ITO (TDS) 1(2)(2), MUMBAI vs. ENAM FINANCIAL CONSULTANTS P. LTD, MUMBAI

The revenue is challenging the order of the ld. CIT (Appeals) in holding that the amount paid by the Assessee to the lessor, i.e. M/s Mumbai Metropolitan Regional Development Authority (MMRDA) was not in the nature of rent as defined in Explanation (i) to section 194-I of the Act for the purpose of tax deduction at source.

At the outset, the ld. Counsel for the assessee submits that the issue in appeal is squarely covered by various decisions of the Tribunal of the Mumbai benches, where the Hon’ble Tribunal consistently holding that lease premium paid by the assessee to MMRDA is not in the nature of rent u/s 194I of the Act. The ld. Counsel for the assessee further submits that the ld. CIT (Appeals) following the decisions of the Co-ordinate bench in the case of Wadhwa & Associates Realtors Pvt. Ltd and Shree Naman Developers Ltd. held that lease premium paid by the assessee to MMRDA during the year under consideration was not in the nature of rent as contemplated under the provisions of section 194I of the Act.

On the other hand, the ld.DR fairly submits that the issue is decided in favour of the assessee by the Tribunal in the above cases.

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 M/s Enam Financial Consultant Pvt. Ltd. 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

M/s Enam Financial Consultant Pvt. Ltd. 06/08/2013 and ACIT Vs K Raheja Corporate Services Pvt. Ltd. in dated 04.02.2015. The ld. CIT (Appeals) following the said orders held as under : “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.

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

In the result, appeal of the revenue is dismissed.