The occupancy in such cases would be occasional or casual. The circular further states that where an agreement is in the nature of rate contract, it cannot be said to be accommodation taken on regular basis, as there is no obligation on the part of the hotel to provide a room or specified set of rooms. In the CBDT's view a rate contract, may be said to be a contract for providing specified types of hotel rooms at pre-determined rates during an agreed period. Such agreements, usually entered into for lower tariff rates, are in the nature of rate contract agreements. It states that there are instances where corporate employers, tour operators and travel agents enter into agreements with hotels with a view to merely fix the room tariffs of hotel rooms for their executives/guests/customers and such agreements. The Board has then gone further to define rate contract agreements (RCA). It is also of the view that where a room or a set of rooms are not earmarked, but the hotel has a legal obligation to provide such types of rooms during the currency of the agreement then also it would be construed to be accommodation made available on regular basis. The Board has then clarified the expression regular basis by stating that where earmarked rooms are let out for a specified rate and specified period, they would be construed to be accommodation made available on regular basis. The Board has also considered the meaning of rent for the purpose of section 194I and has clarified that rent means any payment, by whatever name called, under any lease.or any other agreement or arrangement for the use of any land.and it is of the view that the meaning of rent is wide in its ambit and scope and for this reason, payment made to hotels for hotel accommodation, whether in the nature of lease or licence agreements are covered, so long as such accommodation has been taken on regular basis. It has clarified that where an employee or an individual representing a company makes a payment for hotel accommodation directly to the hotel as and when he stays there, the question of tax deduction at source would not normally arise (except where he is covered under section 44AB as mentioned above) since it is the employee or such individual who makes the payment and the company merely reimburses the expenditure. The Board has emphasized that the provisions of section 194I do not normally cover any payment for rent made by an individual or Hindu Undivided Family except in cases where the total sales, gross receipts or turnover from business and profession carried on by the individual or Hindu Undivided Family exceed the monetary limits specified under clause (a) or clause (b) of section 44AB. The CBDT has now clarified and interpreted as to what constitutes hotel accommodation, taken on regular basis. 715 dated August 8, 1995, had clarified that payments for hotel accommodation, taken on regular basis is in the nature of rent subject to TDS u/s 194I. It was also pointed that an amendment or a clarification is required to mitigate the hardship caused to the hotel industry by this provision. It appears that this circular is a fallout of the decision of the Andhra Pradesh High Court which was rendered on 28th July, 2002 in the case of Krishna Oberoi v Union of India (2002) taxman 709 (AP) wherein the court had held that room charges paid to a hotel is rent u/s 194I. 5 of 2002, dated 30th July, 2002 reported in (2002) 257 ITR (St.) 4 clarifying the applicability of the provisions of section 194-I in respect of payments made to a hotel for hiring of rooms.
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