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Income Tax Appellate Tribunal, MUMBAI BENCHES “C”, MUMBAI
Before: Shri Joginder Singh & Shri Rajendra
आदेश / O R D E R Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 17/06/2014 of the ld. First Appellate Authority, Mumbai. The only ground raised in the present appeal pertains to holding that the amount paid by the lessee (M/s Pyramid Properties) to the lessor (CIDCO) was not in the nature of rent as defined in explanation (i) to section 194 I of the Income Tax Act, 1961 (hereinafter the Act) for the purposes of deduction at source and consequently further erred in not confirming the assessment order treating the assessee in default u/s 201(1) in respect of the amount of tax which has not been deducted u/s 194 I from the payment made to CIDCO and levying the interest u/s 201(1A) of the Act.
During hearing, nobody was present for the assessee. However, one person, who was not authorized to represent the assessee, moved an application seeking adjournment. Considering the contents of the application and the facts, the adjournment application is rejected. We note that this appeal was filed by the Revenue on 12/08/2014. The registered notice of hearing, sent to the assessee was duly received on 13/01/2016 as is evident from postal acknowledgment available on record. The assessee did not make effective arrangement to pursue the appeal, therefore, we have no option but to proceed ex- parte, qua the assessee, and tend to dispose of the appeal on the basis of material available on record. The ld. DR, Shri Sanjay Bare, defended the conclusion arrived at in the impugned order and advanced arguments which is identical to the ground raised by defending the assessment order.
2.1. We have considered the submissions of ld. DR and perused the material available on record. The facts, in brief are that the assessee is a builder/developer, engaged in the business of construction of residential/commercial properties. It was gathered by the ld. Assessing Officer that M/s Pyramid Properties has paid Rs.11,77,86,250/- as lease premium, pursuant to lease agreement of plot no.68 in Sector 19 at Airoli measuring 1884.58 Sq. Mts., to CIDCO during the Financial Year 2010-11. The ld. Assessing Officer was of the view that payment of lease premium is a rent within the meaning of section 194 I of the Act and CIDCO neither government nor a corporation accordingly, it does not qualify for exclusion from TDS as provided u/s 196 of the Act, therefore, the assessee committed default u/s 201(1) of the Act and liable for interest u/s 201(1A) of the Act.
2.2. On appeal, before the Ld. Commissioner of Income Tax (Appeal), it was explained that lease premium cannot be quoted to rent as defined u/s 194 I of the Act as it categorically distinguishes rent from lease premium.
Reliance was placed upon the decision in CIT vs Panbari Tea Company 57 ITR 422 (SC), CIT vs Khimline Pumps Ltd. 258 ITR 459 (Bom.) and JCIT vs Mukund Limited (106 ITD 231) (Tribunal). The Ld. Commissioner of Income Tax (Appeal) considering the decision of the Tribunal in case of M/s Shah Group Builders Ltd. (ITA No.4523/Mum/2012) dated 14/08/2013, deleted the addition.
2.3. The Revenue is aggrieved and is in appeal before this Tribunal. We find that the Tribunal in the case of M/s Shah Group Builder Ltd. vide aforesaid order dated 14/08/2013 for Assessment year 2008-09 held as under:-
“ 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 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 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):-
“9. 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 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. 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”.
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 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.”
We find that in the aforesaid order, the Tribunal has duly discussed the decision of Wadhwa & Associated Realtors Pvt. Ltd. as well as the case of Shri Naman Hotels Pvt. Ltd. and held that lease premium paid by the assessee to CIDCO is not in the nature of rent as contemplated in section 194 I of the Act, thus, the assessee was not liable to deduct tax at source, thus, the assessee cannot be treated in default u/s 201(1)/201(1A) of the Act, consequently, we find no infirmity in the order of the Ld. Commissioner of Income Tax (Appeal) and affirmed the same.
Finally, the appeal of the Revenue is dismissed.
This order was pronounced in the open in the presence of ld. representatives from both sides at the conclusion of the hearing on 19/05/2016.