Income-tax Officer, V. Shri Vijay N. Kodnani, Pune

ITA 10/PUN/2014

• Counselvise Citation: 1024514 RSA 2014
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-03-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 02-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Maximum Marginal Rate
• Section: 12A; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.10/PN/2014 ASSESSMENT YEAR: 2011-12 THE INCOME TAX OFFICER, (TDS)-3, PUNE . APPELLANT VS. SHRI VIJAY N. KODNANI, PLOT NO.261, SEC.NO.25, PRADHIKARAN, PUNE 411044 . RESPONDENT PAN: AQEPK4191L APPELLANT BY : SHRI RAJESH DAMOR RESPONDENT BY : SHRI NIKHIL PATHAK DATE OF HEARING : 30-03-2015 DATE OF PRONOUNCEMENT : 31-03-2015 ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF CIT(A)-V, PUNE DATED 30.10.2013 RELATING TO ASSESSMENT YEAR 2011-1 2 AGAINST ORDER PASSED UNDER SECTION 201(1) / 201(1A) OF THE INCOME-TAX AC T, 1961. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE DEMAND RAISED OF RS.60,31,416/- U/S 20 1(1)/201(1A) OF THE INCOME TAX ACT,1961 IN RESPECT OF LEASE PREMIUM PAY MENT PAID TO PIMPRI CHINCHWAD NEW TOWNSHIP DEVELOPMENT AUTHORITY (PCNTDA). 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONSIDERING THE FACT THAT THE PREMIUM PAID TO PCNTD A IS UPFRONT PAYMENT AS PRE-CONDITION FOR ENTERING IN TO LEASE A GREEMENT. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN NOT APPRECIATING THE FACT THAT THE DEED ENTERED INT O BY THE DEDUCTOR WITH PCNTDA WAS NOT A TRANSFER DEED BUT A LEASE DEED AND EXPLANATION TO SECTION 194I CLEARLY STIPULATES THAT ANY PAYMENT BY WHATEVER NAME CALLED UNDER ANY LEASE DEED/AGREEM ENT IS TO BE TAKEN AS RENT FOR TDS PURPOSE. ITA NO.10/PN/2014 SHRI VIJAY N. KODNANI 2 4. THE APPELLANT CRAVES LEAVES TO ADD, ALTER OR AMEND ANY OR ALL THE GROUNDS OF APPEAL. 3. THE ONLY ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST THE DELETION OF DEMAND CREATED UNDER SECTION 201(1) / 201(1A) OF TH E ACT AMOUNTING TO RS.60,31,416/- IN RESPECT OF THE LEASE PREMIUM PAID TO PIMPRI CHINCHWAD NEW TOWNSHIP DEVELOPMENT AUTHORITY (PCNTDA). 4. ON THE PERUSAL OF RECORD, WE FIND THAT THE ASSES SEE WAS A PROPRIETOR OF RISHI CONSTRUCTION ENGAGED IN THE BUSINESS OF PROMO TERS AND DEVELOPERS. THE ASSESSEE HAD ENTERED INTO 99 YEARS LEASE AGREEMENT WITH PCNTDA FOR USING COMMERCIAL PLOT NO.LC1/2, SECTOR NO.32, CHINCHWAD, HAVELI, PUNE. THE SAID LAND COULD BE USED EITHER FOR RESIDENTIAL OR COMMER CIAL PURPOSES. THE ASSESSEE HAD PAID LEASE PREMIUM OF RS.4,98,46,500/- AND HAD FURTHER AGREED TO PAY SUM OF RS.100/- PER ANNUM FOR THE ENTIRE PER IOD OF LEASE. THE ASSESSING OFFICER CONSIDERED THE SAID PAYMENT AS RE NT AND IN VIEW OF THE PROVISIONS OF SECTION 194 I OF THE ACT, FOR NON-DED UCTION OF TAX AT SOURCE, THE ASSESSEE WAS HELD TO HAVE FAILED TO DEDUCT TAX ON T HE SAID LEASE PREMIUM PAID TO PCNTDA. ACCORDINGLY, DEMAND UNDER SECTION 201(1) OF THE ACT WAS RAISED AT RS.49,84,650/- AND INTEREST UNDER SECTION 201(1A) OF THE ACT WAS RAISED AT RS.10,46,766/-. 5. WE FIND THAT AN IDENTICAL ISSUE AS RAISED IN THE PRESENT APPEAL, AROSE BEFORE THE TRIBUNAL IN ITO (TDS) VS. PREETAM MEDICA L FOUNDATION & RESEARCH CENTRE, IN ITA NO.190/PN/2014, RELATING TO ASSESSME NT YEAR 2013-14, VIDE ORDER DATE 16.01.2015, WHEREIN IT WAS HELD AS UNDER :- 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELAT ION TO THE DEMAND RAISED UNDER SECTIONS 201(1) AND 201(1A) OF THE ACT IN RESPECT OF THE LEASE PREMIUM PAID TO PIMPRI CHINCHWAD NEW TOWNSHIP DEVELOPMENT AUTHORITY (PCNTDA). IN THE FACTS OF THE CASE BEFOR E US, THE ASSESSEE HAD ENTERED INTO 99 YEARS LEASE AGREEMENT THROUGH I TS CHAIRMAN WITH PCNTDA FOR USING 3261 SQ. MTRS. OF LAND LOCATED ON PLOT NO.1, IN ITA NO.10/PN/2014 SHRI VIJAY N. KODNANI 3 SECTOR 13, CHIKHALI, TALUKA HAVELI, PUNE. THE SAID LAND WAS TO BE USED FOR EDUCATION PURPOSES AS PER CLAUSE (N) OF THE LEA SE DEED. THE ASSESSEE PAID LEASE PREMIUM OF RS.1,37,36,963/- FOR THE SAID PLOT AND FURTHER AGREED TO PAY SUM OF RS.100/- PER ANNUM FOR THE ENTIRE PERIOD OF LEASE. THE ASSESSING OFFICER (TDS) WAS OF THE VIEW THAT THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE UNDER SECTION 194 I OF THE ACT AT THE TIME OF PAYMENT OF LEASE PREMIUM TO PCNTDA. TH E ASSESSING OFFICER ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE AND ALSO ISSUED SUMMONS TO THE DEDUCTOR. IN REPLY, THE ASSESSEE EX PLAINED THAT THE TRANSACTION BETWEEN IT AND PCNTDA WAS A TRANSACTION OF SALE AND FURTHER APPROPRIATE TAX RETURN HAD BEEN FILED BY IT . THE ASSESSING OFFICER WAS OF THE VIEW THAT THE TRANSACTION BETWEE N THE PARTIES WAS NOT THAT OF TRANSFER, BUT OF LEASE AND THERE WAS NO TRA NSFER OF OWNERSHIP OF THE PROPERTY, BUT THE SAME WAS LEASED FOR USE EITHE R FOR COMMERCIAL OR RESIDENTIAL PURPOSES AS APPROVED BY THE LESSOR. HO WEVER, THE ASSESSING OFFICER REFERRED TO THE VARIOUS RESTRICTI ONS ON THE LESSEE / ASSESSEE PUT UP BY THE LESSOR AND IT WAS OBSERVED B Y THE ASSESSING OFFICER THAT THIS WAS NOT A CASE OF FREEHOLD TRANSF ER OR SALE AND THE ASSESSEE WAS NOT THE ABSOLUTE OWNER OF THE PROPERTY . THE ASSESSING OFFICER THUS, CONCLUDED THAT THE ASSESSEE WAS LIABL E TO DEDUCT TAX AT SOURCE UNDER SECTION 194 I OF THE ACT ON THE LEASE PREMIUM PAID TO PCNTDA. THE ASSESSEE HAVING FAILED TO DEDUCT TAX A T SOURCE, WAS HELD TO BE IN DEFAULT UNDER SECTION 201(1) OF THE A CT AT RS.13,73,696/- AND FURTHER INTEREST UNDER SECTION 201(1A) OF THE A CT WAS CHARGED AT RS.82,416/-. RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY CHENNAI BENCH OF THE TRIBUNAL IN FOXCONN INDIA DEVELOPER (P ) LTD. VS. ITO (TDS) (SUPRA). 6. THE CIT(A) AFTER CONSIDERING THE FACTS AND REPLY FILED BY THE ASSESSEE, OBSERVED THAT NO DOUBT, AFTER 99 YEARS OF LEASE, THE LEASE HOLD RIGHT EXPIRED AND THE LESSOR WAS VESTED WITH T HE FULL RIGHTS ON THE SAID PLOT OF LAND, WITH THE OPTION EITHER TO RENEW THE LEASE FOR FURTHER PERIOD AND TAKE BACK THE POSSESSION OF THE LAND. H OWEVER, THE PRELIMINARY CLAUSE OF THE LEASE AGREEMENT REFLECTS THAT THE PAYMENT OF LEASE PREMIUM WAS A PRE-CONDITION FOR ENTERING INTO LEASE AGREEMENT. THE CIT(A) HAS REPRODUCED THE PRELIMINARY CLAUSE OF THE LEASE AGREEMENT AT PAGE 7 OF THE APPELLATE ORDER, WHICH A RE NOT BEING REPRODUCED FOR THE SAKE OF BREVITY. THE CIT(A) THU S, HELD THAT THE PAYMENT OF LEASE PREMIUM OF RS.1,37,36,963/- WAS A PRE-CONDITION FOR ENTERING INTO THE LEASE AGREEMENT AND THE SAME WAS NOT UNDER THE LEASE DEED, THEREFORE, THE PAYMENT OF LEASE PREMIUM FELL OUTSIDE THE PURVIEW OF DEFINITION OF RENT AS PROVIDED UNDER SEC TION 194 I OF THE ACT. IT WAS FURTHER POINTED OUT BY THE CIT(A) THAT THERE IS NO MERIT IN THE RELIANCE PLACED UPON THE DECISION OF CHENNAI BENCH OF THE TRIBUNAL IN FOXCONN INDIA DEVELOPER (P) LTD. VS. ITO (TDS) (SUP RA) AS THE SAME WAS DISTINGUISHABLE ON FACTS. IN THE FACTS OF THE CASE BEFORE THE TRIBUNAL, THE ISSUE IN QUESTION WAS UPFRONT PAYMENT OF LEASE AND FURTHER THE SAID UPFRONT PAYMENT WAS PART OF THE CONDITIONS FOR ACQUIRING LEASEHOLD RIGHTS, UNLIKE THE PRESENT CASE WHERE, TH E PAYMENT OF LEASE PREMIUM WAS A PRE-CONDITION FOR ENTERING INTO A LEA SE AGREEMENT. THE CIT(A) PLACED RELIANCE ON THE DECISION OF MUMBAI BE NCH OF THE TRIBUNAL IN NAVI MUMBAI SEZ(P) LTD IN ITA NO.738 TO 7741/MUM /2012, RELATING TO ASSESSMENT YEARS 2006-07 TO 2009-10, VIDE ORDER DATED 12.08.2013, IN ORDER TO HOLD THAT THE PAYMENT OF LEASE PREMIUM TO PCNTDA BEING A PRE-CONDITION FOR ENTERING INTO LEASE AGREEMENT, CO ULD NOT BE SAID TO BE PAID UNDER THE TERMS OF LEASE AGREEMENT. FURTHER, STAMP DUTY HAD ITA NO.10/PN/2014 SHRI VIJAY N. KODNANI 4 BEEN PAID ON THE MARKET VALUE OF THE PLOT REPRESENT ED BY LEASE PREMIUM. IN VIEW THEREOF, THE ASSESSING OFFICER WA S DIRECTED TO DELETE THE DEMAND CREATED UNDER SECTIONS 201(1) AND 201(1A ) OF THE ACT. 7. THE ISSUE ARISING IN THE PRESENT APPEAL IS SQUAR ELY COVERED BY THE RATIO LAID DOWN BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ITO VS. CAMP EDUCATION SOCIETY (SUPRA), WHEREIN IT WAS HELD AS UNDER:- 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE WAS AN EDUCATIONAL SOCIETY RE GISTERED UNDER SECTION 12A OF THE ACT. THE ASSESSEE WAS RUN NING VARIOUS SCHOOLS AND COLLEGES IN THE CITY OF PUNE. DURING T HE YEAR UNDER CONSIDERATION, IN ORDER TO ESTABLISH ANOTHER SCHOOL IN PIMPRI CHINCHWAD AREA, THE ASSESSEE IN REPLY TO AN ADVERTI SEMENT BY PCNTDA, APPLIED FOR A PLOT ON LEASEHOLD BASIS. AS PER THE BID DOCUMENT, WHERE THE BID QUOTED BY A PARTY ACCEPTED, THE SAID PARTY WAS REQUIRED TO PAY THE QUOTED AMOUNT I.E. TH E PREMIUM WITHIN 3 MONTHS OF THE LETTER OF ALLOTMENT. IN CAS E SUCH PREMIUM WAS NOT PAID WITHIN PERIOD OF 3 MONTHS, 25% OF THE TENDER DEPOSIT WAS TO BE FORTIFIED AND BALANCE AMOUNT WAS TO BE REFUNDED WITHOUT ANY INTEREST. THE TENDER DOCUMENT STATED THAT THE TENDER WAS FOR THE PURPOSE OF SALE OF RESERVED PLOTS AND AS PER THE DOCUMENT FULL PREMIUM WAS TO BE PAID TO PCN TDA AND LEASE AGREEMENT WOULD BE ENTERED WITH THE PARTY. T HE ASSESSEE ENTERED INTO A LEASE AGREEMENT WITH PCNTDA FOR 99 Y EARS AND THE LEASE RENT WAS RS.100/- PER ANNUM FOR THE PERIO D OF 99 YEARS. THE ASSESSEE ACCORDINGLY, DEPOSITED THE PRE MIUM AMOUNT OF RS.2,20,24,860/-. AFTER RECEIVING THE PR EMIUM AMOUNT, THE LICENSER I.E. PCNTDA AGREED TO EXECUTE LEASE DEED TO CONVEY / TRANSFER / ASSIGN THE LEASEHOLD RI GHTS. THE LEASE DEED AUTHORIZES THE ASSESSEE TO BUILD / CONST RUCT ANY BUILDING ON THE SAID PLOT OF LAND. THE CASE OF THE ASSESSEE WAS THAT THE PAYMENT OF PREMIUM WAS A PRE-CONDITION FOR OBTAINING THE LEASE RIGHTS AND IT WAS ONLY AFTER PAYMENT OF T HE LEASE PREMIUM, THE LEASE AGREEMENT WAS ENTERED INTO AND B UNDLE OF RIGHTS WERE OBTAINED BY THE ASSESSEE. 7. THE ASSESSING OFFICER HELD THE ASSESSEE TO BE DE FAULT IN RESPECT OF THE TDS PAYABLE ON SUCH LEASE RENT PAYME NT TO PCNTDA. RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE CHENNAI BENCH OF THE TRIBUNAL IN FOX CONN INDIA DEV ELOPER (P) LTD. (SUPRA). THE ASSESSEE WAS HELD TO BE IN DEFAU LT FOR NON- DEDUCTION OF TAX ON SOURCE UNDER SECTION 194I OF TH E ACT ON THE LEASE PREMIUM PAID TO PCNTDA AND DEMAND UNDER SECTI ON 201(1) OF THE ACT WAS RAISED AND INTEREST UNDER SEC TION 201(1A) OF THE ACT WAS CHARGED, RAISING A DEMAND OF RS.22,9 0,585/-. 8. THE CIT(A) VIDE PARA 8 REFERRED TO THE PRELIMINA RY CLAUSES OF THE AGREEMENT ENTERED INTO BETWEEN ASSESSEE AND PCNTDA AND POINTED OUT THAT THE LEASE PREMIUM FINDS MENTIO N IN THE LEASE DEED BUT THE SAID PAYMENT OF LEASE PREMIUM WA S A PRE- CONDITION FOR ENTERING INTO LEASE AGREEMENT. THE C IT(A) THUS, HELD THAT SAME WAS NOT UNDER THE LEASE DEED AND THE PAYMENT OF LEASE PREMIUM FALLS OUTSIDE THE PURVIEW OF DEFINITI ON OF RENT AS SPECIFIED IN SECTION 194I OF THE ACT. THE CIT(A) F URTHER OBSERVED FROM THE RATIO LAID DOWN IN THE CASE OF FOX CONN IN DIA DEVELOPER ITA NO.10/PN/2014 SHRI VIJAY N. KODNANI 5 (P) LTD. (SUPRA) WAS DISTINGUISHABLE ON THE FACTS A S IN THAT CASE ISSUE IN QUESTION WAS UPFRONT PAYMENT AND NOT LEASE PREMIUM. FURTHER, UPFRONT PAYMENT WAS PART OF CONSIDERATION FOR ACQUIRING LEASEHOLD RIGHTS UNLIKE THE PRESENT CASE WHERE PAYM ENT OF LEASE PREMIUM WAS PRE-CONDITION FOR ENTERING INTO LEASE A GREEMENT AND THEREFORE THE FACTS OF THE CASE WERE CLEARLY DI STINGUISHABLE. FURTHER RELIANCE WAS PLACED ON THE SERIES OF DECISI ONS, UNDER WHICH SUCH SIMILAR PAYMENT OF LEASE PREMIUM WAS HEL D TO BE NOT SUBJECT TO DEDUCTION OF TAX AT SOURCE UNDER SECTION 194I OF THE ACT. 9. WE FIND THAT SIMILAR ISSUE OF PAYMENT OF LEASE P REMIUM AROSE BEFORE THE MUMBAI BENCH OF THE TRIBUNAL IN TH E CASE OF NAVI MUMBAI SEZ (P) LTD. IN ITA NOS.738 TO 740/MUM/ 2012 FOR ASSESSMENT YEARS 2006-07 TO 2009-10, WHEREIN THE TR IBUNAL IN ITS ORDER DATED 12.08.2013, HELD THAT LEASE PREMIUM PAID BY THE ASSESSEE TO THE CITY AND INDUSTRIAL DEVELOPMENT COR PORATION OF MAHARASHTRA LTD. (CIDCO) FOR ACQUIRING DEVELOPMENT AND LEASEHOLD RIGHTS FOR A PERIOD OF 60 YEARS, WAS NOT REQUIRED TO BE SUBJECT TO DEDUCTION AT SOURCE UNDER SECTION 194I O F THE ACT. FURTHER ANOTHER BENCH OF THE MUMBAI TRIBUNAL IN THE CASE OF M/S. WADHWA ASSOCIATES IN ITA NO.695/MUM/2012, VIDE ORDER DATED 03.07.2013, HELD THAT TDS WAS NOT REQUIRED TO BE DEDUCTED UNDER SECTION 194I OF THE ACT IN RESPECT O F PAYMENT OF LEASE PREMIUM TO M/S. MMRD LTD. 10. IN VIEW OF ABOVE SAID FACTS AND CIRCUMSTANCES, WHEREIN THE LEASE PREMIUM WAS PAID TO PCNTDA BY THE ASSESSE E AS A PRE-CONDITION FOR ENTERING INTO A LEASE AGREEMENT, THE SAME CANNOT BE SAID TO HAVE BEEN PAID CONSEQUENT TO THE LEASE AGREEMENT EXECUTED BETWEEN THE PARTIES. FURTHER, T HE CIT(A) HAS GIVEN A FINDING THAT STAMP DUTY HAD BEEN PAID O N THE MARKET VALUE OF THE PLOT REPRESENTED BY THE LEASE PREMIUM, WHICH HAS NOT BEEN CONTROVERTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE. RELYING UPON THE R ATIO LAID DOWN BY THE MUMBAI BENCH OF THE TRIBUNAL IN THREE D IFFERENT CASES, WE UPHOLD THE ORDER OF CIT(A) IN HOLDING THA T THE LEASE PREMIUM PAID BY THE ASSESSEE IS OUTSIDE THE PURVIEW OF SECTION 194I OF THE ACT AND THE ASSESSING OFFICER WAS NOT J USTIFIED IN RAISING THE DEMAND UNDER SECTION 201(1) AND 201(1A) OF THE ACT. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE THU S, DISMISSED. 8. FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT WHERE THE LEASE PREMIUM PAID TO PCNTDA WAS A PRE-CONDITION FO R ENTERING INTO THE LEASE AGREEMENT, THE SAME NOT BEING PAID CONSEQ UENT TO THE EXECUTION OF THE LEASE AGREEMENT, CANNOT BE SAID TO BE PAYMENT IN LIEU OF RENT AS ENVISAGED UNDER SECTION 194 I OF THE ACT . IN ADDITION, THE ASSESSEE HAD PAID STAMP DUTY ON THE MARKET VALUE OF THE PLOT REPRESENTED BY THE LEASE PREMIUM AND THE SAID FINDI NG OF THE CIT(A) HAVING NOT BEEN CONTROVERTED BY THE LEARNED DEPARTM ENTAL REPRESENTATIVE FOR THE REVENUE, WE FIND NO MERIT IN THE APPEAL FILED BY THE REVENUE. ACCORDINGLY, WE UPHOLD THE ORDER OF C IT(A) AND DISMISS THE GROUNDS OF APPEAL RAISED BY THE REVENUE. ITA NO.10/PN/2014 SHRI VIJAY N. KODNANI 6 6. FOLLOWING THE SAME PARITY OF REASONING, WE UPHOL D THE ORDER OF CIT(A) AND DISMISS THE GROUNDS OF APPEAL RAISED BY THE REV ENUE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON THIS 31 ST DAY OF MARCH, 2015. SD/- SD/- (R.K. PANDA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 31 ST MARCH, 2015. GCVSR COPY OF THE ORDER IS FORWARDED TO: - 1) THE DEPARTMENT; 2) THE ASSESSEE; 3) THE CIT(A)-V, PUNE; 4) THE CIT-V, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE