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Income Tax Appellate Tribunal, MUMBAI BENCHES “A” MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI N.K. PRADHAN
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES “A” MUMBAI
BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER)
ITA No. 6569/MUM/2014 Assessment Year: 2009-10
ITO (TDS) 1(1) Vs. A Surti Developers P. Ltd. R. No. 804, K.G. Mittal Hospital 75 Hiotel, Air Link Near Hospital Bldg., Charni Road Santacruz Air Port Vile Parle(E) Mumbai – 400002 Mumbai – 400057 PAN No. AAACA8288R (Appellant) (Respondent)
Revenue by : Shri Rajesh Kumar Yadav, DR Assessee by: None
Date of Hearing : 21/12/2016 Date of pronouncement: 15/03/2017
ORDER PER N.K. PRADHAN, AM This is an appeal filed by the Revenue. The relevant assessment year is 2009-10. The appeal is directed against the order of the Commissioner (Appeals) – 12, Mumbai and arises out of order u/s 201(1) & 201(1A) of the Income Tax Act, 1961 (the ‘Act’).
The grounds of appeal filed by the Revenue read as under:-
(i) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the amount paid by the Lessee A. Surti Developers Pvt. Ltd.) to the Lessor (MMRDA) was not in the nature of rent, as defined in the Explanation (i) to section 1941 of the Act for the purpose of deduction of tax at source. (ii) On the facts and 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 194I from the payment made by the assessee to MMRDA for acquisition of the plot of land on lease from MMRDA.
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(iii) On the facts and 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 194I from the payment made to MMRDA and levying interest under section 201(1A). (iv) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the definition of rent, as contained in section 194I 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. 3. Briefly stated, the facts are that during the course of survey, it was found that the assessee, A Surti Developers P. Ltd. (ASDL) had made lease payment of Rs. 60,55,050/- to Mumbai Metropolitan Regional Development Authority (MMRDA) for allotment of plot No. 288, Village Bandivali, Taluka Andheri, Behind Amruuti Nagar, Jageshwari (West), Mumbai. However, as per the Assessing Officer (AO), ASDL had not deducted tax at source on such payment as was required u/s 194I of the Act. In response to the show cause notice u/s 201(1) issued by the AO, the AR of ASDL replied that the said payment was made towards purchase of free FSI viz. premium for area covered by staircase, lift, lobbies and balcony enclosure fee, which is in the nature of capital payment and not rent or lease payment. The AO was not convinced with the said reply of ASDL as in the remarks column of cheque payment voucher, it was mentioned as ‘being pay order drawn in favour of MMRDA towards lease premium for City Survey No. 228’. The AO then held that lease premium of Rs. 60,55,050/- was paid by ASDL for continuous use of land under lease
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agreement and thus was covered under the definition of ‘rent’. The AO thus held ASDL liable for non deduction of tax at source u/s 194I of the Act. Finally, the AO raised liability of Rs. 12,47,370/- u/s 201(1) and interest of Rs. 4,49,042/- u/s 201(1A) of the Act.
ASDL filed an appeal against the order of the AO before the learned CIT(A) and submitted that ‘the case is squarely covered by a decision of the Hon'ble ITAT, Mumbai in the case of Wadhwa & Associates realtors Private Limited (2013) 36 taxmann. Com 526 wherein it has been held that lease premium paid for long term lease is not ‘rent’ within the meaning of Section 194I of the Act and hence the provision relating to TDS u/s 194I of the Act is not applicable to such lease rent’. The AR of ASDL filed a written submission before the learned CIT(A) stating that ‘it is a long term lease for 60 years, hence the lease premium paid for such long term lease cannot be termed as rent within the meaning of section 194I of the Act’. He relied on the decision in the case of (i) ITO vs. Indian Newspaper Society, Delhi 37 taxmann. com 401, (ii) Shree Naman Hotels P. Ltd. – ITA No. 686 & 687 dated 14.08.2013, (iii) ITO vs. Navi Mumbai SEZ P. Ltd. 38 taxmann.com 218 and (iv) Mukund Ltd. 106 ITD 231. We find that the learned CIT(A) was convinced with the submission made by the AR of ASDL and relying on the decision in the case of (i) ITO (TDS) – 3(5), Mumbai vs. Wadhwa & Associates Realtors Private Limited (2013) taxmann.com 526 (A.Y. 2008-09), (ii) ITO (TDS) Rg. 2, Mumbai vs. Navi Mumbai (SEZ) Private Ltd. (2013) 38 taxmann.com 218, (iii) ITO vs. Dhirendra Ramji Vora (2014 TIOL 188 ITAT Mumbai), (iv) ITO vs. Indian Newspapers Society (2013) 37 taxmann.com 401 and (v) Jt.CIT, Spl.Rg. 25, Mumbai vs. Mukund Ltd. 106 ITD 231 (Mumbai ITAT – Special Bench), held that the impugned payment on account of lease premium did not fall within the purview of section 194I. Therefore,
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the learned CIT(A) allowed the appeal filed by the assessee before him.
Before us, the learned DR supports the order passed by the AO u/s 201(1) & 201(1A) of the Act.
We have heard the learned DR and perused the relevant material on record. The issue in the present appeal is whether the lease premium paid for a long term lease of 60 years can be termed as ‘rent’ within the meaning of section 194I of the Act. We find that the issue is squarely covered by the decision of the Co-ordinate Bench as mentioned at para 4 here-in-above.
In Wadhwa & Associates Realtors Private Limited (supra), during the A.Y. 2008-09, the assessee took plot of land from MMRD and made payment of lease premium for allotment of plot of land as also payment for additional built up area and fees for FSI. It is held in the above case that (i) since premium was not paid under lease but was paid as a price for obtaining lease, it preceded grant of lease and, therefore, by any stretch of imagination, it could not be equated with rent which was paid periodically, (ii) payment for additional FSI area could not be equated to rent, and (iii) assessee was not liable to deduct tax at source on both types of payment u/s 194I of the Act.
In Navi Mumbai (SEZ) Private Ltd. (supra), it is held lease premium paid by assessee to CIDCO for acquiring leasehold land for a period of 60 years in order to develop a Special Economic Zone (SEZ) amounted to capital expenditure which did not fall within the meaning of ‘rent’ u/s 194I and therefore, the assessee was not liable to deduct tax at source while making the said payment.
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In Dhirendra Ramji Vora (supra), it has been held by the Tribunal that the lease premium paid to CIDCO does not qualify to be a ‘rent’ within the meaning of section 194I so as to be exigible for deduction of tax at source there under.
In Indian Newspapers Society (supra), the Mumbai Development Authority leased out land in question to the assessee for a period of 80 years for a consideration comprising lease premium of a sum. The AO held that the provisions of section 194I was applicable on such lease payment. The Commissioner (Appeals) having found that such payment was not an advance rent but was a lease payment in the nature of capital expenditure, held that such payment did not fall within the ambit of section 194I of the Act. The Tribunal held that since payment of lease premium was not to be made on periodical basis but it was onetime payment to acquire land with right to construct a commercial complex thereon, section 194I was not applicable.
6.1 As the facts remain similar, we follow the order of the Co- ordinate Bench in the decisions mentioned at para 6 here-in-above and hold that the payment of lease premium of Rs. 60,55,050/- does not fall within the ambit of section 194I of the Act and, therefore, the assessee is not liable to deduct tax at source while making the said payment. Accordingly, we uphold the order passed by the learned CIT(A).
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 15/03/2017 Sd/- Sd/- (MAHAVIR SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER
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Mumbai; Dated: 15/03/2017 Biswajit, Sr. P.S.
Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai