Itta/219/2003 Of M/S Ashish Silk Mills (P) Ltd. Rep By Its M.d v. The Income Tax Officer (Tds)

HON’BLE SRI JUSTICE L. NARASIMHA REDDYANDHON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A No. 219 OF 2003 17-09-2014 BETWEEN M/s. Ashish Silk Mills (P) Limited, 21-1-61/2, Rikabgunj,Hyderabad, represented by its Managing Director, Mr. Raj Kumar,S/o. Sri Gopichand, Aged about 50 years …Appellant And The Income Tax Officer (TDS), Ward 5(6), Hyderabad …..Respondent HON’BLE SRI JUSTICE L. NARASIMHA REDDYANDHON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A No. 219 OF 2003 JUDGMENT:(per the Hon'ble Sri Justice L. Narasimha Reddy) This appeal is preferred by the assessee against the orderdated 27-02-2003 passed by the Hyderabad Bench ‘A’ of theIncome Tax Appellate Tribunal (for short, ‘the Tribunal’) in ITA No.752/Hyd/1998. Briefly stated, the facts are that the appellant is a companyundertaking the activity in textiles. It took the premises on leaseat the rent of Rs.1,50,000/- per month. As provided for under the lease deed, it paid advance rent for a period of six months,aggregating to Rs.9,00,000/-. In the returns submitted for theassessment year 1997-98, no mention was made about thededuction of tax at source, on the amount of Rs.9,00,000/-, asprovided for under Section 194-I of the Income Tax Act, 1961 (forshort, ‘the Act’). Therefore, proceedings under Section 201 of theAct were initiated. The defence pleaded by the appellant was thatthe amount of Rs.9,00,000/- was paid as deposit and since it is nottowards the rent, there was no occasion to effect the deduction oftax at source. That plea was not accepted and through orderdated 10-02-1997, the assessing officer held that the appellant isliable to pay tax as well as the interest thereon. The applicationfiled for rectification under Section 154 of the Act was rejected. Thereupon the appellant filedan appeal before the Commissioner of Income Tax (Appeals) andthat was rejected on 12-08-1998. Hence, it filed ITA No.752/Hyd/1998, which in turn, was also dismissed. Heard Sri S. Ravi, learned Senior Counsel for the appellantand Sri S.R. Ashok, learned Senior Counsel for the respondent. It is a matter of record that the appellant took somepremises on lease at the rent of Rs.1,50,000/- per month. It is notin dispute that it paid a sum of Rs.9,00,000/- in lumpsum to thelessor. Though the amount is called as deposit, it ultimatelyrepresented the advance rent for a period of six months. Once ithas partaken the character of rent, the appellant was under anobligation to effect deduction of tax at source. That having not been done, it has exposed itself not only to liability to pay thecorresponding tax but also interest. There may be some possibility for a lessee to plead that theadvance paid at the commencement of the lease is refundable atthe conclusion and in such an event, deduction of tax at sourcemay not be effected. In the instant case, that possibility does notexist on account of the fact that the lease itself was terminatedwithin a short time and the amount of Rs.9,00,000/- was adjustedtowards the rent. Viewed from any angle, there is no way that the appellantcould have avoided its liability under Section 201 of the Act. Allthe authorities held against the appellant and we do not find anybasis to take a different view. The appeal is accordingly dismissed. There shall be noorder as to costs. ___________________________ L. NARASIMHA REDDY, J 17-09-2014ks ____________________________ CHALLA KODANDA RAM, J