Dadiba Kali Pundole v. Asstt. CIT [ITA No. 779/Mum/2019, dt. 8-10-2020] : 2020 TaxPub(DT) 4150 (Mum-Trib)

Disallowance under section 40(a)(ia) for non-deduction of TDS under section 194-I on room bookings in a club

Facts:

Assessee was saddled with disallowance under section 40(a)(ia) on their alleged payments to Royal Yacht Club. The assessing officer's plea was that they ought to have deducted TDS under section 194-I for the rooms taken by the assessee. It was the plea of the assessee that while making the lump sum payment no specific earmarked rooms were given it was simply an advance given where in foreign guests came and resided and the payments got adjusted against their stay. When there was no earmarked space the said payment cannot be construed as rent under section 194-I thus no TDS was required to be made in the first place. The assessing officer/Commissioner (Appeals) did not agree to this plea. On higher appeal --

Held in favour of the assessee that when no rooms were earmarked to them no deduction under section 194-I could be invoked so was section 40(a)(ia) as well. It was casual renting thus.

Alternate plea was also that the rooms were paid by the consultants and it was reimbursed by the assessee.

Applied: Red Chillies Entertainment Pvt. Ltd. v. ACIT in ITA No. 6655/Mum/2014 for assessment year 2005-06 vide Order, dated 28-2-2017