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Revenue by : Shri Suman Kumar (DR) Assessee by : Shri Nilesh Joshi (AR) Date of hearing : 13.04.2017 Date of Pronouncement : 13.04.2017 Order Under Section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by Revenue u/s 253 of the Income-tax Act (‘the Act’) is directed against the order of ld. CIT(A)-14, Mumbai dated 04.04.2014 for AY-2011-12. Though the Revenue has raised as many as five grounds of appeal
. However, as per our considered view the only substantial issue is whether the assessee was required to deduct tax at source from the payment of lease premium paid to City Industrial Corporation (‘CIDCO’) during the year under consideration.
2. Brief facts of the case are that a survey u/s 133 was carried out in case of City and Industrial Development Corporation of Maharashtra Ltd. (CIDCO) on 04.02.2011. In course of survey, it was noticed that assessee was allotted Plot No. 9 & 10 at Kharghar, Navi Mumbai on lease premium of Rs.19,46,02,098/- for financial year 2009-10 and Rs. 3,45,02,097/- for financial year 20010-11 to CIDCO. According to AO the assessee was required to deduct tax on payment of such lease rent premium as per the provisions of section 194I. The assessee was given show- - M/s Millennium Associates cause notice dated 08.09.2011 & 16.11.2011 asking the assessee as to why these payments should not be treated as ‘lease rent’ paid to CIDCO. The assessee filed its reply and contended that the lease premium is the capital cost of Plot. The agreement on lease is in fact a sale and the assessee was not liable to deduct tax at source on such premium. The contention of assessee was not accepted by AO and AO passed a order u/s 201(1) of the Act as under: “21. In view of the above facts and circumstances of the case, the assessee is held deemed to be in default for failure to deduct tax at source from the payments of Rs. 19,46,02,098. The rates of TDS, as prescribed for Section 194I were changed w.e.f. 01-10-2009. The rates applicable would be as under: a) For the payments ·made from 01-04-2009 to 30-09-2009, the applicable rate was 20.6 %, including E. Cess @ 3%; (PERIOD I). b) For the payments made from 01-10-2009 to 31-03-2010, the applicable rate was 10.3%, including E. Cess @ 3%; (PERIOD Il) 22. In the present case, In the F.Y. 2009-10, the assessee had made a payment of Rs. 83,00,000 during 'PERIOD I' AND a payment of Rs. 18,63,02,098/ - was made in 'PERIOD 11'. Hence, applying the applicable rate, the amount of TDS default u/s. 201(1) of the I.T. Act, on aggregate amount of Rs. 19,46,02,098/-, works out to Rs. 2,08,98,916/-. As regard F.Y. 2010-11, the assessee had made a payment of Rs. 3,45,02,097. Hence, the TDS default, @ 10.3%, works out to Rs. 35,53,716. The total aggregate default comes to Rs. 2,44,52,632.
Now, coming to the interest u/s 201(1A), the same is calculated-for the period starting from the date on which the tax was deductible till the date of order. The following table shows the interest working u/s 201(IA) for both the assessment years:
S.No. TDS Default Month which paid Period Till Interest @ 1% P.M. Amount (Rs.) 30.11.2011, (Col. 2 X Co., 4 X in months 1% (In Rs.) 1 2 3 4 5 1 17,09,800 August’2009 28 4,78,744 November’2009 2 1,09,59,200 25 27,39,800 December’2009 3 19,57,216 24 4,69,732 January’2009 4 28,84,000 23 6,63,320 February’2009 6 28,32,500 22 6,23,150 March’2009 7 5,56,200 21 1,16,802 April’2009 8 35,53,716 20 7,10,743 TOTAL INTEREST 51,79,141 24. The assessment year wise demand/interest is summarized hereunder: S.No. A.Y. Tax (Rs.) Interest(Rs.) Total (Rs.) 1 2010-11 2,08,98,916 44,68,398 2,53,67,314 2 2011-12 35,53,716 7,10,743 42,64,459
The assessee is directed to make payment of Rs. 2,96,31,773/-. Demand notice u/s 156 and challan (No. 281) are accordingly enclosed.
- M/s Millennium Associates
Penalty proceedings u/s.271-C of the I.T. Act are separately initiated, in respect of each assessment year, for non-deduction of tax at source of Rs. 2,44,52,632 at the time of making payment of Rs. 22.91,04,195/-.” On appeal before the ld. CIT(A), the order of AO passed u/s 201(1)/201(1A) was deleted. Thus, aggrieved by the order of ld. CIT(A), the Revenue has filed the present appeal before us. 3. We have heard the ld. Departmental Representative (DR) for Revenue and ld. Authorized Representative (AR) of assessee and perused the material available on record. At the outset, ld. Ld. AR of the assessee submitted that grounds of appeal
raised by Revenue in the appeal is squarely covered in favour of assessee in the case of ITO vs. Millennium Associates in & 3173/Mum/2014 and in assessee’s own group concerned case in ITO vs. M/s Shah Group Builders Ltd. (ITA No. 4523/M/12). The Ld. DR for the Revenue not disputed the factual position submitted by ld. AR of the assessee.
4. We have considered the contention of the parties and has seen that the Co-ordinate Bench of this Tribunal in ITO vs. Millennium Associates (supra) and in ITO vs. M/s Shah Group Builders Ltd. (supra) held that payment of lease premium paid to CIDCO not in the nature of rent as contemplated in section 194I of the Act and assessee was not liable to deduct Tax at Source. Thus, assessee could not treated as assessee in default u/s 201(1) & 201(1A) of the Act. The Co-ordinate Bench in M/s Shah Group Builders Ltd. passed the following order: “5. We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that a similar issue 5 ITA 4523/M/12 involved in the case of Shree Naman Hotels Pvt. Ltd. has been decided by us in favour of the assessee vide an order of even date passed in ITA No. 688 to 691/Mum/2012 by following the order of the co-ordinate Bench of this Tribunal passed in the case of M/s Wadhwa & Associates Realtors Pvt. Ltd. vide order dated 3-7-2013 passed in ITA No. 695/Mum/2012. In the case of M/s Wadhwa & Associates Realtors Pvt. Ltd. (supra), a similar issue was decided by the Tribunal in favour of the assessee for the following reasons given in para 9 to 10 of its order dated 3-7-2013 (supra):- "
We have considered the rival submissions, perused the order of the lower authorities and the material evidence brought on record in the form 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 3 - M/s Millennium Associates 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. 194-1 of the Act.
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 MMRD is also for additional built up are and also for granting free of FSI area, such payment cannot be equated to rent. It is also seen that the MMRD 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 for BKC specify the permissible FSI. Pursuant to such provisions, the assessee became entitled for additional FSI and has further acquired/purchased the additional built 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 M/s. National Stock Exchange (supra) and Mukund Ltd (supra) have been well discussed by the Ld. CIT(A) is his order. The decision of the Hon'ble 6 ITA 4523/M/12 Jurisdictional High Court in the case of 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 decisions vis-à-vis provisions of Sec. 194-1, definition of rent as provided under the said provision, we do not find any reason to tamper or interfere with the findings of the Ld. CIT(A) which we confirm".
6. As the issue involved in the present case as well as all the material facts relevant thereto are similar to the case of Wadhwa & Associates Realtors Pvt. Ltd. (supra) as well as Shree Naman Hotels Pvt. Ltd. (supra) decided by the Tribunal, we respectfully follow the decisions rendered in the said cases by the co-ordinate Bench of this Tribunal and uphold the impugned order of the ld. CIT(A) holding that the lease premium paid by the assessee to CIDCO not being in the nature of rent as contemplated in section 194-I of the Act, the assessee was not liable to deduct tax at source from the said payment and hence could not be treated as the assessee in default u/s 201(1) & 201(1A) of the Act. The appeal filed by the Revenue is accordingly dismissed.”
Thus, respectfully following the decision of Co-ordinate Bench, we do not find any merit in the appeal filed by Revenue.