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Income Tax Appellate Tribunal, MUMBAI BENCH
Before: SHRI SANJAY ARORA & SHRI PAWAN SINGH
O R D E R
PER PAWAN SINGH, JM:
The present appeal is filed by the Revenue against the order of CIT(A)-13, Mumbai dated 06.02.2014 in respect of Assessment Year (AY) 2010-11 raising the following grounds of appeal:- (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 (Shree Hazarimal Somani Memorial Trust) 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 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 1941 from the payment made by the assessee to MMRDA for acquisition of the plot of land on lease 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 1941 from the payment made to MMRDA and levying interest under section 201(1A)." (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 1941 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."
Brief facts of the case are that during the FY- 2009-10 the assessee had made payment of lease premium of Rs. 56,06,000/- to MMRDA. On receipt of the information that assessee had made payment of Rs. 56,06,000/- and had not deducted the tax at source u/s. 194I of I.T. Act, hence, notice dated 14.02.2011, 28.02.2011, 14.03.2011 and 27.02.2012 was issued to the assessee to show cause as to why the assessee be treated as defaulter within the meaning of section 201(1) of the Act for non-deduction of tax at source on the payment of lease premium. The assessee submitted its reply vide reply dated 21.03.2011, 30.03.2011, 20.10.2011 and 12.03.2012 wherein it was contended that lease premium was paid on account of obtaining additional FSI for construction of school building run by assessee trust. The contention of assessee was not accepted. The AO concluded that assessee deemed in default u/s. 201(1) of the Act, the tax was calculated along with interest u/s. 201(1A) of the Act i.e. Rs.
11,21,200 on account of TDS and Rs. 1,59,827/- on account of interest, thus a total sum of Rs. 12,81,072/- in assessment order dated 15.03.2012.
Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A) and after considering the contention of the assessee, the CIT(A) allowed the appeal of assessee. Against which the Revenue filed the present appeal before us.
We have heard the Departmental Representative (DR) of the Revenue and Authorised Representative (AR) for assessee and perused the material available on record. As per our opinion, the sole ground for re-consideration is that “if any payment made on account of availing additional FSI can be equated with rent”. DR for Revenue supported the order of AO and argued that CIT(A) misinterpreted the provisions of section 194(I). DR for Revenue further argued that order of CIT(A) be reversed and that ord4er of AO be restored. On the other hand, AR of the assessee argued that this issue is squarely covered order of Co-ordinate Bench of ITAT in case of ITO vs. Wadhwa & Associates Realtors (P.) Ltd. vide wherein the identical issue was considered by the Co-ordinate Bench of this Tribunal.
We have considered the submissions of ld. AR of parties and gone through the record of the case. We have noticed that while deciding the appeal of assessee, CIT(A) concluded as under: “I have gone through the same. It is also noted from the decision given in the case of Naman Developer that Honourable ITAT, Mumbai has upheld the decision given by CIT(A). In view of this fact, I am in agreement with the appellant that the amount being lease premium was not liable for deduction of tax being expense incurred towards acquiring a capital asset by the appellant. This has already been decided by Honourable ITAT, Mumbai in the case of Wadhawa Associates Realtors (P) Ltd in 36 taxman.com 526 (2013) as well as in the case of Shri Naman Developer Ltd. in ITA number 686 and 687/Mum/2012, the one cited by appellant also Respectfully following the decisions available in the case. I am of the view that levy of tax and interest in all totalling amounting to Rs. 12,81,072/-
being not sustainable in the case of appellant has to be deleted and hence are deleted. The ground takein in appeal is allowed.”
We have further gone through the order of Co-ordinate Bench of ITAT, Mumbai in case of Wadhwa & Associates Realtors (P.) Ltd. (supra), wherein while dealing with the identical issue, it was held: - “10. 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 LW. 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 '0' 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 National Slack 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 COUl1 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-a-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 seen that the identical issue was considered by the Co- ordinate Bench in Wadhwa & Associates Realtors (P.) Ltd. wherein it was held that premium is not paid under the lease but paid as a price for obtaining the lease, hence, it proceeds the grant of lease, therefore, by any stretch of imagination it cannot be equated with rent. It was further categorically held that rent is paid periodically, however, the premium was paid by the assessee for availing additional FSI. Hence,
keeping in view that the facts of the present case and the order of Co- ordinate Bench, we do not find any illegality or infirmity in the order of CIT(A) as the same is squarely covered by the decision of Wadhwa & Associates Realtors (P.) Ltd. (supra). 8. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on this 13th May, 2016.