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Income Tax Appellate Tribunal, “F” Bench, Mumbai
O R D E R Per B.R. Baskaran (AM) :-
Both appeals filed by the Revenue are directed against the orders passed by the learned CIT(A)-59, Mumbai and they relate to A.Ys. 2012-13 & 2013-14. Solitary issue urged by the Revenue in both the appeals is whether the learned CIT(A) was justified in holding that the lease amount paid by the assessee to the lessor (MMRDA) was not in the nature of rent liable for deduction of tax at source u/s. 194I of the Act.
We have heard the parties and perused the record. The assessee is engaged in the business of real estate development and leasing activities. The assessee took a plot on lease from MMRDA and paid premium in both the years under consideration to MMRDA for securing additional FSI. The Assessing Officer took the view that the lease premium paid by the assessee is in the nature of rent and hence the assessee should have deducted tax at source u/s. 194I of the Act. Since there was failure on the part of the assessee,
2 M/s. BKC Properties Pvt. Ltd. the Assessing Officer treated the assessee as assessee in default in both the years under consideration and accordingly raised demand u/s. 201(1) and also interest u/s. 201(1A) of the Act. The Ld CIT(A) noticed that identical demands raised by the Assessing Officer in A.Ys. 2008-09, 2010-11 and 2011-12 were deleted by the Tribunal, vide its order dated 24.12.2013 passed in to 6272/Mum/2012 by holding that lease premium is not in nature of rent. Accordingly by following the decision of the Tribunal, the learned CIT(A) deleted the demands raised by the Assessing Officer by holding that provisions of section 194I of the Act was not applicable to the lease premium paid to MMRD. Aggrieved by the order passed by the learned CIT(A), the Revenue has filed these appeals before us.
We have heard the parties and perused the record. We noticed that the learned CIT(A) has followed the decision rendered by the Coordinate Bench in assessee’s own case, which was in turn rendered by following the decision rendered by the Mumbai Tribunal in the case of Wadhwa and Associates Realtors P. Ltd. in dated 3.7.2013. For the sake of convenience, we extract below operative portion of the order passed by the Coordinate Bench in assessee’s own case.
We have heard the rival submissions and perused the material on record. We find that in the case of Wadhwa & Associates Realtors Pvt. Ltd.(supra)the issue has been discussed and decided in Favour of the assessee as under:
We have considered the rival submissions, perused the order of the lower authorities and the material evidence brought on record in the firm of paper Book and the judicial decisions relied upon by the rival parties. The entire grievance revolves around the premium paid by the assessee to M/s. MMRDA Ltd. for the leasehold rights acquired by the assessee through the lease deed dt. 22nd November, 2004. It is the say of the Revenue that this lease premium was liable for deduction of tax at source failing which the assessee is to be treated as assessee in default. It is the say of the assessee that such lease premium is in the nature of capital expenditure and therefore there is no question of deduction of tax at source. Further, the said lease premium does not come within the purview of the definition of rent as provided u/s. 194-I of the Act.
3 M/s. BKC Properties Pvt. Ltd.
1O. We have carefully perused the lease deed as exhibited from page No 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 proceeds 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 MMRD is also for additional built up are and also for grating free of FSI area, such payment cannot be equaled to rent. It is also seen that the MMRDA in exercise of power u/s. 43 r. w. Sec. 37(1) of the Maharashtra Town Planning Act 1966, MRTP Act and other powers enabling the same has approved the proposal to modify regulation 4A(ii) and thereby increased the FSI of the entire ‘G’ Block of BKC. The Development Control Regulations fur BKC specify the permissible FSI. Pursuant to such provisions, the assessee became entitled for additional PSI and has further acquired/purchased the additional bu18lt up area for construction of additional area on the aforesaid plot. Thus the assessee has made payment to MMRD under Development Control for acquiring leasehold land and additional built up area. The decisions of the Tribunal in the case of Al/s. National Stock Exchange (supra) and Mukund Ltd (supra) has been well discussed by the Ld. CIT(A) is his order. The decision of the Hon'ble Jurisdictional High Court in the case of Khimline Pumps Ltd. (supra) squarely and directly apply on the facts of the case when 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 decisions vis-à-vis provisions of Sect. 194-I, definition of rent as provided under the said provision, we do not find any reasons to interfere or interfere with the findings of the Ld. CIT(A) which we confirm.
In the result, the appeal filed by the Revenue is dismissed".
5. Similarly, in the case of in the case of Navi Mumbai (SEZ) Pvt.Ltd. to which one of us was party, the issue has been discussed at length and it has been held that word Rent does not include premium paid for additional FSI or lease hold rights. We find that in the cases under consideration payments were made to MMRDA for condonation of deficiency and acquiring additional FSI for adjusting the areas of staircase, lift and lift-lobbies. In our opinion such payments cannot be termed Rent and therefore provisions of section 194I are not applicable in the cases before us. Therefore, upholding the orders of the FAA, we decided the effective grounds of appeal against the AOs for all the three AYs.
4 M/s. BKC Properties Pvt. Ltd.
4. Since, the learned CIT(A) has decided the issue by following the decision rendered by the Tribunal in assessee’s own case, we do not find any reason to interfere with the order passed by the learned CIT(A).
In the result, appeals filed by the Revenue are dismissed. Order has been pronounced in the Court on 25.4.2017.