DCIT, New Delhi V. M/s Result Services Pvt. Ltd., New Delhi

ITA 5964/DEL/2012

• Counselvise Citation: 596420114 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 16-12-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 30-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SURESH RAM CHANDANI; SANJAY JAWARANI
• Keywords: Wholly owned subsidiary

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.5964/DEL/2012 ASSESSMENT YEAR : 2009-10 DCIT, M/S RESULT SERVICES PVT.LTD., CIRCLE-15 (1), 8-BALAJI ESTATE, GURU RAVIDAS MARG, NEW DELHI. V. KALKAJI, NEW DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAACR AAACR AAACR AAACR- -- -0505 0505 0505 0505- -- -N NN N APPELLANT BY : MS. MEENAKSHI VOHRA, SR. DR. RESPONDENT BY : SHRI SURESH RAMCHANDANI & SHRI SANJAY JAWARANI, CA . ORDER PER TS KAPOOR, AM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORD ER OF LD CIT(A) DATED 31.8.2012. THE REVENUE IS AGGRIEVED WI TH THE DECISION OF LD CIT(A) WHEREBY HE HAD DELETED THE ADDITION OF ` .97,24,126/- MADE U/S 40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TDS FR OM RENT PAID BY THE ASSESSEE TO ITS HOLDING COMPANY. 2. AT THE TIME OF HEARING AN ADJOURNMENT LETTER ON BEHALF OF ASSESSEE WAS PLACED BEFORE US BUT GOING THROUGH THE MATER IAL ON RECORD WE OBSERVED THAT THE MATTER CAN BE DISPOSED OFF AS IT WAS COVERED BY THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE I N THE IMMEDIATELY PRECEDING YEAR. THEREFORE, WE REJECTED THE ADJOURNMENT APPLICATION AND PROCEEDED WITH THE MATTER. ITA NO5964/DEL/2012 2 3. THE LD DR CONCEDED THAT MATTER WAS COVERED IN FAV OUR OF ASSESSEE BUT SUBMITTED THAT REVENUE IS IN APPEAL BEFORE T HE HON'BLE HIGH COURT. 4. WE HAVE HEARD THE LD DR AND HAVE GONE THROUGH TH E MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ISSUE INVOLVED IS THAT THE HOLDING COMPANY OF ASSESSEE HAD TAKEN ON RENT BUILDING WHICH WA S PARTLY USED BY ASSESSEE AND ASSESSEE USED TO REIMBURSE A PART OF RENT BE ING PAID BY ITS HOLDING COMPANY TO THE LANDLORD. THE ASSESSING O FFICER REQUIRED THE ASSESSEE TO FURNISH DETAILS OF TAX DEDUCTED AND DEPOSI TED WHICH WAS FURNISHED BY THE ASSESSEE VIDE LETTER DATED 13.12.20 11. FROM THE DETAILS FURNISHED, THE ASSESSING OFFICER OBSERVED THAT TAX DEDUCTED ON PAYMENT OF RENT TO HOLDING COMPANY WAS DEPOSITED LATE , THEREFORE, HE MADE THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT. BEFOR E LD CIT(A) IT WAS SUBMITTED BY THE ASSESSEE THAT EVEN THOUGH THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TDS ON RENT AS THE HOLDING COMPAN Y HAD DEDUCTED FULL TDS ON RENTAL AMOUNT SPECIFIED IN THE AGREEMENT WHICH INCLUDED THE SHARE OF SUBSIDIARY ALSO AND LD CIT(A) HAD GIVEN RE LIEF IN FULL IN THE PRECEDING YEAR UNDER SIMILAR CIRCUMSTANCES BUT STILL A S A MATTER OF ABUNDANT PRECAUTION THE APPELLANT COMPANY HAD DEDUC TED TAX AT SOURCE WHICH WAS DEPOSITED AFTER THE DUE DATE. THE LD CIT(A) AFTER GOING THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE A ND AFTER RELYING ON THE ORDER OF ITAT IN I.T.A. NO.2846 FOR ASSESSMENT YEAR 2008-09 DELETED THE ADDITION. 5. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. WE F IND THAT THE SIMILAR ADDITION WAS MADE IN ASSESSMENT YEAR 2008-09 AND ITAT ORDER VIDE ORDER DATED 28.6.2012 HAD DELETED THE ADDITION BY HOLDING AS UNDER:- ITA NO5964/DEL/2012 3 6. WE HAVE HEARD BOTH THE SIDES. THE ASSESSEE IS A 100% SUBSIDIARY OF HOLDING COMPANY OF MCCANN ERICKSON INDIA PVT. LIMITED. MCCANN ERICKSON INDIA PVT. LTD. HAS TAKEN O N RENT OFFICE PREMISES LOCATED AT DELHI AND MUMBAI. COPIES OF THESE TWO LEASE AND LICENCE DEEDS ENTERED WITH THE LANDLORDS ARE ON RECORD. THE HOLDING COMPANY, MCCANN ERICKSON INDIA PVT. LTD., HAS PERMITTED ASSESSEE TO USE PART OF THESES PREMISES. ASSESSEE HAD REIMBURSED THE AMOUNT TO HOLDING COMPANY WITHOUT DEDUCTING TDS. THE RENT FOR THE WHOLE PREM ISES WAS PAID DIRECTLY BY THE HOLDING COMPANY TO THE LESSORS AN D THE TAX WAS DEDUCTED AS PER PROVISIONS OF SECTION 194-I OF THE INCOME- TAX ACT, 1961. THE CLAUSE 5 OF THE LEASE DEED FOR D ELHI PREMISES DATED 22.10.2007 BETWEEN CEPCO INDUSTRIES PVT. LTD. A ND MCCANN ERICKSON INDIA PVT. LTD. READ AS FOLLOWING : 5. THE LESSEE MAY USE THE DEMISED PREMISES OR PARTS THE REOF FOR THEIR COMMERCIAL USE AS WELL AS FOR THE OFFICES OF ITS SUBSIDIARIES AND ASSOCIATES AND ALLIED COMPANIES AND FOR THE PURPOSES OF COMPANIES / FIRMS AND BUSINESS IN WHICH THE DIRECTORS OF THE LESSEE ARE INTERESTED OR CONCERNED, HOWEVER, ANY SUCH COMPANIES / SUBSIDIARIES SHALL NOT ACQUIRE ANY INTEREST IN THE DEMISED PREMISES AND LIABILITY FOR PAYMENT OF RENT, OTHER OUTGOING, ETC. SHALL REMAIN SOLE RESPONSIBILITIES OF TH E LESSEE. SIMILARLY, THE LEASE & LICENCE AGREEMENT BETWEEN NA TIONAL ORGANIC CHEMICAL INDUSTRIES LIMITED AND MAFATLAL INDU STRIES LIMITED AND MCCANN ERICKSON INDIA PVT. LTD. ALSO PROV IDE IN CLAUSE 7 (D) AS UNDER :- D. NOT TO SUB-LET OR GIVE ON LEAVE AND LICENSE BASIS O R ON ANY OTHER BASIS THE LICENSED PREMISES OR ANY PORTION THEREOF , NOR ITA NO5964/DEL/2012 4 PERMIT ANY THIRD PARTY TO USE AND OCCUPY THE LICENSED PREMISES OR ANY PORTION THEREOF SAVE AND EXCEPT TO ITS SUBSIDIA RIES, AFFILIATES, GROUP ENTITIES, ASSOCIATES, WHICH SHALL BE WI THOUT ANY PRIOR WRITTEN CONSENT OF THE LICENSOR. THE ASSESSEE IS PAYING RENT TO THE HOLDING COMPANY AS REIMBURSEMENT SINCE LAST MANY YEARS. THIS POSITION HAS B EEN ACCEPTED BY THE DEPARTMENT ALL THROUGH AND IT HAS BE EN NEVER DISPUTED EVEN WHEN PROVISIONS FOR TDS WERE ON STATUTE SI NCE 1994. SECTION 194-I OF THE INCOME-TAX ACT, 1961 WA S INSERTED IN ACT W.E.F. 01.06.1994. SIMILARLY, THIS POSITION WAS AL SO NOT DISPUTED EVEN AFTER THE AMENDMENT IN SECTION 40(A)(IA ) OF THE ACT BY THE TAXATION LAW (AMENDMENT) ACT, 2006 W.E.F . 1.4.2006. ON THIS ISSUE, THERE IS NO MATERIAL CHANGE IN THE FACT S AND LAW DURING THE YEAR UNDER CONSIDERATION. THE LEASE DEED PROVIDES FOR USE OF THE PREMISES BY THE SUBSIDIARY COMPANIES. THE ACT UAL PAYMENTS MADE BY THE LESSEE (HOLDING COMPANY) TO THE LESSOR AND NECESSARY TAX WAS DEDUCTED THERE FROM. THE HOLDING COMPANY HAS ALSO NOT DEBITED THE WHOLE OF RENT TO IT S BOOKS OF ACCOUNT. IT HAS ONLY DEBITED THE RENT WHICH PERTAIN S TO THE PART OF THE PREMISES OCCUPIED BY IT. THEREFORE, IN OUR CO NSIDERED VIEW, THERE WAS NO LESSOR AND LESSEE RELATIONSHIP BETWEEN THE HOLDING COMPANY AND ASSESSEE WHERE THE PROVISIONS OF SEC TION 194I ARE ATTRACTED. KEEPING THESE FACTS IN VIEW, WE FIND MERITS IN THE ORDER OF THE CIT (A) IN DELETING THE ADDITION M ADE U/S 40(A)(IA) OF THE ACT. WE SUSTAIN THE ORDER OF THE C IT (A) AND DISMISS REVENUES APPEAL. ITA NO5964/DEL/2012 5 6. WE FIND THAT FACTS AND CIRCUMSTANCES IN THIS CASE A RE EXACTLY SAME THEREFORE RESPECTFULLY FOLLOWING THE ORDER OF T RIBUNAL WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF LD CIT(A). THEREFO RE, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED . 8. ORDER PRONOUNCED IN THE OPEN COURT ON 14TH DAY O F FEBRUARY, 2014. SD/- SD/- (I.C. SUDHIR) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 14.02.2014. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 16.12.2013 DATE OF DICTATION 12.2.2014 DATE OF TYPING 12.2.2014 DATE OF ORDER SIGNED BY BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET & SENT TO THE BENCH CONCERNED. ITA NO5964/DEL/2012 6