Section 194-I

Section 194-I — the law in short

What the courts have decided on section 194-I, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Japan Airlines Co Ltd v CIT Supreme CourtHelps taxpayer
  We pay landing and parking charges to the airport. Is that rent under 194-I at the higher rate?
  No. The charges pay for a bundle of services connected with operating aircraft at the airport — air traffic services, ground safety, aeronautical communication and compliance with safety standards — with use of the tarmac only incidental, so they are not rent under s.194-I and s.194C is the right provision.
• Hindustan Coca Cola Beverage P Ltd v CIT Supreme CourtHelps taxpayer
  I did not deduct TDS, but the person I paid has already paid tax on it. Can the department still recover it from me?
  Reported as holding that the tax cannot be recovered twice — once the payee has paid, the deductor is not liable for the tax again. Interest may still run for the period of delay.
• CIT (TDS)-2 v Santur Builders Pvt Ltd High CourtHelps taxpayerValidity unconfirmed
  The AO says our EDC paid to HUDA was 'rent' and has raised a s.201 demand for not deducting under s.194-I. Is that right?
  No. External Development Charges paid to the Haryana authority are not rent, so s.194-I is not attracted and a s.201(1)/201(1A) order built on s.194-I cannot stand. The Delhi High Court dismissed the Revenue's appeal, holding the point squarely covered by its own earlier decision in DLF Homes Panchkula. It also refused to let the Revenue rescue the order by switching to s.194C at the appeal stage, because s.194C was never the case the AO made.
• Puri Constructions Pvt Ltd v Addl CIT High CourtHelps departmentValidity unconfirmed
  I paid External Development Charges to HUDA/HSVP because the Town and Country Planning Department told me to. I have no contract with HUDA. Does s.194C still oblige me to deduct tax at source?
  Yes. The Delhi High Court rejected the developers' challenge and held that EDC payments fall within s.194C. The privity argument does not work: s.194C looks for a contract under which the contractor carries out work, not for a contract between the payer and the payee. Nor does s.196 rescue the developer, because HSVP is a legal entity distinct from the Government of Haryana. This is a different question from the one decided in DLF Homes Panchkula, which held EDC is not 'rent' under s.194-I. The two decisions sit side by side and do not conflict.
• DLF Homes Panchkula Pvt Ltd v JCIT High CourtHelps taxpayer
  Are External Development Charges paid to HUDA 'rent' under s.194-I? And if the AO picked the wrong section, can the department switch sections on appeal?
  EDC paid to the Haryana authority under the statutory licensing scheme is not rent, so s.194-I is not attracted. The Revenue did not even try to defend the Assessing Officer's reasoning; it asked instead for a remand so the officer could apply s.194C. The Court refused. An order under s.201 stands or falls on the reasoning the officer actually gave, and the reasoning here was fundamentally flawed. The s.201(1) and 201(1A) demands were set aside.
• PCIT v Asian Mills P Ltd High CourtHelps taxpayerValidity unconfirmed
  I paid freight without TDS after taking the transporters' PANs. Can the AO still disallow the freight?
  No. The exclusion from the duty to deduct in s.194C(6) is complete the moment its substantive conditions are met, and from that point the payer has no authority to deduct at all; the obligation under s.194C(7) to furnish particulars arises at a much later point and its breach cannot revive a deduction obligation that never existed. Since s.40(a)(ia) operates only where tax was deductible and was not deducted, it had nothing to work on. On the facts the Tribunal had found that no prescribed authority stood nominated to receive the particulars, so filing them with Form 26Q was sufficient compliance. Two other issues went the same way: discounts to customers who took delivery into their own godowns were not rent under s.194-I, and depreciation on cars registered in directors' names but paid for and used by the company was allowed on beneficial ownership.
• DIT (International Taxation) v Schlumberger Asia Services Ltd (Full Bench) High CourtHelps taxpayerValidity unconfirmed
  Our Uttarakhand assessments add back the service tax ONGC reimbursed to us. Is there a binding answer in that High Court?
  Yes, and it is against the Revenue. A Full Bench of the Uttarakhand High Court answered the reference holding that the amount reimbursed by ONGC to the service provider, representing service tax the provider had already paid to the Government, does not form part of the aggregate amount referred to in clauses (a) and (b) of s.44BB(2).
• DIT v Mitchell Drilling International Pvt Ltd High CourtHelps taxpayer
  The officer has added the service tax we collected from ONGC to our s.44BB gross receipts. Is that right?
  No. Service tax collected by the assessee and passed on to the Government is not to be included in the gross receipts under s.44BB(2) read with s.44BB(1). It is not an amount paid or payable, or received or deemed to be received, for the services rendered — the assessee is only a collecting agency.
• CIT v Maharashtra State Electricity Distribution High CourtHelps taxpayer
  We pay transmission and wheeling charges to a licensee. Is TDS due under 194-I or 194J?
  Neither, on this assessee's facts. Carrying power over another's network gives the payer no possession or occupancy of the network, so the charge is not rent under s.194-I; and the charge is a tariff fixed by the regulator, not consideration for a technical service rendered to the payer, so s.194J does not apply either. Note that the Court expressly confined its conclusion on rent to this assessee, in view of the public function it discharges after the restructuring of the State Electricity Board.
• United Airlines v CIT High CourtHelps departmentValidity unconfirmed
  My airline pays landing and parking charges at an Indian airport. Do I have to deduct tax at source on them as rent under section 194-I?
  Yes, on this Delhi High Court view. It dismissed the writ petition against the Commissioner's order under section 264 and held that landing and parking charges are rent within Explanation (i) to section 194-I. That Explanation gives rent a wider meaning than in common parlance: any payment, by whatever name called, under any agreement or arrangement for the use of any land. When the wheels of an aircraft touch the airfield, use of the airport's land begins, and parking is use of land too. The definition is a legal fiction and must be applied literally; arguments about the intention behind the provision are out of place in a taxing statute.
• Anusuya Alva v DCIT High CourtHelps taxpayer
  My tenant deducted tax from my rent but never paid it over or gave me a Form 16A. The department is now recovering it from me - can it?
  No. The Karnataka High Court quashed the demand to that extent. Section 205 bars a direct demand on the assessee to the extent tax has been deducted from her income, and the section says nothing about the deducted tax having been remitted. The word deduct in section 205 cannot be read as deducted and remitted. The person deducting acts as an agent of the Revenue under a statutory compulsion the payee cannot resist, so his default cannot be visited on her. The Revenue must recover from the deductor, and was restrained from enforcing the demand against the landlord by any coercive method.
• ACIT v SDV International Logistics Ltd ITATHelps taxpayerValidity unconfirmed
  My employees claim HRA and home loan interest together. Must I treat that as a double benefit?
  No, not on these facts. The point was ground 2 of a composite order under s.201 and s.271C. The first appellate authority had held the exemption and the interest deduction to be two independent provisions, each with its own conditions, and the Tribunal upheld that because the department could not controvert it, so the short deduction and the consequential penalty both fell away. The employees concerned had let out the houses they owned and were living in rented premises, with the whole of the interest set against rental income and the exemption claimed on the rent they actually paid.
• Statutory position — s.194M and s.194-IB: the rate fell from five per cent to two per cent on 1 October 2024 CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  My client is an individual paying a contractor and also paying rent. He has no TAN. What does he deduct, and at what rate?
  Two per cent under either section, for anything on or after 1 October 2024; five per cent before that. Section 194M applies to an individual or HUF not already covered by s.194C, s.194H or s.194J who pays a resident more than fifty lakh rupees in a financial year for contract work, commission or brokerage or professional fees. Section 194-IB applies to an individual or HUF outside the second proviso to s.194-I who pays a resident rent exceeding fifty thousand rupees for a month or part of a month. Neither section requires a TAN, because s.203A is disapplied in both.
• Statutory position — s.194-IB and s.194M: the once-a-year deduction on rent, the cap that operates only under s.206AA, the gateway that keeps most individuals out of s.194M, and why neither needs a TAN CBDT Circulars & InstructionsCuts both ways
  I am an individual paying Rs 70,000 a month rent, and separately I have paid an interior contractor Rs 62 lakh for my own house. When exactly do I deduct, how much, and do I need a TAN?
  Under section 194-IB you deduct once, not monthly: the tax is deducted at the time of credit of rent for the last month of the previous year, or the last month of the tenancy if you vacate during the year, or at the time of payment of that rent, whichever is earlier, and the rate is two per cent of the income by way of rent, substituted for five per cent with effect from 1 October 2024. Under section 194M you deduct two per cent, again substituted for five per cent from the same date, but only if you are not a person required to deduct under section 194C, 194H or 194J, and only if the sum or aggregate of sums credited or paid to that resident during the financial year exceeds fifty lakh rupees. Neither section requires a TAN: section 194-IB(3) and section 194M(2) each disapply section 203A.
• CBDT Circular 1/2008 CBDT Circulars & InstructionsHelps taxpayer
  We pay cooling charges to a cold storage for our stock. Is that rent under s.194-I at 10%?
  No. The main function of a cold storage is preservation of perishable goods by a mechanical process and storage is only incidental; the customer gets no right to use any demarcated space or the machinery and does not become a tenant. Section 194-I does not apply, and the Board has directed that s.194C applies to the cooling charges instead.
• CBDT Circular 5/2002 CBDT Circulars & InstructionsCuts both ways
  We book hotel rooms through the year for staff and guests. Is that rent under s.194-I?
  It depends on the agreement, not on the volume. Where earmarked rooms are let out for a specified rate and a specified period, that is accommodation taken on a regular basis and s.194-I applies. Where the arrangement is a rate contract - specified types of rooms at pre-determined rates, with no obligation on the hotel to provide a room - s.194-I does not apply.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.