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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI RAJENDRA, AM & SHRI AMARJIT SINGH, JM
Assessee by: Shri T.K Sinha Department by: Shri V. Vidhyadhar (DR) Date of Hearing: 12.12.2017 Date of Pronouncement: 02.03.2018 O R D E R
PER AMARJIT SINGH, JM:
The revenue has filed the above mentioned appeals against the different order passed by the Commissioner of Income Tax (Appeals)- 59, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the assessment years2008-09 & 2010-11.
The revenue has filed the present appeal against the order dated 24.02.2016 passed by the Commissioner of Income Tax (Appeals)-59, ITA. No. 2322/M/16 & 2323/M/16 A.Ys. 2008-09 & 2010-11 Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the assessment years 2008-09.
The revenue has raised the following grounds: - “
On the facts and in the circumstances of the case and in taw, the Ld. CIT(A) has erred in holding that the amount paid by the Lessee {M/s. Adarsh Co-op Housing Society Ltd.) to the Lessor (MMRDA) was not in the nature of rent, as defined in the Explanation (i) to section 194-1 of the Act for the purpose of deduction of fax a! source '' (ii) "On the facts and in the circumstances of the case and in taw, the id CIT(A) has erred in not confirming the order of the Assessing Officer treating the assessee as an assessee in default u/s. 201(1) in respect of the amount of tax which has not been deducted under section 194-1 from payment made to MMRDA and levying interest under section 2Q1(1A)." (iii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the definition of rent, as contained in section 194-1 and in resorting to interpretative reasoning whereas as per the settled principle of jurisprudence, this exercise is required only when the law is unclear." (iv) "On the fads and in the circumstances of the case and in law, the Ld. CIT(A) has erred in going into the question of taxability of the payment made by the assessee to MMRDA despite the decision of the Apex Court in the case of The Aggarwal Chambers of Commerce V Ganpat Rai Hiralal,
33. ITR 245, where it has been held that [he persons who are responsible for deduction of tax at source are not concerned with the ultimate result of assessment." (v) The appellant prays that for this and other reasons it is submitted that the order of the CIT(A) on the grounds be set aside and that of the Assessing Officer be restored. (yi) The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.” & 2323/M/16 A.Ys. 2008-09 & 2010-11
4. The brief facts of the case are that during the course of survey action by the ITO (TDS)-2(3), Mumbai, in the case of M/s. Mumbai Metropolitan Regional Development Authority (M.M.R.D.A.), an information was received that M/s. Adarsh Co-op. Housing Society has made Premium payments amounting to Rs.8,48,84,878/- to M/s. MMRDA, on which the TDS as applicable as per Income tax Act has not been deducted. The notice dated 01.03.2011 was issued and served upon the assessee on 02.03.2011. In reply to the notice, the assessee informed that the record was not in the possession because all the record was taken by the CBI, Mumbai. After getting the reply of the notice, the Assessing Officer collected the detail from MMRDA in which it was found that the major payment was made in respect of Premium for Staircase, Balcony Enclosures, External Columns etc. As per provision of Section 194-1 of the Act, the TDS was liable to be deducted but the TDS was not deducted, therefore, the assessee was in default in terms of Section 201(1) and 201(IA) of the Act for non- deduction of TDS and non-payment of interest thereon. The TDS was assessed to the tune of Rs.7,78,26,347/- u/s 194-I of the Act @ 22.660% and interest u/s 201(IA) @ 1% per month was worked out to the tune of Rs.75,89,113/- and the total to the tune of Rs.2,52,24,563/- . The assessee filed an appeal before the CIT(A) who allowed the claim of the assessee, therefore, the revenue has filed the present appeal before us. & 2323/M/16 A.Ys. 2008-09 & 2010-11 ISSUE NOS. 1 TO 4:- 5. Under these issues the revenue has challenged the finding of the CIT(A) in which it was held that the amount paid by the lessee (M/s. Adarsh Co-op Housing Society Ltd.) to the Lessor (MMRDS) was not in the nature of rent as defined of Section 194-1 of the Act for the purpose of deduction of tax at source. Before going further, we deemed it necessary to advert the finding of the CIT(A) on record: - “5.5 I have perused the facts of the case, submission of the appellant, order u/s 201(1)/201(1A), Remand Report of AO & Assessee’s rejoinder to the remand report. Section 194-1 of the Income Tax 1961 provides that, “Any person not being an individual or a Hindu undivided family, who is responsibility for paying to a resident any i9ncome by way of rent, shall at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income tax thereon at the rate of- (a) two per cent for the use of any machinery or plant or equipment; and (b) ten per cent for the use of any land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings: Provided that no deduction shall be made under this section where the amount of such income or, as the. case may be, the aggregate of like amounts of such income credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed one hundred and eighty thousand rupees:
ITA. No. 2322/M/16 & 2323/M/16 A.Ys. 2008-09 & 2010-11 Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such income by way of rent is credited or paid, shall be liable to deduct income-tax under this section. Explanation. —For the purposes of this section, (i) "rent" means any payment, by whatever name called, under any lease, sublease, tenancy or any other agreement or arrangement for the use of (either separately or together) any, — (a) land; or {b} building (including factory building); or (land appurtenant to a building (including factory building); or 5.5.1 Hence, the matter for consideration in this case is that whether the payments made by the appellant to MMRDA under different heads as mentioned above could be said to be in the nature of payment under any lease, sub-Lease, tenancy or any other agreement or arrangement for the use of Land or building or land appurtenant to a building so as to be categorized as 'rent which tax was required to be deducted under section 1941 of the Act. 5.5.2 On perusal of the facts of the case, it is evident that the appellant, a cooperative housing society, got a piece of Land allotted by government of Maharashtra through collector of Mumbai vide revenue and forest department's Letter dated 09/07/2004 and the Society had made the payment of Rs.10,19,19,652/- as demanded to the office of the collector Mumbai city. Allotment of the Land was not for any fixed tenure but for the period as long as other terms and conditions of allotment are satisfied. Another piece of land was also allotted to the appellant society on payment of Rs.6,14,02,640/- vide revenue and forest department letter dated 05/08/2005. Thereafter a plan for construction of multi- storied building was submitted before the BMC which was approved on 06/09/2005 vide BMC's letter dated 05/10/2005 for construction up to plinth level. Subsequently, revised plan for additional floors was submitted from time to time before & 2323/M/16 A.Ys. 2008-09 & 2010-11 MMRDA, being a planning authority of Backbay Reconciliation Scheme where the property of the society is situated, for which development charges, stair case premium, Balcony Enclosure Fees, External Columns Premium, Security Fees as also some small amount by way of penalty for defaults were paid during financial years under consideration, 5.5.3 MMRDA is not the owner of the land allotted to the appellant and, therefore, payment made to MMRDA by the appellant were not for acquisition of lease hold rights. Since, MMRDA is the prescribed plan approval authority, the charges paid to MMRDA are in the nature of charges paid for approval of plan for construction of building and not in the nature of payments made under lease/sub Lease/tenancy/ or any other agreement or arrangement for the use of the land or any building. 5.5.4 It is pertinent to note that premium and rent have distinct and separate connotations in law as enshrined in Section 105 of the Transfer of Property Act, 18S2. Premium is a one- time non-recurring payment for transferring and purchasing the right to enjoy the benefits granted by the Lessor resulting in conveyance of some of the rights, title and interest in the property out of such a bundle of rights, whereas rent is paid periodically under definite intervals as per rent agreement for enjoyment of right during the period of payment of rent. In this case, it is found that the appellant has made payments to MMRDA for approval of plan and development charges, stair case premium, Balcony Enclosure Fees, External Columns Premium, Security Fees and other such charges were paid as onetime measure and there was no liability on the appellant Society to make any periodical payments to MMRDA and subsequent years of occupation of the property which could be termed as rent. Since, the MMRDA has not been vested with any original title or authority in the said and, which could be said to have been given on lease to the appellant by MMRDA and since, there is no other further periodical payments to be made apart from the premium payments as mentioned above which can be attributed to bringing into existence the & 2323/M/16 A.Ys. 2008-09 & 2010-11 foregoing landlord and tenant relationship between the Appellant and MMRDA, the payments made to MMRDA by the appellant cannot be held as rent under the definition as given in explanation(i) to sec 194-1 of the Act. 5,5.5 In A, R. KRISHANAMURTHY v. CAT 176 ITR 417 (SC), the transfer of leasehold rights even for temporary period of 10 years has been held to give rise to chargeable capital gains where the Apex Court followed its earlier decision in R.K. PALSHIKAR v. CIT 172 ITR 311 (SC) where the Lease for 99 years was concluded to be of an enduring nature. Similar view has been upheld in JCIT v. MLJKUND LTD. 106 ITO 231 (MUM) (SB), CIT v, INTERNATIONAL HOUSING COMPLEX (KER) BEARING OF 2009 which was converse case where the Assessee offered the Lease premium received for 99 years as rental Income 1n each year, but the revenue assessed the same as capital gains which was ratified by the High Court. 5.6 The appellant has placed reliance on the decision of Hon’bles Mumbai Tribunal - 'G' Bench in the case of M/s.Wadhwa Associates Realtors (P) Ltd. [2013] 36 Taxman 526 [Mumbai Tribunal] where in Hon'ble ITAT has held inter- alia as under: - "10. We have carefully perused the lease deed as exhibited from page 1 to 42 of the Paper Book. A careful reading of the said lease deed transpires that the premium is not paid under a lease but is paid as a price for obtaining The lease, hence it precedes the grant of lease. Therefore, by any stretch of imagination, it cannot be equated with the rent which is paid periodically. A perusal of the records further show that the payment to MMRDA is also for additional built up are and also for granting free of FSI are, such payment cannot be equated to rent. R is also seen that the MMRDA in exercise of &r u/s.43 r.w.r. 37(1) of theMaharashtra Town Planning Act, 1966, MRTP Act and ether powers enabling the same has approved the proposal to modify regulation 4A{ii) and thereby increased the FS1 of the entire 'C' block of BKC. The Development Control Regulations for BKC specify the permissible FSI. Pursuant to such provisions, the assesses became entitled for additional FSI and has further acquired/put- chased the additional built up area for construction of ITA. No. 2322/M/16 & 2323/M/16 A.Ys. 2008-09 & 2010-11 additional area on the aforesaid plot. Thus the assessee has made payment to MMRDA under Development Control for acquiring leasehold land and additional built up area. The decision of the Tribunal in the case of National Stock Exchange [supra] and M/s. Mukund Ltd. [supra] have been we!! discussed fry the Ld.CIT(Aj in his order. The decision of the Hon'ble Jurisdictional High Court in the case of M/s. Khimline Pumps Ltd. {supra] squarely and directly apply on the facts of the case wherein the Hon'ble Jurisdictional High Court has held that payment for acquiring leasehold land is a capital expenditure. Considering the entire facts in totality in the light of the judicial decision vis-a-vis provisions ofsection 1941, definition of rent as provided under the said provisions, u>e do not find any reason to tamper or interfere with the findings of the Ld. CYT(A) which we confirm. 5.7 Similar issue has come up before the Delhi Bench of the Tribunal in the case of The Indian News Papers Society [144 ITD 668 (Del)] and the Hon’ble Tribunal has held that the lease premium paid by the assessee to MMRDA does not fall under section 194-1 of the Act and therefore the provisions of section 201(11 of the Act does riot apply because the said lease premium was capital expenditure to acquire Land on lease with substantial right to construct and cover the building complex. 5.8 Further, In the case of ITO (TDS) Vs. Oriental Bank of Commerce (ITAT MUMBAI), 1TA No. 1300 & 13Q1/MUM/2G14 (Date of Decision: 23.11.2015),”
On appraisal of the above said finding, we noticed that the CIT(A) has decided the matter of controversy on the basis of the decision of the Mumbai Tribunal Bench in the case of M/s. Wadhwa Associates Realtors (P) Ltd. (2013) 36 Taxman 526 and in the case of The Indian News Paper Society (144 ITD 668 (Del) and in the case of ITO (TDS) Vs. Oriental Bank of Commerce (ITAT Mumbai), & 1301/M/2014 dated 23.11.2015.It is ITA. No. 2322/M/16 & 2323/M/16 A.Ys. 2008-09 & 2010-11 specifically held that the payment was paid for obtaining the lease which cannot be equated with the rent which was paid periodically so far as the payment to MMRDA for additional built up area cannot be equated with rent. To arrive at this conclusion number of decision has been discussed in the above mentioned order which is not required to be repeated. The facts are not distinguishable at this stage. No law contrary to the law relied by the CIT(A) has been produced before us. On the facts and circumstances of the present case, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, these issues are decided in favour of the assessee against the revenue.
The revenue has filed the present appeal against the order dated 24.02.2016 passed by the Commissioner of Income Tax (Appeals)-59, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the assessment years 2010-11.
The revenue has raised the following grounds: - “On the facts and in the circumstances of the case and in taw, the Ld. CIT(A) has erred in holding that the amount paid by the Lessee {M/s. Adarsh Co-op Housing Society Ltd.) to the Lessor (MMRDA) was not in the nature of rent, as defined in the Explanation (i) to section 194-1 of the Act for the purpose of deduction of fax at source '' ITA. No. 2322/M/16 & 2323/M/16 A.Ys. 2008-09 & 2010-11 (ii) "On the facts and in the circumstances of the case and in taw, the id CIT(A) has erred in not confirming the order of the Assessing Officer treating the assessee as an assessee in default u/s. 201(1) in respect of the amount of tax which has not been deducted under section 194-1 from payment made to MMRDA and levying interest under section 201(1A)." (iii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the definition of rent, as contained in section 194-1 and in resorting to interpretative reasoning whereas as per the settled principle of jurisprudence, this exercise is required only when the law is unclear." (iv) "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in going into the question of taxability of the payment made by the assessee to MMRDA despite the decision of the Apex Court in the case of The Aggarwal Chambers of Commerce V Ganpat Rai Hiralal, 33 ITR 245, where it has been held that [he persons who are responsible for deduction of tax at source are not concerned with the ultimate result of assessment." (v) The appellant prays that for this and other reasons it is submitted that the order of the CIT(A) on the grounds be set aside and that of the Assessing Officer be restored. (yi) The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.”
The facts of the present case are that quite similar to the facts of the case as narrated in the above mentioned appeal bearing no. 2322/M/2016, therefore, there is no need to repeat the same. The issues are same. Therefore, all the issues are decided in favour of the assessee against the revenue on similar lines as decided in ITA. No.2322/M/2016. & 2323/M/16 A.Ys. 2008-09 & 2010-11