29 August 2013
AS PER RENT AGREEMNET.. In the event of terminanation before Lock -in -Period, lESSEE shall be liable to pay the monthly rent for the entire remaining unexpired period of the Leek-in-Period.
AS PER SETTLEMENT AGREEMENT a)Client shall pay an amount of Rs 25,00,000;-(Twenty Five Lakhs Only) ("Settlement Amount") to Lessee subject to applicable TDS dedulction on Settlement of all claims and counterclaims of the Parties, amount of Rs 25,00,000/-is towards the full and final settlement of all claims and counterclaims between the Parties. Further, both Farties agree and understand that no other amount except the said amount of Rs 25,00,001/-shall be payable by lessor to lessee. b) A Sum of Rs 9 lac paid to lessor now_standss settled and adjusted as being non refundable to lessee.
MY CASE The lessee entered in to rent agreement with lessor for lock in period of 3 years. Now the lessee cancels the rent agreement after 1 year only and thus had to pay the amount of 1 Cr.Approx. which is settled at 25 lacs by entering into settlement agreement as quoted below and the amount of security deposit paid at the time of entering into rent agreement as refundable to lessee is also adjusted as being non refundable to the lessee. MY QUESTION IS???? whether TDS will be deducted on 25 lac (unexpired period rent ) and 9 lac (security deposit adjusted) and please also quote the law or case as the sollution to my problem.
According to me, since the 9,00,000 forfeited is not in the nature of rent, TDS should not be deducted. As per the settlement agreement, only the amount of 25,00,000 is taken as rent for the unexpired period of the lease and not 9,00,000. This 9,00,000 is more in the nature of a penalty then rent…
Hence, prima facie the TDS should not come….
However, for this, the exact wordings of the agreement need to be checked.
30 August 2013
SO Your opinion is that TDS is to be deducted on 25,00,000/-(unexpired period rent) and not on 9,00,000 (security deposit adjusted) As per 194I (Circular issued by CBDT) If Security deposit is refundable, no tax would be deductable at source since it cannot be treated as advance rent. However TDS is to be deducted when security deposit has been adjusted. Please compare my case with the above sai clause.
CAclubindia
