Opinion Of Eminent Legal Luminaries On Controversial Issues

Whether TDS Is Required For Apportioning Rent TO Subsidiaries?

QUERY: PQR Group is into various businesses in India. It has a holding company which has various subsidiary companies each carrying out different business. The holding company has taken a complete building on rent wherein each floor is occupied by a subsidiary company. The rent is paid by holding company after due deduction of taxes at sources. At the year end, the rent is apportioned to all the subsidiary companies in the ratio of utilisation of premises by each of them. Whether the subsidiary companies are liable to deduct tax at source from such apportionment by the holding company?
ANSWER: When a holding company paid rent to the landlord, it deducted the tax and paid to the Central Govt. At the end of the year, the holding company apportioned the rent on the basis of ratio of utilisation of premises by the subsidiary companies. The rent is apportioned on the gross basis i.e. including TDS. For which the holding company would issue certificate under Rule 37BA of the Income Tax Rules, 1962 to the subsidiaries for claiming the TDS. The subsidiaries would pay the full amount to holding company including tax. Thus, the subsidiaries are not liable to deduct the tax while reimbursing the rent to holding company
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Credit: Several of the queries and answers are reproduced with permission from the AIFTP Journal. We thank AIFTP for generously allowing us to host their research material.
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