AZ Foundation, trust registered u/s 12AB, runs an educational institution. The trust is paying rent of 30 lakhs per annum for the building occupied…

Issue Involved: The issue under consideration is whether a trust, being exempt can be treated as assessee in default for not deducting tax at source and levy of interest for such default. Provision applicable: As per section 201, where any person who is required to deduct any sum, does not deduct or does not pay or after deducting fails to pay, then such person shall be deemed to be an assessee in default in respect of such tax unless the payee has paid such tax on such income at the time of furnishing return of income under section 139. Analysis: Section 194-I does not provide any exemption to a trust registered under section 12AB, paying rent of an amount exceeding the threshold limit, from deducting tax at source. If a trust registered under section 12AB is liable to deduct tax at source and has not deducted such tax, it shall be deemed to be assessee in default by virtue of section 201 and would be liable to pay interest. Conclusion: In the present case, since AZ Foundation trust has not deducted tax at source on the rent payment of 30lakhs, it shall be deemed to be assessee in default and the ITO TDS was justified in issuing the show cause notice to AZ Foundation.