TRENT LTD, V. IT (TDS) 3(2),

CO 61/MUM/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8975 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 11-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Maximum Marginal Rate; Capital expenditure
• Section: 37(1); 201(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , , , BEFORE SHRI RAJENDRA SINGH , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER . / ITA NO. 1730 / MUM ./ 2012 ( / ASSESSMENT YEAR : 200 9 10 ) INCOME TAX OFFICER (TDS) WARD 3(2), SMT. K.G. MITTAL AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD (W) MUMBAI 400 002 .. / APPELLANT V/S TRENT LIMITED (SATNAM REALTORS PVT. LTD.) BOMBAY HOUSE, 24, HOMI MODI STEET FOR, MUMBAI 400 001 .... / RESPONDENT . / PERMANENT ACCOUNT NUMBER AADPD1692A . / C.O. NO. 61/MUM./2013 ( . 1730 /MUM./201 2 ) ( ARISING OUT OF ITA NO. 1730 /MUM./201 2 ( / ASSESSMENT YEAR : 200 9 10 ) TRENT LIMITED (SATNAM REALTORS PVT. LTD.) BOMBAY HOUSE, 24, HOMI MODI STEET FOR, MUMBAI 400 001 .. / CROSS OBJECTOR V/S INCOME TAX OFFICER (TDS) WARD 3(2), SMT. K.G. MITTAL AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD (W) MUMBAI 400 002 .... / RESPONDENT . / PERMANENT ACCOUNT NUMBER AADPD1692A TRENT LIMITED 2 / REVENUE BY : MR. PRABHAT JHA / ASSESSEE BY : MR. J.D. MISTRY A/W MR. MAHESH O. RAJORA / DATE OF HEARING 18.09.2013 / DATE OF ORDER 27.09.2013 / ORDER , / PER AMIT SHUKLA , J.M. THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE, CHALLENGING THE IMPUGNED ORDER DATED 27 TH DECEMBER 2011, PASSED BY THE LEARNED COMMISSIONER (APPEALS), MUMBAI, IN RELATION TO ORDER UNDER SECTION 201(1) / 201(1A) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) FOR THE ASSESSMENT YEAR 2009 10. 2 . THE ONLY ISSUE INVOLVED IN THE PRESENT APPEAL PREFERRED BY THE REVENUE IS IN RESPECT OF NON DEDUCTION OF TDS AND LEVY O F INTEREST UNDER SECTION 201(1) / 201(1A) ON THE GROUND THAT THE ASSESSEE HAS NOT COMPLIED WITH THE PROVISIONS OF SECTION 194 I. TO CHALLENGE THIS ISSUE, THE REVENUE HAS TAKEN AS MANY AS 13 GROUNDS WITH VARIOUS SUB GROUNDS, WHICH ARE ARGUMENTATIVE IN NATUR E AND NOT IN ACCORDANCE WITH THE PRESCRIBED IN INCOME TAX APPELLATE TRIBUNAL RULES, 1962. HOWEVER, WE ARE DISPOSING OFF THE APPEAL BASED ON THE ISSUES INVOLVED AND CHALLENGED BEFORE US. 3 . AT THE OUT SET, THE LEARNED COUNSEL, MR. J.D. MISTRY, ON BEHALF OF TH E ASSESSEE, SUBMITTED THAT THE TRIBUNAL IN ASSESSEES OWN CASE HAS ALREADY DECIDED THE IDENTICAL ISSUE FOR THE ASSESSMENT YEAR 2011 12, IN ITA NO.4629/MUM./2012, VIDE ORDER DATED 21 ST AUGUST 2013, WHEREIN THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESS EE AFTER FOLLOWING CO ORDINATE TRENT LIMITED 3 BENCH DECISION RENDERED IN W ADHWA REALTORS PVT. LTD., VIDE ORDER DATED 3 RD JULY 2013, PASSED IN ITA NO.695/MUM./2012. 4 . FACTS IN BRI EF, APROPOS THE AFORESAID ISSUE, ARE THAT IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE AS SESSEE HAS MADE PAYMENT OF LEASE PREMIUM TO MMRDA FOR SUMS AGGREGATING TO ` 4,70,28,733. THIS PAYMENT WAS PAID ON ACCOUNT OF ADDITION AL FSI IN THE PLOT OF LAND ALLOTTED TO IT IN BANDRA KURLA COMPLEX. THIS ADDITIONAL FSI WAS ON ACCOUNT OF AREAS FOR STAIRCAS E, LIFTS AND LIFTS LOBBIES. THE PLOT WAS EARLIER ALLOTTED TO SATNAM RELATERS PVT. LTD. B;Y WAY OF LEASE DEED EXECUTED BY MMRDA ON 16 TH NOVEMBER 2004, AGAINST THE PAYMENT OF LEASE PREMIUM OF ` 32.72 CRORES. LATER ON, SATNAM REALTORS PVT. LTD. MERGED WITH TH E ASSESSEE W.E.F. 1 ST APRIL 2009 AND THIS AMOUNT OF ` 4.70 CRORES WAS PAID BY THE ASSESSEE FOR THE ADDITIONAL FSI. THE ASSESSING OFFICER HELD THAT IT IS IN THE NAT URE OF RENT UNDER SECTION 194 I AND, THEREFORE, THE ASSESSEE WAS LIABLE TO DEDUCT TDS AND, AC CORDINGLY, HE LEVIED INTEREST UNDER SECTION 201(1) / 201(1A). 5 . BEFORE THE LEARNED COMMISSIONER (APPEALS), THE ASSESSEE HAD MADE DETAILED WRITTEN SUBMISSIONS, WHICH HAVE BEEN INCORPORATED FROM PAGE 4 TO 46 OF THE APPELLATE ORDER. THE LEARNED COMMISSIONER (A PPEALS), AFTER APPRECIATING THE WRITTEN SUBMISSIONS AND ALSO THAT THE ASSESSEES FACTS ARE SIMILAR TO THE DECISION OF THE TRIBUNAL IN SHREE NAMAN DEVELOPERS LTD. DELETED THE SAID DEMAND AFTER OBSERVING AND HOLDING AS UNDER: 5.10 IN THE PRESENT CASE, THE WRITTEN SUBMISSION FURNISHED BY THE APPELLANT AND THE ORDER PASSED BY THE AO HAS BEEN CONSIDERED BY ME. IT IS SEEN THAT THE FACTS IN THE CASE OF THE APPELLANT ARE SIMILAR TO THE FACTS IN THE CASE OF SHREE NAMAN DEVELOPERS LTD. AND OTHER CASES CITED IN PARA 5.6 ABOVE. HENCE, IT IS EVIDENT THAT THE PREMIUM OF RS.4.70 CRORES APPROXIMATELY IN RESPECT OF THE LEASED PLOT, PAID BY THE APPELLANT FOR ALLOTMENT OF ADDITIONAL AREA FOR STAIRCASE, LIFTS AND LIFT LOBBIES FREE OF FSI IS NOT IN THE NATURE OF RENT AS CONTEM PLATED U/S 194 - I OF THE ACT. IT IS THUS ALSO EVIDENT THAT THE APPELLANT WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE U/S 1 94 - I OF THE INCOME - TAX ACT, 1961. I HOLD ACCORDINGLY. THE DEMAND OF RS.1,34,35,021/ - RAISED BY THE AC BY INVOKING PROVISIONS OF SECTION 2 01(1)/2011A) IS DELETED. TRENT LIMITED 4 6 . BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE FINDINGS GIVEN BY THE ASSESSING OFFICER. ON THE OTHER HAND, THE LEARNED SR. COUNSEL SUBMITTED THAT NOT ONLY THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF TH E TRIBUNAL IN ASSESSEES OWN CASE BUT ALSO THERE ARE VARIOUS OTHER DECISIONS OF THE TRIBUNAL, MUMBAI BENCH, WHEREIN, ON SIMILAR ISSUE, IT HAS BEEN HELD THAT LEASE PREMIUM PAID TO MMRDA AND GRANTING OF A FREE FSI, DOES NOT FALL WITHIN THE PURVIEW OF SECTION 194 I. 7 . AFTER CAREFULLY CONSIDERING THE SUBMISSIONS AND ALSO THE MATERIAL ON RECORD, WE FIND THAT THIS ISSUE IS SQUARELY COVERED BY THE VARIOUS DECISIONS OF THE TRIBUNAL INCLUDING THAT OF THE ASSESSEES OWN CASE. THE TRIBUNAL, IN ASSESSEES OWN CASE, HAS OBSERVED AND HELD AS UNDER: 7. 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. & SHREE NAMAN DEVELOPERS LTD. H AS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE VIDE AN ORDER DATED 14 - 08 - 2013 PASSED IN ITA NO. 688 TO 691/MUM/2012 BY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH RENDERED JO. THE CASE OF M/S WADHWA & ASSOCIATES REALTORS PVT. LTD. VIDE ORDER DATED 3 - 7 - 2013 ASSED IN ITA NO. 695/MUM/2012. IN THE CASE OF M/S WADHWA & ASSOCIATES REALTORS PVT. L D. (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 - 2 013 (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 SO URCE 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. TRENT LIMITED 5 THEREFORE, BY ANY STRETCH OF IMAGINATION, IT CANNOT BE EQUATED WITH THE RENT WHICH IS PAID PERIODICALLY. A PERUSAL OF THE RECORDS F URTHER 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 PLAN NING 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 FSL 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 CONT ROL 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 MULCUND LTD (SUPRA) HAVE BEEN WELL DISCUSSED BY THE LD. CIT(A) IS HIS ORDER. THE DECISION OF THE HONBLE J URISDICTIONAL HIGH COURT IN THE CASE OF KHIMLINE PUMPS LTD. (SUPRA) SQUARELY AND DIRECTLY APPLY ON THE FACTS OF THE CASE WHEREIN THE HONBLE 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 - - 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 C ONFIRM. 8. 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. & SHREE NAMAN DEVELOPERS 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 ID. CIT(A) HOLDING THAT THE LEASE PREMIUM PAID BY THE ASSESSEE TO MMRDA NOT BEING IN T HE 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(1A) OF THE ACT. THE APPEAL FILED BY THE REVENUE IS ACCORDINGLY DISMISSED. 8 . THUS, I N VIEW OF THE AFORESAID DECISION OF THE TRIBUNAL, WE ALSO HOLD THAT THE LEARNED COMMISSIONER (APPEALS) WAS JUSTIFIED IN COMING TO THE CONCLUSION THAT THE PAYMENT MADE BY THE ASSESSEE TO MMRDA IS NOT IN THE NATURE OF RENT WIT H IN THE AMBIT OF SECTION 194 I. CONSEQUENTLY, THE ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) IS HEREBY UPHELD AND THE GROUND RAISED BY THE REVENUE IS TREATED DISMISSED. TRENT LIMITED 6 9 . 9. IN THE RESULT, REVENUES APP EAL IS TREATED AS DISMISSED. WE NOW TAKE UP ASSESSEE S CROSS APPEAL, VIDE WHICH, INTER ALIA, FOLLOWING GROUNDS HAVE BEEN RAISED: THE COMMI SSIONER OF INCOME TAX (APPEALS) 14, MUMBAI [HEREINAFTER REFERRED TO AS CIT(A)] ERRED IN NOT APPRECIATING THE FACT THAT STATE GOVERNMENT AND LOCAL AUTHORITY HAVE AN OVERRIDING TITLE ON PAYMENT MADE TO MMRDA AND HENCE SAME DOES NOT REQUIRE DEDUCTION OF TAX AT SOURCE. THE APP ELLANT SUBMITS THAT ON THE FACTS AND CIRCUMSTANCE OF THE CASE OF THE APPELLANT NO TDS IS REQUIRED TO BE DEDUCTED ON PREMIUM PAID TO MMRDA. 10 . AS ADMITTED BY BOTH THE PARTIES, THE GROUNDS RAISED ABOVE HAVE BECOME INFRUCTUOUS IN VIEW OF OUR FINDINGS GIVEN IN PARA 7 AND 8 ABOVE. 11 . 11. IN THE RESULT, ASSESSEES CROSS OBJECTION IS TREATED AS DISMISSED. 12. , 27 TH SEPTEMBER 2013 ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH SEPTEMBER 2013 SD / - RAJENDRA SINGH ACCOUNTANT MEMBER SD / - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 27 TH SEPTEMBER 2013 TRENT LIMITED 7 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI