In
a recent ruling, the Andhra Pradesh High Court (“Court”) adjudicated
that payments made by customers to hotels in the nature of rental charges
towards occupancy of hotel rooms would attract withholding tax provisions as
envisaged under Section 194-I of the Indian Income Tax Act, 1961 (“ITA”).
The
petitioner contented that no transfer of property takes place in the favour of
the occupant indicating that it was merely a license agreement and not a rent
agreement or a lease agreement as contemplated under Section 194-I of the ITA.
The Court overruled this position by stating that the phrase “any payment’
by whatever name called and ‘any other agreement or arrangement’ occurring
in the definition of ‘rent’ in Explanation to the aforesaid section
have widest import and thus even a license agreement would also be covered
therein.
Source: The Economic Times, August 14, 2002