ITO (TDS) 2(5), MUMBAI V. PALTON YARN P.LTD, MUMBAI

ITA 1298/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2410 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 26-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Assessee Lawyers: HARI S RAHEJA
• Keywords: Maximum Marginal Rate; Non-deduction of tax; Capital expenditure
• Section: 37(1); 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI JOGINDER SINGH, J M AND SHRI JASON P. BOAZ , AM ./ I.T.A. NO. 1298/MUM/2014 ( / ASSESSMENT YEAR: 2010 - 11 ) ITO(TD S) 2(5), ROOM NO. 703, SMT. K. G. MITTAL HOSPITAL BLDG., CHARNI ROAD (W), MUMBAI 400 002 / VS. PALTON YARN PVT. LTD. 140 - A1, SHAH & NAHAR INDL. EST., S. JADHAV MARG, LOWER PAREL, MUMBAI - 400 013 ./ ./ PAN/GIR NO. AABCP 8572 E ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI O. P. MEENA / RESPONDENT BY : SHRI HARI S. RAHEJA / DATE OF HEARING : 23.11.2015 / DATE OF PRONOUNCEME NT : 24 .11.2015 / O R D E R PER JASON P. BOAZ , A. M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 14 , MUMBAI (CIT(A) FOR SHORT) DATED 12.12.2013 FOR THE ASSESSMENT YEAR (A.Y.) 2010 - 11. 2 . THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER: 2.1 A SURVEY U/S.133A OF THE INCOME - TAX ACT, 1961 (IN SHORT THE ACT) WAS CARRIED OUT ON 9.2.2011 IN THE CASE OF MUMBAI METROPOLITAN REGION DEVELOPMENT AUTHORITY (MMRDA). IN THE COURSE OF SURVEY IT WAS FOU ND THAT MMRDA HAD GIVEN PLOT TO THE ASSESSEE ON LEASE THROUGH TENDERS FOR WHICH THE ASSESSEE MADE PAYMENT OF 2 ITA NO. 1298/MUM/2014 (A.Y. 2010 - 11) ITO(TDS) VS. PALTON YARN PVT. LTD. RS.10,63,888/ - BY WAY OF LEASE RENT AND OTHER SUMS TERMED AS PREMIUM, ON WHICH PAYMENT NO TAX WAS DEDUCTED AT SOURCE. F ROM THE DETAILS FILED, THE ASSESSING OFFICER (A.O.) OBSERVED THAT VIDE AGREEMENT DATED 29.5.2007 THE ASSESSEE HAD LEASED OUT THE PLOT OF LAND FOR AN ACQUISITION PRICE OF RS.1/ - AND THE SAME WAS RE - LEASED TO THE ASSESSEE FOR A PERIOD OF 60 YEARS FOR UNDERTAKING THE DEVELOPMENT THERE OF IN ACCORDANCE WITH THE MMRDAS PLANNING PROPOSAL . THE AO FURTHER OBSERVED AS PER THE LEASE DEED DATED 10.4.2008, THE ASSESSEE AGREED TO PAY AN AMOUNT OF RS.10,63,888/ - TO MMRDS AS A PREMIUM FOR LEASE OF PREMISES HAVING AREA OF ABOUT 69 6 5.07 SQ. YARDS (I .E., THE SAME AREA THE ASSESSEE HAD LEASED OUT TO MMRDA) . AFTER GOING THROUGH THE SUBMISSIONS OF THE ASSESSEE FOR NON DEDUCTION OF TAX AT SOURCE ON PAYMENTS MADE TO MMRDA, THE AO REJECTED THE ASSESSEES CONTENTION S AND PROCEEDED TO HOLD THE ASSESSEE AS ONE IN DEFAULT U/S.201(1) OF THE ACT FOR ITS FAILURE TO DEDUCT TAX AT SOURCE U/S.194I OF THE ACT ON PAYMENT OF LEASE PREMIUM OF RS.10,63,888/ - IN THE YEAR UNDER CONSIDERATION. IN THAT VIEW OF THE MATTER, THE AO VIDE ORDER DATED 31.10.2011 HELD THE ASSESSEE LI ABLE TO PAY TAX OF RS. 2,19,161/ - @ 20.60% ON RS.10,63,888/ - AND CHARGED THE ASSESSEE INTEREST U/S.201(1A) OF THE ACT AMOUNTING TO RS.59,173/ - . 2.2 ON APPEAL, THE LD. CIT(A) ALLOWED THE ASSESSEES APPEAL VIDE ORDER DATED 12.12.2013 FOLLOWING THE DECISION O F THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF WADHWA ASSOCIATES REALTORS (P.) LTD., [2013] 36 TAXMAN 526 (MUMBAI - TRIBUNAL). 3.1 THE REVENUE BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) - 14, MUMBAI DATED 12.12.2013 FOR A. Y . 2010 - 11 HAS PREFERRE D THIS APPEAL RAISING THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE AMOUNT PAID BY M/S. PALTON YARN PVT. LTD. (LESSEE) TO CITY INDUSTRIAL DEVELOPM ENT CORPORATION (MMRDA) (LESSOR) WAS NOT IN THE NATURE OF RENT AS DEFINED U/S.1941 OF THE ACT. 3 ITA NO. 1298/MUM/2014 (A.Y. 2010 - 11) ITO(TDS) VS. PALTON YARN PVT. LTD. 2. ON FACTS IN CIRCUMSTANCES OF THE CASE AND IN LAW TH E, THE LD. CIT(A) HAS ERRED IN ACCEPTING THE CLAIM OF THE ASSESSEE THAT NO TAX WAS DEDUCTIBLE UNDER SECT ION1941 FROM THE PAYMENT MADE BY THE ASSESSEE TO MMRDA FOR ACQUISITION OF THE PLOT OF LAND ON LEASE FROM MMRDA. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT CONFIRMING THE ORDER OF THE ASSESSING OFFICER TREATING THE ASSESSEE AS AN ASSESSEE IN DEFAULT U/S. 201 (1) IN RESPECT OF THE AMOUNT OF TAX WHICH HAS NOT BEEN DEDUCTED UNDER SECTION 1941 FROM THE PAYMENT MADE TO MMRDA AND LEVYING INTEREST UNDER SECTION 201 (1A). 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN IGNORING THE DEFINITION OF RENT, AS CONTAINED IN SECTION 1941 AND IN RESORTING TO INTERPRETATIVE REASONING WHEREAS AS PER THE SETTLED PRINCIPLE OF JURISPRUDENCE, THIS EXERCISE IS REQUIRED ONLY WHEN THE LAW IS UNCLEAR. 5. ON THE FACTS AN D IN THE CIRCUMSTANCES OF THE CASE AN IN LAW, THE LD. CIT(A) HAS ERRED IN GOING INTO THE QUESTION OF TAXABILITY OF THE PAYMENT MADE BY THE ASSESSEE TO MMRDA DESPITE THE DECISION OF THE APEX COURT IN THE CASE OF THE AGGARWAL CHAMBERS OF COMMERCE V. GANPAT R AI HIRALAL, 33 ITR 245, WHERE IT HAS BEEN HELD THAT THE PERSONS WHO ARE RESPONSIBLE FOR D DUCTION OF TAX AT SOURCE ARE NOT CONCERNED WITH THE ULTIMATE RESULT OF ASSESSMENT. 3.2.1 W E HAVE HEARD BOTH THE LD. DR FOR REVENUE AND THE LD. AR FOR THE ASSESSEE , AND HAVE PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JUDICIAL DECISIONS CITED. THE ENTIRE ISSUE IN THE GROUNDS, RAISED (SUPRA) REVOLVES AROUND THE PREMIUM PAID BY THE ASSESSEE TO MMRDA FOR THE LEASE HOLD RIGHTS ACQUIRED BY TH E ASSESSEE VIDE LEASE DEED DATED 10.4.2008. ACCORDING TO REVENUE, THIS LEASE PREMIUM WAS LIABLE FOR DEDUCTION OF TAX AT SOURCE AND FAILURE TO DO SO WOULD RENDER ASSESSEE LIABLE TO BE TREATED AS ASSESSED IN DEFAULT. ON THE OTHER HAND , THE ASSESSEE SUBMITS T HAT SUCH LEASE PREMIUM PAID TO MMRDA IS IN THE NATURE OF CAPITAL EXPENDITURE AND THEREFORE THERE IS NO REQUIREMENT OF DEDUCTION OF TAX AS SUCH LEASE PREMIUM DOES NOT FALL WITHIN THE AMBIT OF THE DEFINITION OF RENT AS PROVIDED U/S.194I OF THE ACT. WE FIND, AS RELIED ON BY THE LD. CIT(A) IN THE IMPUGNED ORDER, THAT THE SIMILAR 4 ITA NO. 1298/MUM/2014 (A.Y. 2010 - 11) ITO(TDS) VS. PALTON YARN PVT. LTD. ISSUE WAS CONSIDERED BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF WADHWA ASSOCIATES REALTORS (P) LTD. [2013] 36 TAXMANN 526 (MUMBAI ITAT) AND AT PARA 10 THEREOF THE CO - ORDIN ATE BENCH HE LD AS UNDER: 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 T HE 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 P ROPOSAL 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 HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF KHIMLINE PUMPS LTD. (SUPRA) SQUARELY A ND 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 CONFIRM. 3.2.2 FOLLOWING THE AFORESAID DECISION OF THE CO - ORDINATE BENCH OF T HE TRIBUNAL IN THE CASE OF WADHWA ASSOCIATES REALTORS (P) LTD. (SUPRA), WHICH ARE SIMILAR TO THE FACTS AND CIRCUMSTANCES TO THE CASE ON HAND, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) IN T H E IMPUGNED ORDER. CONSEQUENTLY, TH E REVENUES GROUNDS AT SR. NOS. 1 TO 5 ARE DISMISSED. 5 ITA NO. 1298/MUM/2014 (A.Y. 2010 - 11) ITO(TDS) VS. PALTON YARN PVT. LTD. 4. IN THE RESULT, THE R EVENUE S APPEAL FOR A.Y. 2010 - 11 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 24 , 201 5 SD/ - SD/ - ( JOGINDER SINGH ) ( JASON P. BOAZ ) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 24 . 11 .201 5 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI