Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI G.S.PANNU & SHRI C.N.PRASAD
आदेश / O R D E R PER C.N.PRASAD [J.M.] These two appeals are filed by Revenue for the assessment years 2010-11 and 2011-12 against the order of the Ld. CIT (Appeals) -59, Mumbai dated 11.05.2015.
2 & 4422/Mum/2015 (A.Ys 2010-11 and 2011-12 resply.) M/s Enam Financial Consultants Pvt. Ltd 2. The common grounds of appeal in both these appeals filed by the Revenue are as under : “(i) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in holding that the amount paid by the Lessee (M/s. Enam Financial Consultants Pvt. Ltd.) to the Lessor (MMRDA) was not in the nature of rent, as defined in the Explanation (i) to section 194-I of the Act for the purpose of deduction of tax at source. (ii) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in accepting the claim of the assessee that no tax was deductible under section 194-I from the payment made by the assessee to MMRDA for additional FSI from MMRDA. (iii) On the facts and in the circumstances of the case and in law, the Ld. 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-I from the payment made to MMRDA and levying interest under section 201(IA). (iv) 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-I and in resorting to interpretative reasoning whereas as per the settled principle of jurisprudence, this exercise is required only when the law is unclear. (v) 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 the persons who are responsible for deduction of tax at source are not concerned with the ultimate result of assessment.
2. The appellant craves leave to add, amend, alter or modify any ground which may be necessary at the time of hearing of the case or thereafter.
3. The order of the CIT(A)being erroneous be set aside and A.O’s order be restored.”
3 & 4422/Mum/2015 (A.Ys 2010-11 and 2011-12 resply.) M/s Enam Financial Consultants Pvt. Ltd 3. The issue in both these appeals is regarding non deduction of TDS on the premium paid to MMRDA by the Assessee for additional FSI. The Assessing Officer treated the premium paid by the Assessee as akin to rent and therefore since the Assessee failed to deduct TDS u/s 194-I of the Act he held the Assessee as defaulter u/s 201(1) and also charged interest u/s 201(1A) for failure to deduct TDS on such premium paid by the Assessee to MMRDA. The Ld. CIT (Appeals) following the order of the Mumbai Bench in the case of Wadhwa Associates Realtors (P) Ltd. [36 Taxman 526] held that the Assessee is not liable to deduct TDS u/s 194-I of the Act on the premium paid by Assessee to MMRDA for acquiring additional FSI.
The Ld. Counsel for the Assessee submits that the issue in appeal is decided in favour of the Assessee in Assessee’s own case for the assessment year 2009-10 in by order dated 22.2.2017 by the Coordinate Bench. It is submitted that the Coordinate Bench held that lease premium paid by the Assessee to MMRDA is not in the nature of rent as contemplated u/s 194-I of the Act and the Assessee is not required to deduct tax at source. The Ld. Counsel therefore submits that in view of this decision of the Coordinate Bench, the Ld. CIT (Appeals) order be confirmed.
The Ld. DR supported the orders of the Assessing Officer.
6. On hearing rival submissions and also perusing the order of the Coordinate Bench, we find that the Tribunal in Assessee’s own case for the 4 & 4422/Mum/2015 (A.Ys 2010-11 and 2011-12 resply.) M/s Enam Financial Consultants Pvt. Ltd assessment year 2009-10 considered similar issue and held that the lease premium paid by the Assessee to MMRDA for acquiring staircase, lifts, lift room, lobbies etc. as additional FSI is not in the nature of rent within the meaning of Section 194-I and therefore the Assessee need not deduct TDS. While holding so, the Tribunal observed as under :
“ 5. We have heard the rival submissions, perused the orders of the authorities below and the decisions relied on. The assessee entered into a lease agreement with MMRDA by participating in public tender announced by MMRDA for acquiring a plot in BKC region and paid premium as a price for obtaining the lease for a period of 8 years. After acquiring the right to hold the property for a period of 8 years, assessee started construction of building. In the course of construction of building, there are certain areas of construction like staircase, lifts, lift room, lobbies etc. which consumes spaces and as per the rules, assessee can pay some charges/premium to the concerned authority i.e. MMRDA and can construct above areas free of FSI, that means for the purpose of calculation of FSI the above areas shall be excluded. The assessee during the assessment year 2009-10, paid Rs.4,23,81,332/- to MMRDA as premium for acquiring staircase, lifts, lift room, lobbies etc. for counting fee of FSI. This premium paid by the assessee was treated as rent under the provisions of section 194I by the Assessing Officer and since no tax was deducted by the Assessee on such premium paid to MMRDA, the Assessing Officer invoked the provisions of section 194I and treated the assessee treating the assessee as defaulter u/s 201(1) and 201(1A) of the Act.
The question before us to be decided is whether the premium paid by the assessee to MMRDA for acquiring the stair case, lifts, lift room, lobbies etc. for free of FSI is in the nature of rent for the purpose of the provisions of 194I of the Act or not. We find that the Co-ordinate bench in the case of ITO Vs. Wadhwa & Associates Realtors Pvt. Ltd [36 Taxman.com 526] considered similar issue and held that premium paid by the assessee to MMRDA for the construction of building and for additional built up area for grant of free of FSI cannot be equated to rent. Similar view has been taken by the Tribunal in the case of ITO Vs. Shree Naman Developers Ltd. in and 687/M/2012 dated 06/08/2013 and ACIT Vs K Raheja Corporate Services Pvt. Ltd. in ITA No.5807/M/2012 dated 04.02.2015. The ld. CIT (Appeals) following the said orders held as under :
5 & 4422/Mum/2015 (A.Ys 2010-11 and 2011-12 resply.) M/s Enam Financial Consultants Pvt. Ltd “5.1 I have considered the cited decisions. The facts of Shree Naman Developers Ltd. are exactly identical to the facts in the case of the assessee. In that case, the assessee was allotted certain plots of land in Bandra Kurla Complex on lease subject to payment of lease premium to MMRDA. In addition, the assessee made further payment of premium to MMRDA towards additional basement area and areas towards lifts, staircase and lift lobbies, etc. during the year under consideration. Demand u/s.201(1) / 201(1A) was raised holding that the assessee was liable to deduct TDS as per the provisions of section 1941. The CIT(A) examined the issue in detail in that case and noted that the lease premium charged by the MMRDA to the assessees was equal to the prevailing market rate for acquisition of commercial premises as per the valuation made for stamp duty purpose. He also noted that the rates so prescribed by the stamp duty authorities were for the acquisition of property and not for the use of let out property by the tenant. He further noted that even the additional premium was charged by the MMRDA to the assessee for the additional FSI as per the ready reckoner rate prescribed by the stamp duty authorities. The ld.CIT(A) held that the whole transaction involving grant of leasehold rights by the MMRDA to the assesses thus was nothing but the transaction of transfer of property and the lease premium agreed to be paid was the consideration for the acquisition of such leasehold rights in the property. In this regard, a reference was made by the ld.CIT(A) to the decision in the case of Raja Bahadur Kamakshya Narain Singh of Ramgarh v. Commissioner of Income tax, (1943) 11 ITR 513 (PC) wherein it was held that the payment of salami under the lease agreement was a capital receipt being a single payment made for the acquisition of the right by the lessee to enjoy the benefits granted to them under the lease. He also relied on the decision of Hon'ble Supreme Court in the case of Member for the Board of Agricultural Income Tax vs. Sindhurani Chaudhranj & Ors. 32 ITR 169 (SC) wherein it was held that salami as a lumpsum non recurring payment made by a prospective tenant to the landlord which is not in the nature of rent within the definition of "agricultural income" given in the Income Tax Act. It was held that such 10 ITA 686 & 687/M/12 CO 08 & 09/M/13 ITA 688 to 691/M/12 CO 12 to 15/M/13 payment has all the characteristics of a capital payment and it is not revenue in nature. The ld.CIT(A) further relied on the decision of Hon'ble Bombay High Court in the case of Commissioner of Income tax v. Khimline Pumps Ltd.
6 & 4422/Mum/2015 (A.Ys 2010-11 and 2011-12 resply.) M/s Enam Financial Consultants Pvt. Ltd (2002) 258 ITR 459 wherein it was held that amount of Rs.45 lacs paid by the assessee to M/s. APVE Ltd. for acquisition of leasehold land was a capital expenditure. The ld.CIT(A) also referred to the decision of Special Bench of ITAT in the case of Mukund Ltd. 106 ITR 231 wherein it was held that the premium paid for acquiring leasehold right in land was a capital expenditure. The ld.CIT(A) then discussed the case laws relied upon by the AO in his orders and recorded a finding after such discussion that in none of the said case laws, it was held that the lease premium paid in the similar circumstances was in the nature of advance rent and tax was deductible at source u/s. 194-I of the Act. He held that the case laws relied upon by the AO, therefore, were distinguishable on facts and in law and the same were not applicable to the facts of the assessee' s case. The Id. CIT(A) finally referred to the decision of the Tribunal in the case of National Stock Exchange of India Limited (ITA No.1955/Mum/99 and others) and noted that in the similar facts and circumstances involved in that case, it was held by the Tribunal that a consideration paid for acquiring leasehold rights in land was a capital expenditure and not rent. Accordingly, the ld.CIT(A) held that the payment made by the assessees to MMRDA on account of lease premium for acquiring leasehold rights and additional FSI in respect of the lease property was not in the nature of rent as contemplated in section 194-I of the Act and the assessees were not required to deduct tax at source from the said payment. Accordingly, the demand raised by the AO treating the assessees in default u/s.201(l) & 201(1A) was cancelled by the ld.CIT(A). 5.2 Against the above order of the CIT(A), the Revenue preferred appeal before the Tribunal and the ITAT 'E' Bench, Mumbai vide order dated 14-08-2013 held as under: "As the issue involved in the present cases as well as all the material facts relevant thereto are similar to the case of Wadhwa & Associates Realtors Pvt.Ltd. (supra) decided by the Tribunal, we respectfully follow the said decision of the co- ordinate Bench of this Tribunal and uphold the impugned orders of the ld. GIT(A) holding that the lease premium paid by the assessees to MMRDA not being in the nature of rent as contemplated in section 194-I of the Act, they were not liable to deduct tax at source from the said payment and hence could not be treated as the assessees in default u1s.201(1) & 201(14) of 7 & 4422/Mum/2015 (A.Ys 2010-11 and 2011-12 resply.) M/s Enam Financial Consultants Pvt. Ltd the Act. The appeals filed by the Revenue are accordingly dismissed." 5.3 Since the facts in the present case are absolutely identical to the facts in the case of Shree Naman Developers Ltd., respectfully following the decision of jurisdictional ITAT, with which I agree, it is hereby held that the lease premium paid by the assessee to MMRDA during the year under consideration, was not in the nature of rent as contemplated u/s. 1941 and, therefore, the assessee was not required to deduct tax at source from the said payment. Accordingly, the demand raised by the Assessing Officer, treating the assessee in default u/s.201(1) I 201(IA) is incorrect and is directed to be deleted. Grounds of appeal are allowed to the above extent.
7. As seen from the above, the ld. CIT (Appeals) held that the present case is identical to the facts in the case of Shee Naman Developers Ltd. and therefore following the decision of the Co-ordinate bench, he held that lease premium paid by the assessee to MMRDA is not in the nature of rent under provisions of 194I of the Act. The ld. DR could not bring any distinguishing features on facts. In the circumstances following the above Co-ordinate bench decisions on similar issue, we uphold the order of the ld. CIT (Appeals) and reject the grounds of revenue.” Respectfully following the said order, we uphold the order of the Ld. CIT (Appeals) and dismiss the grounds of the Revenue.
In the result, both the appeals of the Revenue are dismissed.
Order pronounced in the open court on the 26th day of April 2017.
Sd/- Sd/- (G.S.PANNU) (C.N.PRASAD) लेखा सदस्य / न्याधयक सदस्य / ACCOUNTANT MEMBER JUDICIAL MEMBER मुंबई / Mumbai; दिनाुंक / Dated 26.04.2017 LR, SPS अपीलार्थी / The Appellant 1. 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A), Mumbai. आयकर आयुक्त / CIT 4. 5. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुंबई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. सत्यादपत प्रदत //True Copy// आदेशान सार/ BY ORDER,