TDS on Rent under section 194I of Income Tax Act, 1961

Section 194I : Any person who is not an Individual or HUF, who is paying any
income to resident by way of rent is liable to deduct tax at source only in case
the aggregate of the amount of such rent credited or paid or likely to credited or
paid during the financial year by the aforesaid person to the account of, or to
payee exceeds Rs. 1,80,000/-. Individuals and /or HUFs who are subject to tax
audit are also under this obligation to deduct TDS.
In this, Rent means any payment, under any lease, sub-lease, tenancy or any
other agreement or arrangement for the use of either separately or together)
any:a) land; , b) Building etc

ACIT v Result Services (P) Ltd [IT Appeal NO. 2846 (DELHI) OF 2011]
(Delhi ITAT)
Payment has been made by the subsidiary company to the holding company for
the use of the factory building.
The actual payments made by the lessee (holding company) to the lessor and
necessary tax was deducted therefrom. The holding company has also not
debited the whole of rent to its books of account. It has only debited the rent
which pertains to the part of the premises occupied by it. Therefore, there is no
lessor and lessee relationship between the holding company and assessee where
the provisions of section 194-I are attracted.
Pee Cee Cosma Sope Ltd.v. Joint Commissioner of Income- tax (Agra
ITAT, 2013)
The assessee-company was engaged in the business of manufacturing and paid
certain amounts to the consignees to whom it had sold goods. Those amounts
were claimed as reimbursement of expenses.
Impugned payment is reimbursement of the expenses and is not the commission
as the concerned party did not give any services in respect of the payment of
expenditures made.
Since this is not a commission payment, therefore, there is no question of
deducting tax at source under section 194H. Since the payment is not subject to
tax deducted at source, therefore, provisions of section 40(a)(ia) is not applicable
on the issue
Assistant C.I.T. (TDS),Circle, Gurgaon V/s. Serco BPO Pvt. Ltd. Bldg (ITA
No.5003/Del/2012)
In ITAT Ahmedabad in the case of Karnavati Co-op Bank Ltd. Vs. DCIT (134 ITD
486) wherein the decision of Hon'ble ITAT Delhi "F" Bench in the case of
Expeditors International India Pvt. Ltd. vs. Addl. CP' [(2010) (2 ITR (Trib.) 153
(Delhi)] has been referred to.
It has been held that where certain charges were reimbursed by the assessee
and the charges being in the nature of reimbursement, the same were not liable

to deduction of tax at source as it would tantamount to double deduction of tax

at source on the same payment. Since the TDS was originally deducted by
Infovision Information Services Pvt. Ltd. from the payment of rent made to the
owners of the premises and the appellant has actually reimbursed the rental
expenses, the appellant was under no legal obligation to deduct tax at source
Relying upon decision of Hon'ble Supreme Court in the case of Hindustan Coca
Cola Beverages Pvt. Ltd. Vs. CIT,293 ITR 226(SC);Karnavati Co-op. Bank Ltd. vs.
DCIT,134 ITD 486(Ahmedabad),Expeditors International India Pvt. Ltd. vs. Addl.
CIT,2 ITR(Trib.)153(Del.) and Circular No.275/201/95-IT(B) dated January 29,
1997, cancelled the demand for TDS as also interest u/s 201(1A) of the Act,
The assessee being not a tenant or sub-tenant of the aforesaid 13 premises. The
ld. CIT(A) found that the IISPL . discharged its entire tax liability and there was no
such tenancy or sub-tenancy agreement between them. It was also noticed that
the premises which were utilized by the assessee in terms of the facility
agreement dated 1.12.2008 were actually taken on rent by IISPL. and the due tax
was deducted at source by IISPL from the rent payments.
The assessee being not a tenant or sub tenant in respect of the said premises,
actual amount of rent paid by Infovision Information Services Pvt. Ltd. alone was
reimbursed for use of facility. Accordingly, the ld. CIT(A) concluded that the
assessee was under no legal obligation to deduct tax at source & therefore, no
interest was chargeable for non deduction of tax at source. The Revenue have
not placed before us any material, suggesting that the assessee had any interest
either as a lessee or sub-lessee or a tenant in any of the aforesaid 13 premises.