Income-tax Officer, V. M/s. N.K. Construction, Pune

ITA 1295/PUN/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2677 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 16-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHEERAJ KUMAR JAIN
• Keywords: Maximum Marginal Rate
• Section: 12A; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , A M . / ITA NO. 1295 /PN/201 4 / ASSESSMENT YEAR : 20 11 - 1 2 THE INCOME - TAX OFFICER (TDS) - 2, PUNE . / APPELLANT VS. M/S. N K CONSTRUCTION, PLOT NO.509, SECTOR NO.27, PRADHIKARAN, NIGDI, PUNE 411044 . / RESPONDENT PAN: AAGFN1405L / APPELLANT BY : SHRI DHEERAJ KUMAR JAIN / RESPONDENT BY : NONE / DATE OF HEARING : 18 . 0 2 .201 6 / DATE OF PRONOUNCEMENT: 24 . 0 2 .201 6 DATE OF HEARING : 18 . 0 2 .201 6 DATE OF PRONOUNCEMENT: 24 . 0 2 .201 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT (A) - V , PUNE , DATED 2 6 . 03 .20 1 4 RELATING TO ASSESSMENT YEAR 20 11 - 1 2 AGAINST ORDER PASSED UNDER SECTION 201(1)/201(1A) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE DEMAND RAISED RS. 87,78,089/ - U/S 201(1) / 201(1A) OF THE INCOME TAX ACT, 1961 IN RESPECT OF LEASE PREMIUM PAYMENT 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 PCNTDA IS UPFRONT PAYMENT AS PRE - CONDITION FOR ENTERING IN TO LEASE AGREEMENT. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE DEED ENTERED INTO BY THE DEDUCTOR WITH ITA NO. 129 5 /PN/20 1 4 M/S. N K CONSTRUCTION 2 PCNTDA WAS NOT A TRANSFER DEED BUT A LEASE DEED AND EXPLANATION TO SECTION 194I CLEARLY STIPULATED THAT ANY PAYMENT BY WHATE VER NAME CALLED UNDER ANY LEASE DEED / AGREEMENT IS TO BE TAKEN AS RENT FOR TDS PURPOSE. 4. THE APPELLANT CRAVES LEAVES TO ADD, ALTER OR AMEND ANY OR ALL THE GROUNDS OF APPEAL. 2 . DESPITE SERVICE OF NOTICE, NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY APPLICATION WAS MOVED FOR ADJOURNMENT. HOWEVER, WE PROCEED TO DECIDE THE PRESENT APPEAL SINCE THE ISSUE INVOLVED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDER OF TRIBUNAL ITSELF. 3. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PUT FORWARD HIS CONTENTIONS. 4. THE ISSUE RAISED IN THE PRESENT APPEAL VIS - A - VIS IS THE DEMAND RAISED UNDER SECTION 201(1) AND 201(1A) OF THE ACT AT RS.87,78,089/ - IN RESPECT OF LEASE PREMIUM PAID TO PIMPRI CHINCHWAD NEW TOWNSHIP DEVELOPMENT AUTHORITY (PCNT DA). AUTHORITY (PCNT DA). 5. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF PROMOTERS AND DEVELOPERS. DURING THE COURSE OF TDS VERIFICATION IN THE CASE OF PIMPRI CHINCHWAD NEW TOWNSHIP DEVELOPMENT AUTHORITY (PCNTDA) ON 07.0 8.2012, IT WAS NOTED THAT THE ASSESSEE HAD ENTERED INTO LEASE AGREEMENT FOR 99 YEARS WITH PCNTDA ON THE TERMS AND CONDITIONS LAID DOWN BY THE LESSOR IN THE LEASE DEEDS DATED 28 . 09.2010 AND 17.03.2011 FOR PLOT N O .6 IN SECTOR N O .32A AND 2650 SQ. MTRS. OF LAN D LOCATED AT PLOT N O .L.C. 1/3 IN SECTOR N O .32A WITHIN THE VILLAGE LIMITS OF RAVET, TALUKA HAVELI, PUNE. THE ASSESSING OFFICER WAS OF THE VIEW THAT AS PER THE LEASE DEED, THE PREMIUM PAID FOR ACQUISITION OF LEASEHOLD RIGHTS FOR 99 YEARS WAS NOTHING BUT RE NT AND HENCE, THE PROVISIONS OF SECTION 194 I OF THE ACT WERE APPLICABLE. ACCORDINGLY, HE RAISED THE DEMAND UNDER SECTION 201(1) AND 201(1A) OF THE ACT. ITA NO. 129 5 /PN/20 1 4 M/S. N K CONSTRUCTION 3 6. THE CIT(A) CONSIDERED THE ARGUMENTS OF THE ASSESSEE AND THE VIEWS TAKEN BY VARIOUS BENCHES OF TRIBU NAL AND HELD THAT THE PAYMENT OF LEASE PREMIUM MADE TO PCNTDA WAS A PRE - CONDITION FOR ENTERING INTO LEASE AGREEMENT AND THEREFORE, IT COULD NOT BE SAID THAT THE SAME WAS PAID UNDER THE TERMS OF LEASE AGREEMENT. FURTHER, THE STAMP DUTY HAD BEEN PAID ON THE MARKET VALUE OF PLOT REPRESENTED BY LEASE PREMIUM, THEREFORE, THE DEMAND RAISED UNDER SECTION 201(1) AND 201(1A) OF THE ACT BY THE ASSESSING OFFICER WAS DIRECTED TO BE DELETED. 7. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 8. WE FIND THAT SIMILAR ISSUE WHETHER TAX SHOULD BE DEDUCTED AT SOURCE UNDER SECTION 194 I OF THE ACT AND FOR SUCH NON - DEDUCTION OF TAX AT SOURCE DEMAND SHOULD BE RAISED UNDER SECTION 201(1) OF THE ACT AND INTEREST UNDER SECTION SHOULD BE RAISED UNDER SECTION 201(1) OF THE ACT AND INTEREST UNDER SECTION 201(1A) OF THE ACT IS CHARGEABLE IN RESPECT OF LEASE PREMIUM PAID TO PCNTDA BY THE ASSESSEE, AROSE BEFORE THE TRIBUNAL IN ITO VS. CAMP EDUCATION SOCIETY IN ITA NO.2134/PN/2013 RELATING TO ASSESSMENT YEAR 2013 - 14, ORDER DATED 27.10.2014. THE TRIBUNAL HELD AS UNDER: - 6. WE HAVE HEARD THE RIVAL CONTE NTIONS AND PERUSED THE RECORD. THE ASSESSEE WAS AN EDUCATIONAL SOCIETY REGISTERED UNDER SECTION 12A OF THE ACT. THE ASSESSEE WAS RUNNING VARIOUS SCHOOLS AND COLLEGES IN THE CITY OF PUNE. DURING THE YEAR UNDER CONSIDERATION, IN ORDER TO ESTABLISH ANOTHER SCHOOL IN PIMPRI CHINCHWAD AREA, THE ASSESSEE IN REPLY TO AN ADVERTISEMENT 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. THE PREMIUM WITHIN 3 MONTHS OF THE LETTER OF ALLOTMENT. IN CASE 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 PCNTDA AND LEASE AGREEMENT WOULD BE ENTERED WITH THE PARTY. THE ASSESSEE ENTERED INTO A LEASE AGREEMENT WITH PCNTDA FOR 99 YEARS AND THE LEASE REN T WAS RS.100/ - PER ANNUM FOR THE PERIOD OF 99 YEARS. THE ASSESSEE ACCORDINGLY, DEPOSITED THE PREMIUM AMOUNT OF RS.2,20,24,860/ - . AFTER RECEIVING THE PREMIUM AMOUNT, THE LICENSER I.E. PCNTDA AGREED TO EXECUTE LEASE DEED TO CONVEY / TRANSFER / ASSIGN THE L EASEHOLD RIGHTS. THE LEASE DEED AUTHORIZES THE ASSESSEE TO BUILD / CONSTRUCT ANY BUILDING ON THE SAID PLOT OF ITA NO. 129 5 /PN/20 1 4 M/S. N K CONSTRUCTION 4 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 THE LEASE PREMIUM, THE LEASE AGREEMENT WAS ENTERED INTO AND BUNDLE OF RIGHTS WERE OBTAINED BY THE ASSESSEE. 7. THE ASSESSING OFFICER HELD THE ASSESSEE TO BE DEFAULT IN RESPECT OF THE TDS PAYABLE ON SUCH LEASE RENT PAYMENT TO PCNTDA. RELIANCE WAS PLA CED ON THE RATIO LAID DOWN BY THE CHENNAI BENCH OF THE TRIBUNAL IN FOX CONN INDIA DEVELOPER (P) LTD. (SUPRA). THE ASSESSEE WAS HELD TO BE IN DEFAULT FOR NON - DEDUCTION OF TAX ON SOURCE UNDER SECTION 194I OF THE ACT ON THE LEASE PREMIUM PAID TO PCNTDA AND D EMAND UNDER SECTION 201(1) OF THE ACT WAS RAISED AND INTEREST UNDER SECTION 201(1A) OF THE ACT WAS CHARGED, RAISING A DEMAND OF RS.22,90,585/ - . 8. THE CIT(A) VIDE PARA 8 REFERRED TO THE PRELIMINARY CLAUSES OF THE AGREEMENT ENTERED INTO BETWEEN ASSESSEE A ND PCNTDA AND POINTED OUT THAT THE LEASE PREMIUM FINDS MENTION IN THE LEASE DEED BUT THE SAID PAYMENT OF LEASE PREMIUM WAS A PRE - CONDITION FOR ENTERING INTO LEASE AGREEMENT. THE CIT(A) THUS, HELD THAT SAME WAS NOT UNDER THE LEASE DEED AND THE PAYMENT OF L EASE PREMIUM FALLS OUTSIDE THE PURVIEW OF DEFINITION OF RENT AS SPECIFIED IN SECTION 194I OF THE ACT. THE CIT(A) FURTHER OBSERVED FROM THE RATIO LAID DOWN IN THE CASE OF FOX CONN INDIA DEVELOPER (P) LTD. (SUPRA) WAS DISTINGUISHABLE ON THE FACTS AS 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 PAYMENT OF LEASE PREMIUM WAS PRE - CONDITION FOR ENTERING INTO LEASE AGREEMENT AND THEREFORE THE FACTS OF THE CASE WERE CLEARLY DISTINGUISHABLE. FURTHER RELIANCE WAS PLACED ON THE SERIES OF DECISIONS, UNDER WHICH SUCH SIMILAR PAYMENT OF LEASE PREMIUM WAS HELD 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 PREMIUM AROSE BEFORE THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF NAVI MUMBAI SEZ (P) LTD. IN ITA MUMBAI BENCH OF THE TRIBUNAL IN THE 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 TRIBUNAL IN ITS ORDE R DATED 12.08.2013, HELD THAT LEASE PREMIUM PAID BY THE ASSESSEE TO THE CITY AND INDUSTRIAL DEVELOPMENT CORPORATION OF MAHARASHTRA LTD. (CIDCO) FOR ACQUIRING DEVELOPMENT AND LEASEHOLD RIGHTS FOR A PERIOD OF 60 YEARS, WAS NOT REQUIRED TO BE SUBJECT TO DEDUC TION AT SOURCE UNDER SECTION 194I OF 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 A CT IN RESPECT OF 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 ASSESSEE 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, THE CIT(A) HAS GIVEN A FINDING THAT STAMP DUTY HAD BEEN PAID ON 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 RATIO LAID DOWN BY THE MUMBAI BENCH OF THE TRIBUNAL IN THREE DIFFERENT CASES, WE UPHOLD THE ORDER OF CIT(A) IN HOLDING THAT THE LEASE PREMIUM PAID BY THE ASSESSEE IS OUTSIDE THE PURVIEW OF SECTION 194I OF THE ACT AND THE ASSESSING OFFICER WAS NOT JUSTIFIED IN RAISING THE DEMAND UNDER SECTION 201(1) AND 201(1A) OF THE ACT. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE THUS, DISMISSED. ITA NO. 129 5 /PN/20 1 4 M/S. N K CONSTRUCTION 5 9 . THE ISSUE ARISING IN THE PRESENT APPEAL BEFOR E US IS IDENTICAL TO THE ISSUE BEFORE THE TRIBUNAL IN ITO VS. CAMP EDUCATION SOCIETY (SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE OUT OF THE LEASE PREMIUM PAYMENTS PAID TO PCNTDA. ACCO RDINGLY, WE UPHOLD THE ORDER OF THE CIT(A) IN HOLDING THAT THE LEASE PREMIUM PAID BY THE ASSESSEE WAS OUTSIDE THE PURVIEW OF SECTION 194I OF THE ACT AND THE ASSESSING OFFICER WAS NOT JUSTIFIED IN RAISING THE DEMAND UNDER SECTION 201(1) OF THE ACT AND CHARG ING INTEREST UNDER SECTION 201(1A) OF THE ACT. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE THUS, DISMISSED. 1 0 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 24 TH DAY OF FEBRU ARY , 201 6 . SD/ - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 24 TH FEBR UARY , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - V , PUNE ; 4. / THE CIT (TDS), PUNE , ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE