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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI AMIT SHUKLA, JM & SHRI RAJESH KUMAR, AM
अऩीराथी की ओय से/Appellant by : Shri S S Kemwal प्रत्मथी की ओय से/ Respondent by : Shri Prakash G Jhunjhunwala सुनवाई की तायीख / Date of Hearing : 22.2.2016 घोषणा की तायीख /Date of Pronouncement :15.3.2016 आदेश / O R D E R
PER RAJESH KUMAR, AM :
This is an appeal by the revenue directed against the order dated 16.8.2012 passed by the ld.CIT(A) and it relates to the assessment year 2009-10.
The sole issue raised by the revenue in this appeal pertains to treating the lease payment as rent u/s 194I of the Income Tax Act, 1961.
The facts in brief are that during the course of survey by DCIT(TDS)–1, Mumbai on M/S City Industrial Development Corporation (hereinafter referred to as CIDCO) the AO found that M/S Abhinav builders had paid a sum of Rs. 3,36,65,549/-to CIDCO as lease premium on 8th April,2008 without deduction of tax at source. The assessee was issued show cause notice dated 22.02.2011 calling upon the assessee as to why it should not be treated as assessee in default under section 201(1) &201(1A) of the Act for non-deduction of TDS on said premium which was in the nature of rent paid to CIDCO. The assessee replied by submitting that the premium paid was for the plot and it was a capital cost and not rent for the lease. Therefore provisions of section 194-I of the act were not applicable. The AO rejected submissions of the assessee by holding that under the provision of section 194I of the Act any person (not being an individual or HUF whose case was not covered by the provisions of section 44 AB of the Act) would deduct TDS from the rent either at the time of crediting to the account of payee or at the time of payment whichever is earlier. The AO clearly held that the premium paid by the assessee to CIDCO was nothing but rent paid by the lessee to the lessor for use of land or rights related thereto for a given period of time and therefore the provision of section 194I were clearly attracted. The AO treated the assessee in default in terms of section 201(1)/201(1A) of the Act for non-deduction of tax at source raising a demand of Rs. 1,03,74,913/- on the assessee.
Aggrieved by the order of ITO(TDS), the assessee preferred an appeal before the CIT(A). The CIT (A) allowed the appeal of the assessee by holding that lump sum lease premium paid for acquiring rights in the land for a longer period of time was not rent and therefore the provisions of sections 194I were not applicable by holding as under:
“I have carefully gone through the various clauses of lease agreement submission of the appellant and that of the AO and other relevant documents. On a careful perusal it generally observed that these clauses of the lease deed are standard regulatory clauses which do not affect the leasehold right of the appellant in any manner. For example clause C of the lessee’s covenants is in respect of restriction on excavation. These clauses in conformity with leased land laws applicable in the state. This clause is to ensure the right of the lessons respect of any material etc found from the land. In such cases the assessee does not have a right of excavation. This clause retains the right of the state to any mineral found from the land. However the execution of the land is permitted for the purpose of constructing the foundation of the building or for executing any work pursuant to the terms of the lease.”
Likewise all other clauses in the lease are only regulatory in nature and are meant for the purpose of proper development of the area and they in no way affect the leasehold right of the assessee. Such restrictions would be imposed by the local authority while granting permission for construction of building even in the cases of freehold ownership. I therefore do not agree with the contention of the AO that the clauses are restrictive covenants, and hence the premium paid on leasehold rights becomes advanced and for the use of the land. Accordingly and on the basis of aforesaid discussion I hold that the amount paid by the appellant’s Lee’s premiums for acquiring leasehold rights respect of the leased and same is not in the nature of rent as contemplated under section 194 – I of the act. Accordingly the appellant was not acquired to deduct tax at source under section 194 – I of the income tax act 1961. In the present case the written submission furnished by the appellant and the order passed by the AO had been considered by me. It is seen that facts in the case of the appellant are similar to the facts in the case of Navi Mumbai SEZ PvtLtd and other cases cited in para 3.4 above. Hence it is evident that lease premium of 3366 5549 respect of lease plot paid by a period is in the nature of rent as contemplated under section 194–I of the act. It is thus also evident that appellant was not required to deduct tax at source under section 194 – I of the act. I hold accordingly the demand of Rs. 1 037 4913 placed by the AO by invoking the provisions of section 201(1)/201(1A) of the Act is deleted”
We have considered the rival submission and perused the material on record. We find that the assessee had taken on leasehold basis a plot of land from CIDCO and one-time premium of Rs. 3,36,65,549/- was paid for acquiring rights of ownership and other connected on rights for a long- term period of 60 years and permitted extensions thereon. The premium paid on the said land was also admitted by the AO to be one-time premium but he came to the conclusion that the said premium was in the nature of rent though paid in lump sum before taking the possession of the land. Thus it is quite clear that the premium paid was not rent but consideration for transferring land in favour of the assessee on leasehold basis. The DR vehemently relied on the order of AO and prayed for upholding the same. On the other hand AR of the assessee argued that the case of the assessee is fully covered by a plethora of judgments which are dealt with hereunder. In the case of ITO versus Wadhwa & Associates Realtors Pvt Ltd 36 Taxman.com 526(Mum ITAT) the tribunal held that the premium was not paid under the lease but paid as a price for obtaining the lease which preceded the grant of lease and therefore it could not be equated with rent which was paid periodically. In the case of ITO(TDS) versus Shree Naman Developers Ltd and 687/MU/2012 it has been held that lease premium paid by the assessee to MMRDA not being in the nature of rent as contemplated under section 194–I of the Act and therefore not liable to deduction of tax at source and the assessee could not be treated assessee in default under section 201(1) and 201(1A) of the Act. In the case of ITO Vs M/S Shah Group Builders Ltd (ITA No.4523/Mum/2012) it was held that lease premium paid by the assessee to CIDCO was not rent and therefore not liable to tax at source under section 194–I and consequently the assessee could not be treated in default under section 201(1) & 201(1A) of the Act. In the case of TRO(TDS) Vs Shelton Infrastructure Pvt Ltd in ITA No 5678/Mum/2012 AY 2010-2011 dated 19.5.2014, the Tribunal held that the payment of premium represents the transfer price of the land only on lease hold basis and no part qualifies to fall within the meaning of rent as contemplated in section 194-I of the Act and therefore no deduction of tax at source is required. The case of the assessee is squarely covered by the above decisions and we therefore respectfully following the decisions of the coordinate benches dismiss the appeal of the revenue. In result the appeal of the revenue is dismissed.
In the result, the appeal of the revenue stands dismissed.