - 3 , MUMBAI. 5 ) , , / THE D.R. E BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / , ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS