ACIT(TDS) CIRCLE - 1, KOLKATA, KOLKATA vs. M/S. EARNEST TOWERS PVT. LTD., KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘C’ BENCH, KOLKATA [Before Sri J. Sudhakar Reddy, Hon’ble Accountant Member & Sri Aby T. Varkey, Hon’ble Judicial Member]

I.T.A. No. 242/Kol/2016 Assessment Year: 2010-11 & I.T.A. No. 243/Kol/2016 Assessment Year: 2011-12

ACIT (TDS) Circle-1 Kolkata……………………..……………………….……………………………………..Appellant 10B, Middleton Road Kolkata – 700 071

M/s. Earnest Towers Pvt. Ltd…......……………...……..………………………………………..…..Respondent 9B Wood Street 4th Floor Kolkata – 700 016 [PAN : AABCE 8612 N]

Appearances by: None, appeared on behalf of the assessee. Shri G. Mallikarjuna, CIT, DR, appearing on behalf of the Revenue. Date of concluding the hearing : December 7th, 2017 Date of pronouncing the order : January 19th , 2018 O R D E R Per J. Sudhakar Reddy :-

Both these appeals are filed by the revenue and are directed against the order of the ld. Commissioner of Income Tax (Appeals)-24, Kolkata, (hereinafter the ‘ld. CIT (A)’), passed u/s 250 of the Income Tax Act, 1961 (the ‘Act’), dt. 24/11/2015, for the Assessment Year 2010-11 & 2011-12, on the following grounds:-

For the Assessment Year 2010-11 “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. 194I of the I.T. Act, 1961. 2. That on the facts & circumstances of the case, the Ld. CIT(A) has erred both on facts and in law to appreciate that the issue in question was not

2 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 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. 3. 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. 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 ITR 422 (SC)(1965)] on the issue. 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.”

As the Grounds of Appeal for the Assessment Year 2011-12, are identical as that for the Assessment Year 2010-11, they are not reproduced for the sake of brevity. 2. The ld. Counsel for the assessee, filed a petition for adjournment. As this is not a fit case for grant of adjournment, we reject the same and dispose of this case ex- parte on merits, qua the assessee, after hearing the ld. D/R.

3 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 interest at the prevailing prime lending rate decided by the Reserve Bank of India on the total amount due. 5. From the details filed by the assesse it was found that during the year under consideration the assesse company has paid lease premium as well as interest on delayed payment (Interest accrued) on lease premium payable to MMRDA, without deducting the TDS U/s 1941 and U/s194A of the I.T. Act, as under:

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 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.”

Kolkata, the 19th day of January, 2018.

Sd/- Sd/- [J. Sudhakar Reddy] [Aby T. Varkey] Accountant Member Judicial Member

Dated : 19.01.2018 {SC SPS}

5 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

Copy of the order forwarded to: 1. M/s. Earnest Towers Pvt. Ltd 9B Wood Street 4th Floor Kolkata – 700 016