ITO TDS 2(2), MUMBAI vs. KEYSTONE LIFESPACES P.LTD, NAVI MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद� राजे� के अनुसार PER RAJENDRA, AM- Challenging the orders dtd.10.1.2014 and 16.1.2014 of the CIT(A)-14,Mumbai the Assessing Officers(AO.s)have filed the appeals for above mentioned two years raising identical Grounds of Appeal.As the issue involved in both the appeals are common so we are adjudicating the appeals by a single common order. 2088/M/2014(A.Y.2010-11): 2.Effective Ground of appeal is about payment made by the assessee to CIDCO . Proceedings of survey,u/s.133A of the Act was carried out in the case of City and Industrial Development Corporation of Maharashtra Ltd.(CIDCO).During the course of survey proceedings,it was noticed that a plot of land bearing plot No.49 was rented out to M/s.Sai Proviso,that later on it entered into a tripartite agreement with the assessee and CIDCO, that in pursuance of the agreement the assessee made payment of Rs.3.57 crores to M/s.Sai Proviso and Rs.10.37crores to CIDCO.As per the AO,the payment made by the assessee were in the nature of lease rent and the assessee was liable to deduct tax at source as per the provisions of section 194-I of the Act.Vide his letter dt.14.11.2011 the AO asked the assessee to show cause as to why the amount of Rs.101.37crores, paid to CIDCO should not be treated as lease rent and that why it should not be treated as an assessee in default u/s 201 (1)/201(1A)of the Act for non deduction of tax on the lease rent.After considering the submission of the assessee,dtd.21.11.2011,the AO held that payment made to CIDCO was in the nature of rent,that the assessee should have deducted tax as per the provisions of sec 194- I of the Act.He determined the liability of the assessee at Rs.47.35 lakhs u/s. 201(1)/201(1A) of the Act for the year under consideration. 3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA).After considering the submission of the assessee and the order of the AO passed u/s. 201(1)/201(1A),the FAA held that payment made by the assessee was not on account of lease,that assessee had paid Rs.10.37 crores in lieu of the plot of land granted to it, that the amount charged by CIDCO was equal to rate prevalent as per Stamp Duty 2088&20890KeystoneLifespaces Ready Reckoner, that the premium paid by the assessee to CIDCO was capital in nature, that same could not be considered as rent liable to TDS u/s.194 of the Act. Referring to the judgment of M/s.Shah Group Builders Ltd.(ITA No.4523/Mum/2012 dt.14.8.2013-AY 2008- 09)the FAA granted relief to the assessee. 4.Before us,the Departmental Representative (DR) supported the order of the AO.The Authorised Represntative(AR)stated that similar issue had arisen in other cases and has been decided by the Tribunal in favour of the assessee and against the AO. He referred to the cases of CIDCO(ITA/2985/M/2012 dated 8.8.2012),M/s. Wadhwa & Associates Realtors Pvt. Ltd.(ITA/695/Mum/2012-dated 3.7.20130;Khimline Pumps Ltd. (258 ITR 459); Mukund Ltd.(106ITD231);Navi Mumbai Sez P.Ltd.(dt.16.8.2013 ITA/738 to741/Mum/2012); Krishak Bharati Co-operative Limited vs. DCIT(ITANo.205/2010 dt.12.7. 2012);Bharat Petroleum Corporation Ltd. (ITA No.4985/Mum/2013 dt.29.10.2014).;Oriental Bank of Commerce(ITA No.1300/1301/Mum/2014 dated 23.11.2015). 5.We find that in the case of Oriental Bank of Commerce, (supra), the bank had paid CIDCO a certain amount and same was considered as rent by the AO for TDS purposes.The Tribunal referred to the cases of M/s. Wadhwa & Associates Realtors Pvt. Ltd. (supra) and Navi Mumbai Sez P.Ltd.(supra) and decided the issue in faovur of the assessee. We find that in the case of M/s. Wadhwa & Associates Realtors Pvt. Ltd. (supra), the Tribunal had dealt the issue as under :- “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.

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 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.” 2