ITAT Delhi: Lease Rentals Paid Annually Attracts TDS U/S 194-I

The yearly payment of lease rentals will be subject to TDS under section 194-I of the Income Tax Act of 1961, according to the Delhi bench of the Income Tax Appellate Tribunal (ITAT).

The firm being assessed, Ajnara India Ltd., is in the business of planning and building infrastructure and real estate projects. In order to build a residential and commercial project, the assessee obtained a plot from the NOIDA Authority on a perpetual lease. Throughout the year, the assessee made payments on the account of the yearly lease rent without deduction of tax at source.

The Assessing Officer (“AO”) stated that the lease rental amounts furnished via taxpayer draw TDS provisions under section 194-I of the Income Tax Act, 1961 (“Act”). The AO issued an order under section 201(1)/201(1A) on 29.03.2014 asking demand of Rs. 18,62,868/- under section 201(1) and interest thereafter under section 201(1A) of the Act.

The CIT(A) ruled that even if the assessee is not an assessee-in-default, it cannot be released from its obligation to pay interest under section 201(1A). In light of the provisions of the First Proviso to section 201(1) of the Act, the CIT(A) instructed the AO to alter the demand once it was confirmed that the deductee, or NOIDA Authority, had taken such payments by the assessee into account when calculating its income.

Read Also: All About TDS Rate on Rent of Property Under Section 194IB

It was noted that the CIT(A) reviewed the Lease Deed Agreement between the assessee and NOIDA Authority that was submitted to him during the appellate proceedings and came to the conclusion that reading the Lease Deed Agreement, CBDT Circular from October 13, 2016, and provisions of Section 194-I of the Act draw the distinction 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 saw that the aforementioned payments were subject to TDS obligation under section 194-I of the Act and upheld the CIT’s (A) judgement. The ITAT Delhi rejected the taxpayer’s appeal and determined that the assessee is subject to interest charges under section 201(1A) of the Income Tax Act.

Case Title	M/s. Ajnara India Ltd. Vs. ITO
Citation	ITA No.3931/Del/2017 Asstt. Year: 2012-13
Date	29.08.2022
Assessee by	None
Department by	Shri Kanav Bali, Sr. DR
Delhi ITAT	Read Order