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Income Tax Appellate Tribunal, “D” BENCH: KOLKATA
Per Shri A.T.Varkey, JM
1. The appeal filed by the revenue is against the order of Ld. CIT(A)-24, Kolkata dated 27.01.2016 for AY 2012-13.
The sole issue involved in this appeal of revenue is that whether the lease premium falls within the purview of sub-clause (i) of explanation to Sec. 194I of the Income-tax Act, 1961 (hereinafter referred to as the “Act”). For that revenue has raised the following grounds of appeal.
“Ground No. 1 That on the facts & circumstances of the case, the Ld. CIT(A) has erred in holding that premium for acquiring leasehold rights for the leased plot was not rent, whereas the real nature of the payment of the impugned amount by way of "Lease Premium" falls within the purview of sub-clause (i) of explanation to Sec. 1941 of the LT. Act, 1961. Ground No. 2 That on the facts & circumstances of the case, the Ld. C1T(A) has erred both on facts and in law to appreciate that the issue in question was not capital vs. revenue expenditure, but whether the payment was made for use of the land or not as required u/s. 194 of the Act. Ground No. 3
2 Earnest Towers Pvt. Ltd., AY- 2012-13 That on the facts & circumstances of the case, the Ld. CIT(A) has erred both on facts and in law to appreciate that restrictive clauses in the deed covering the transaction, governing use of the land, alteration etc. Ground No. 4 That on the facts & circumstances of the case, the Ld. CIT(A) failed to appreciate the applicability of the ratio of judicial pronouncement in the case of CIT vs. Panbari Tea Co. Ltd. [57 1TR 422 (SC)(1965)] on the issue. Ground No. 5 That on the facts & circumstances of the case, the department craves to add, alter, modify the above grounds of appeal
, during the course of appellate proceedings.”
3. Facts in brief are that the assessee is a Joint Venture Company promoted by TCG Urban Infrastructure Holdings Ltd (51%), Hiranandani Properties Pvt. Ltd (24%) and Intelligent Parks Pvt. Ltd (25%). By virtue of a lease deed dated 23.06.2008 and by virtue of the Supplementary lease deed dated 01.02.2012 in between the assessee and the Mumbai Metropolitan Region Development Authority the assessee has taken on lease for infrastructural development of a plot of land bearing Plot No. C-54 & 55 in "G" Block of Bandra-Kurla Complex situated and lying in Village KoleKalyan, Tal. Andheri ad measuring to 8076.38 Sq. metres having totalled maximum permissible built up area of 40608 sq. mtrs. Including the additional built up area on payment of premium of Rs.1182,51, 22,200/- . According to the agreements the amount of premium was to be paid in one time or the assessee has to pay the annual instalment with simple interest @10% p.a. on every payment of instalment and also delayed payment of instalment will attract penal interest at the prevailing prime lending rate decided by the Reserve Bank of India on the total amount due. From the details filed by the assessee it was found that during the year under consideration the assessee company has paid lease premium to MMRDA without deducting the TDS U/s 194I of the Act, as under: Sl. No. Date of payment Nature of payment Amount paid 1. 06/09/2011 Premium/charges on additional work 8,71,98,515/- 2. 21/11/2011 Ground rent, interest including security deposit 15,95,522/- 3. 30/12/2011 Ground rent 11,350/- 4. 04/01/2012 Ground rent 7,560/- Total : 8,88,12,947/-
3 Earnest Towers Pvt. Ltd., AY- 2012-13 In this regard, the assessee was asked to explain why your failure to deduct TDS on the said payments to MMRDA under the agreements as mentioned, shall not be treated as default u/s. 201(1)/201(lA) of the Act. In response, the assessee filed written submission on 20.03.2013 and on consideration of the same the AO was of the view that the premium paid was in the nature of rent and consequently the assessee, should have deducted TDS u/s. 194I of the Act and TDS on interest paid u/s. 194A. On appeal, the Ld. CIT(A) following decision in the appellate order No. 776 dated 24.11.2015 for AY 2011-12 held that section 194I is not attracted on instalment payable by the assessee to MMRDA. Aggrieved, revenue is in appeal before us.
We have heard rival submissions and gone through the order of Ld. CIT(A). At the time of hearing, Ld. DR vehemently supported the order of AO and submitted that the premium is nothing but advance rent paid. He also pointed out that lease premium is not a non-refundable deposit and for the consideration for use of loan and hence, partakes the character of rent. Therefore, he prayed before the bench to uphold the order of the AO. We find that the issue is squarely covered in favour of the assessee by the decision in assessee’s own case in and ITA No. 243/Kol/2015 for AYs 2010-11 and 2011-12 vide order dated 19.01.2018, wherein the tribunal followed its own order in assessee’s own case for AY 2008-09, wherein it was held as under: “7. We find that the Tribunal has, in the assessee’s own case for the Assessment Year 2008- 09, on an identical issue held as follows:- “15. On careful consideration of the rival submissions, we observe that as per section 194-1 of the Act, any person, not being an individual or a Hindu 4 I.T.A. No. 242/Kol/2016 Assessment Year: 2010-11 & I.T.A. No. 243/Kol/2016 Assessment Year: 2011-12 M/s. Earnest Towers Pvt. Ltd undivided family, who is responsible for paying any income 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, shall deduct income-tax thereon at the rate prescribed therein. Since in the present case, we have held that the lease premium paid by the assessee was capital in nature and was not rent, therefore, we are unable to approve the findings of TDS Officer/Assessing Officer that the assessee was liable to deduct TDS on payment of lease premium to MMRDA. At this point, we place reliance on the judgment of Hon'ble jurisdictional High Court of Delhi in the case of Krishak Bharati Cooperative Ltd. vs DCIT (2013) 350 ITR 24 (Del) wherein their lordships held that for premium on acquisition of lease hold rights in the land, lease for 90 years with substantial interest in the land, then lease premium constituted capital expenditure. 16. In view of discussions made hereinabove, we are not in agreement with the findings of the Assessing Officer and we decline to hold that the Commissioner of 4 Earnest Towers Pvt. Ltd., AY- 2012-13 Income Tax(A) has erred in not treating the assessee as assessee in default within the meaning of section 201(1)of the Income Tax Act for non-deduction of TDS on payment of lease premium to MMRDA. At the cost of repetition, it is worthwhile to mention that for invoking the provisions of section 201(1)of the Act, this is a precondition that the person should be required to deduct any sum in accordance with the provisions of this Act and he does not deduct, or does not pay or after deduction fails to pay the whole or in part of the tax as required under the provisions of the Act, then only such person shall be deemed to be an assessee in default in respect of payment of such tax. In the case in hand, the assessee was not liable to deduct any tax on payment of lease premium to MMRDA because it was capital expenditure to acquire land on lease with substantial right to construct a commercial building complex.”
Since the issue is squarely covered in favour of the assessee by the decision of the Tribunal in AY 2008-09 which according to the Ld. AR has been confirmed by the Hon’ble jurisdictional High court and in the absence of any controverting material brought on record by the revenue of there is any change in fact or law, we find no infirmity in the order of the Ld. CIT(A) in allowing the ground of appeal of assessee. Accordingly, we uphold the same. Therefore, the appeal of revenue is dismissed.
In the result, appeal of revenue is dismissed.
Order is pronounced in the open court on 23.03.2018 Sd/- Sd/- (Waseem Ahmed) (Aby. T. Varkey) Accountant Member Judicial Member
Dated : 23rd March, 2018 Jd.(Sr.P.S.)
Copy of the order forwarded to:
Appellant – ACIT (TDS), Circle-1, Kolkata. Respondent – M/s. Earnest Towers Pvt. Ltd., 9B, Wood Street, 4th floor, 2 Kolkata-700 016. 3. The CIT(A) Kolkata.