ITO (TDS) 2(5), MUMBAI V. ORIENTAL BANK OF COMMERCE, MUMBAI

ITA 1300/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2495 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2015
• 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
• Assessee Lawyers: V MOHAN
• Keywords: Capital asset; Depreciation; Search and seizure; Maximum Marginal Rate; Cost of acquisition; Capital receipt; Revenue expenditure; Capital expenditure
• Section: 2(14); 201(1); 37

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI , . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.1300 & 1301/MUM/2014 ASSESSMENT YEAR 2009-10 & 2010-11 INCOME TAX OFFICER (TDS)- 2(5), ROOM NO.703, SMT. K.G. MITTAL HOSPITAL BLDG., CHARNI ROAD (WEST), MUMBAI-400002 / VS. M/S ORIENTAL BANK OF COMMERCE, MAKER TOWER, F, 14 TH FLOOR, CUFFE PARADE, MUMBAI-40005 ( ! / REVENUE) ( '#$ % /ASSESSEE) PAN. NO. AAACO0191M ! / REVENUE BY SHRI O. P. MEENA-DR '#$ % / ASSESSEE BY SHRI V. MOHAN & !' ( % ) / DATE OF HEARING : 23/11/2015 ( % ) / DATE OF ORDER: 23/11/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDERS DA TED 04/12/2012 AND 11/12/2013 OF THE LD. FIRST APPELLAT E AUTHORITY, MUMBAI. THE ONLY GROUND RAISED IN THIS A PPEAL PERTAINS TO HOLDING THAT THE AMOUNT PAID BY THE ASS ESSEE BANK (THE LESSEE) TO CITY INDUSTRIAL DEVELOPMENT CO RPORATION ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 2 (MMRDA) (LESSOR) WAS NOT IN THE NATURE OF RENT AS D EFINED U/S 194 I OF THE ACT. . 2. DURING HEARING OF THIS APPEAL, THE LD. DR, SHRI O.P. MEENA DEFENDED THE CONCLUSION ARRIVED AT IN THE ASS ESSMENT ORDER BY CONTENDING THAT THE LD. COMMISSIONER OF IN COME TAX (APPEALS) ERRED IN ACCEPTING THE CLAIM OF THE ASSES SEE THAT NO TAX DEDUCTIBLE FROM THE PAYMENT MADE BY THE ASSESSE E TO THE MMRDA FOR ACQUISITION OF PLOT OF LAND ON LEASE FROM MMRDA AND FURTHER IGNORING THE DEFINITION OF RENT AS CONT AINED IN THE SAID SECTION RESORTING TO INTERPRETATIVE REASONING. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE, SHRI V. MOHAN, DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER BY CONTENDING THAT THE IMPUGNED ISSUE IS COVERED BY TH E DECISION OF THE TRIBUNAL IN THE CASE OF NAVI MUMBAI SEZ PVT. LTD. VS INCOME TAX (ITA NO.738 TO 741/MUM/2012), ITO(TDS) VS WADHWA AND ASSOCIATES REALTORS (P) LTD. (2013) 36 TAXMAN.COM 526 (MUMBAI TRIB.) AND ITO VS INDIAN NEWSPAPER SOCIETY (2013) 144 ITD 668 (DEL.). THIS F ACTUAL MATRIX WAX NOT CONTROVERTED BY THE REVENUE. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION FROM THE AFORESAID ORDER OF THE TRIBUNAL DATED 16/0 8/2013 IN THE CASE OF M/S NAVI MUMBAI SEZ PVT. LTD. FOR READY REFERENCE AND ANALYSIS:- ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 3 THE DEPARTMENT HAS FILED THESE APPEALS FOR ASSESS MENT YEARS 2006-07 TO 2009- 10 AGAINST SEPARATE ORDERS OF LD. CIT(A) A LL DATED 24.11.2011. IN ALL THESE APPEALS, THE FACTS AND THE ISSUE INVOL VED IS COMMON. HENCE, WE HAVE HEARD THESE APPEALS TOGETHER AND DISPOSE OF F THE SAME BY A COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. WE MAY STATE THAT THE GROUNDS OF APPEAL TAKEN BY DEPARTMENT ARE ELABORATIVE IN ALL THESE APPEALS BUT THE ONLY ISSUE INVOLVED IN THE APPEALS IS AS TO WHETHER THE LEASE PREMIUM PAID BY ASSESSEE TO THE CITY AND INDUSTRIAL DEVELOPMENT CORPORATION OF MAHARASHT RA LTD. (CIDCO) FOR ACQUIRING DEVELOPMENT AND LEASE-HOLD RIGHTS FOR A PERIOD OF 60 YEARS UNDER THE LEASE DEED(S) IS RENT WITHIN THE ME ANING OF SECTION 194-I OF THE INCOME TAX ACT, 1961 (THE ACT) AND HEN CE LIABLE FOR DEDUCTION OF TAX AT SOURCE OR NOT. 3. THE RELEVANT FACTS ARE THAT ASSESSEE HAS PAID LE ASE PREMIUM OF RS.50 CRORES IN ASSESSMENT YEAR 2006-07, RS.946.06 CRORES IN ASSESSMENT YEAR 2007-08, RS.1033.61 CRORES IN ASSESSMENT YEAR 2008-09 AND RS.146.82 CRORES IN ASSESSMENT YEAR 2009-10 TO CIDC O IN ORDER TO ACQUIRE VARIOUS LANDS LYING AT NAVI MUMBAI FROM CID CO ON LEASE BASIS. THE RELEVANT UNDISPUTED FACTS RELATING TO ABOVE LAN DS ARE SUMMARISED IN THE ORDERS OF AUTHORITIES BELOW AND WE STATE THE SAME RELATING TO ASSESSMENT YEAR 2006-07 AS UNDER : I) THE GOVERNMENT OF MAHARASHTRA THROUGH RESOLUTIO N DATED 18.3.1970 DECIDED THAT A SUBSIDIARY COMPANY OF THE STATE INDUSTRIAL INVESTMENT CORPORATION OF MAHARASHTRA LTD. SHOULD B E ENTRUSTED THE TASK OF DEVELOPMENT OF TRANS-THANA AND TRANS-HARBOU R AREAS IN URAN, PANVEL AND THANA WITH A VIEW TO DECONGEST AND PROVI DE RELIEF TO MUMBAI CITY AND ALSO TO ENSURE THE INTEGRATED DEVEL OPMENT OF THE REGION ALONG WITH ITS INDUSTRIAL DEVELOPMENT. LATER , CITY AND INDUSTRIAL DEVELOPMENT CORPORATION OF MAHARASHTRA LTD (CIDCO) WAS CREATED AND ESTABLISHED UNDER THE COMPANIES ACT, 1956 AND W AS DESIGNATED AS NEW TOWN DEVELOPMENT AUTHORITY FOR THIS TASK. II) THAT GOVERNMENT DECIDED THAT PRIVATELY OWNED L ANDS IN THE PROJECT AREA SHALL BE ACQUIRED BY THE GOVERNMENT AND WILL B E PLACED AT THE DISPOSAL OF CIDCO. CIDCO WAS REQUIRED TO UNDERTAKE ALL THE DEVELOPMENT WORK, PROVIDE NECESSARY INFRASTRUCTURE ON BEHALF OF THE ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 4 GOVERNMENT AND DISPOSE OFF THE LAND, RESIDENTIAL, COMMERCIAL AND SOCIAL STRUCTURES AND COLLECT SERVICE CHARGES ETC. TO THE EXTENT REQUIRED. III) LATER FOR PROMOTION OF ABOVE OBJECTIVE, BY ANO THER RESOLUTION, PASSED BY THE GOVERNMENT OF MAHARASHTRA ON 15.09.20 00, CIDCO WAS APPOINTED AS THE NODAL AGENCY FOR SETTING UP A SPEC IAL ECONOMIC ZONE AT NAVI MUMBAI I.E. THE NMSEZ. FOR THIS PURPOSE, TH E ASSESSEE- COMPANY HAS BEEN JOINTLY PROMOTED AS A SPECIAL PURP OSE VEHICLE (SPV) BY CIDCO AND DRONAGIRI INFRASTRUCTURE PVT LIMITED ( DIPL) TO DEVELOP AND OPERATE THE SPECIAL ECONOMIC ZONE AT NAVI MUMBA I. IV) AS PER DEVELOPMENT AGREEMENT BETWEEN THE ASSESS EE AND CIDCO, THE ASSESSEE IS REQUIRED TO MAKE PAYMENT OF LEASE P REMIUM IN RESPECT OF THE LAND WHICH IS BEING ACQUIRED BY CIDCO AND BE ING ALLOTTED TO THE ASSESSEE FROM TIME TO TIME. V) AS PER DEVELOPMENT AGREEMENT, THE ASSESSEE IS AU THORIZED TO DEVELOP AND MARKET THE NMSEZ. ACCORDINGLY, ASSESSEE -COMPANY PAID LEASE PREMIUM OF RS.50 CRORES IN ASSESSMENT YEAR 20 06-07, RS.946.06 CRORES IN ASSESSMENT YEAR 2007-08, RS.1033.61 CRORE S IN ASSESSMENT YEAR 2008-09 AND RS.146.82 CRORES IN ASSESSMENT YEA R 2009-10, IN RESPECT OF LAND ALLOTTED TO IT AND THE RELEVANT LEA SE DEED(S) EXECUTED. VI) BY VIRTUE OF SAID LEASE DEED(S), ASSESSEE HAS ACQUIRED LEASE HOLD RIGHTS IN THE LAND FOR THE PURPOSE OF DEVELOPING, D ESIGNING, PLANNING, FINANCING, MARKETING, DEVELOPING NECESSARY INFRASTR UCTURE, PROVIDING NECESSARY SERVICES, OPERATING AND MAINTAINING INFRA STRUCTURE ADMINISTRATING AND MANAGING SEZ. ASSESSEE HAS ALS O ACQUIRED THE RIGHTS TO DETERMINE, LEVY, COLLECT, RETAIN, UTILIZE USER CHARGES FEE FOR PROVISION OF SERVICES AND /OR TARIFFS IN ACCORDANCE WITH TERMS AND CONDITIONS PROVIDED IN THE DEVELOPMENT AGREEMENT AN D THE LEASE DEED (S) VII) THAT LEASE DEED(S) AS WELL AS DEVELOPMENT AGRE EMENT ASSIGNED TO THE ASSESSEE RIGHTS TO DEVELOP, CONSTRUCT AND DISPO SE OFF RESIDENTIAL AND COMMERCIAL SPACES AS PER TERMS AND CONDITIONS PROVI DED THEREIN. ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 5 VIII) THAT ASSESSEE IS ALSO ENTITLED TO GRANT SUB-L EASE IN RESPECT OF THE PORTIONS OF THE DEMISED (LEASED ) LAND, IN ACCORDAN CE WITH THE APPLICABLE LAW, AND AS PER THE PROVISIONS OF THE LE ASE DEED(S) IX) THAT THE LEASE DEED ALSO GRANTS THE ASSESSEE PO WER TO ASSIGN ITS RIGHT, TITLE OR INTEREST OR CREATE A SECURITY INTER EST IN RESPECT OF ITS RIGHT, EITHER FULLY OR IN PARTS THEREOF IN FAVOUR OF THE L ENDERS INCLUDING GRANTING OF STEP-IN-RIGHTS IN THE EVENT OF DEFAULT UNDER THE FINANCING AGREEMENT FOR THE PURPOSES OF OBTAINING FIANC. X) THAT THE ASSESSEE HAS ALSO ACQUIRED SOLE RIGHTS FOR MARKETING OF THE NMSEZ AND THE INDUSTRIAL/COMMERCIAL PROJECTS TO POT ENTIAL TENANTS. 4. IN RESPECT OF ABOVE PAYMENTS MADE BY ASSESSEE TO CIDCO TOWARDS LEASE PREMIUM, THE AO STATED THAT NO DEDUCTION OF T DS HAS BEEN MADE BY ASSESSEE FOR ANY OF SUCH PAYMENTS. THAT PAYMENTS /CREDITING OF LEASE PREMIUM FALLS WITHIN THE AMBIT OF SECTION 194-I OF THE ACT. THE AO ISSUED SHOW CAUSE NOTICE AS TO WHY THE ASSESSEE SHO ULD NOT BE TREATED AS AN ASSESSEE IN DEFAULT U/S 201(1) AND 201(1A) OF THE ACT FOR NOT DEDUCTING TAX U/S 194-I OF THE ACT OF LEASE PREMIUM PAID BY IT TO CIDCO FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION I. E. A.YS.2006-07 TO 2009-10. 5. ON BEHALF OF THE ASSESSEE IT WAS SUBMITTED THAT PRE- DOMINANT OBJECTIVE FOR THE PAYMENT OF LEASE PREMIUM UNDER LE ASE DEED(S) IS ACQUISITION OF LEASEHOLD RIGHTS IN THE SAID LEASEHO LD LAND AND NOT FOR THE USE OF THE LAND. THAT LEASE PREMIUM ARE CONSIDE RATION FOR PURCHASE OF LARGER INTEREST IN THE SAID LEASEHOLD LAND WHICH COMPRISES OF BUNDLE OF RIGHTS INCLUDING BUT NOT LIMITED TO RIGHT OF POS SESSION, RIGHT OF LONG TERM ENJOYMENT, RIGHT OF DEVELOPMENT BY WAY OF CONS TRUCTION OF BUILDING THEREON, RIGHT TO SALE CONSTRUCTED PREMISE S ON OWNERSHIP BASIS RIGHT TO COLLECT AND APPROPRIATE THE SALE PRO CEEDS ETC. THUS BY IMPLICATION LESSOR WOULD FOREGO ALL SUCH RIGHTS IN FAVOUR OF LESSEE PERMANENTLY. IT WAS ALSO CONTENDED THAT RENT AS DEF INED IN SECTION 194- I OF THE ACT, ENVISAGES SUCH PAYMENTS ONLY FOR USE OF LAND OR BUILDING, WITHOUT THERE BEING ANY CORRESPONDING ACQUISITION O F LARGER RIGHTS IN THE SAID LEASEHOLD PLOTS. HENCE, THE LEASE PREMIUM PAID TO CIDCO LTD. FOR ACQUISITION OF LEASEHOLD LAND IS CLEARLY DISTIN CT FROM RENT. ON BEHALF OF ASSESSEE, A REFERENCE WAS MADE TO SECTION 105 OF THE TRANSFER OF ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 6 PROPERTY ACT, 1882 AND SUBMITTED THAT RENT IS DEFIN ED TO MEAN MONEY PAID PERIODICALLY OR ONSPECIFIED OCCASION TO THE TR ANSFEROR OF LAND. RELYING ON THE DECISION OF THE HONBLE APEX COURT I N THE CASE OF A.R.KRISHNAMURTHY V/S CIT (176 ITR 417) IT WAS SUBM ITTED THAT THERE IS A DIFFERENCE BETWEEN RENT AND PREMIUM AND IF WHA T IS PAID IS THE COST OF ACQUISITION OF RIGHT IN A PROPERTY KNOWN AS LEASEHOLD RIGHT, IT IS NOT RENT BUT A PREMIUM WHICH IS A CAPITAL FOR THE R ECIPIENT. ON BEHALF OF THE ASSESSEE IT WAS ALSO SUBMITTED THAT SECTION 2(14) OF THE ACT ALSO RECOGNIZES LEASEHOLD INTEREST AS A SEPARATE, DISTIN CT AND INDEPENDENT RIGHT IN AN IMMOVABLE PROPERTY CAPABLE OF BEING TRA NSFERRED FOR A CONSIDERATION. THUS THE PAYMENT MADE BY THE LESSEE TO THE LESSOR TO BE CONSTRUED AS A CAPITAL PAYMENT FOR ACQUISITION OF L EASEHOLD RIGHTS IN ANY IMMOVABLE PROPERTY. HENCE THE PREMIUM FOR TRANS FER OF LAND UNDER LEASE WILL BE TAXABLE IN THE FORM OF CAPITAL GAIN U/S 45 OF THE ACT IN THE HANDS OF THE LESSOR. THE ASSESSEE ALSO PLACE D RELIANCE ON THE DECISION OF SPECIAL BENCH MUMBAI OF THE TRIBUNAL IN THE CASE OF JCIT V/S MUKUND LTD (13 SOT 558) (MUM) (106 ITD 231 (SB) AND SUBMITTED THAT THE TRIBUNAL HAS HELD THAT LUMP SUM PAYMENT OF RS.2.04 CRORES PAID BY THE ASSESSEE TO MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION (MIDC) ON LEASE FOR 99 YEAR S OF LAND BY MIDC FOR THE PURPOSE OF SETTING UP FACTORY/ PLANT W AS CAPITAL IN NATURE AS THE SAID PAYMENT WAS MADE FOR OBTAINING LEASEHOL D RIGHTS. THE ASSESSEE ALSO STATED THAT THE BASIC MOTIVE FOR MAKI NG PAYMENT OF LEASE PAYMENT FOR THE LEASE DEED IS TOWARDS TRANSFER OF L ARGER INTEREST/ AND LEASE HOLD RIGHTS BY CIDCO IN THE LEASEHOLD PLOTS A ND NOT JUST FOR ITS USE AS ENVISAGED U/S 194-I OF THE ACT. THEREFORE, THERE WAS NO DEFAULT FOR NOT DEDUCTING TDS AS QUESTION OF DEDUCTION OF TDS O N THE SAID PAYMENT DOES NOT ARISE. IT WAS ALSO STATED BEFORE T HE AO THAT THE LEASE PREMIUM PAID ARE CAPITAL RECEIPTS IN THE HANDS OF C IDCO AND ARE COMPLETELY DISTINGUISHED FROM RENT. HENCE, APPLICAB ILITY OF SECTION 194- I IS NOT APPLICABLE. 6. AO DID NOT AGREE WITH THE SUBMISSIONS OF ASSESSE E AND AFTER CONSIDERING THE DEFINITION OF RENT UNDER SECTION 19 4-I OF THE ACT IN THE LIGHT OF EXPLANATION(I) THEREOF STATED THAT DEFINIT ION OF RENT CREATES A LEGAL FICTION , WHEREBY ALMOST ANYTHING AND EVERYTH ING PAYMENT IN RELATION TO THE PROPERTY UNDER LEASE TRANSACTIONS Q UALIFY FOR RENT FOR THE PURPOSES OF SECTION 194-I OF THE ACT. HENCE LEA SE PREMIUM PARTAKES OF THE CHARACTER OF RENT. AO HAS FURTHER STATED THA T THERE ARE VARIOUS ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 7 RESTRICTIVE CLAUSES IN THE LEASE AGREEMENT WHICH NE GATES THE ASSESSEES CONTENTION THAT IT HAS ACQUIRED RIGHTS IN THE LAND AND NOT MERELY THE RIGHTS TO USE THE LAND. AO HAS STATED THAT HAD IT B EING A CASE OF ACQUISITION OF LAND RIGHTS, THERE WAS NO NEED TO PU T RESTRICTIVE CLAUSES IN THE AGREEMENT. AO AFTER CONSIDERING THE DECISION S OF THE HONBLE DELHI HIGH COURT IN THE CASE OF UNITED AIRLINES V/S CIT REPORTED IN 152 TAXMANN 516(DELHI), THE CASEOF CIT V/S REEBOK CO. R EPORTED IN 163 TAXMANN 61 (DEL), THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V/S HMT LTD 67 TAXMANN 506 (KAR) AND DE CISION OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF KR ISHNA OBEROI V/S UNION OF INDIA 123 TAXMANN 709 HAS HELD THAT THE LE ASE PREMIUM PAID BY THE ASSESSEE IS IN THE CHARACTER OF RENT AS PER EXTENDED DEFINITION CONTAINED UNDER SECTION 194-I OF THE ACT. THEREFORE , THE ASSESSEE HAS COMMITTED DEFAULT WITHIN THE MEANING OF SECTION 201 (1) OF THE ACT BY NOT DEDUCTING THE TAX AT SOURCE U/S 194-I OF THE AC T ON PAYMENT OF LEASE PREMIUM OF RS.50 CRORES IN ASSESSMENT YEAR 20 06-07, RS.946.06 CRORES IN ASSESSMENT YEAR 2007-08, RS.1033.61 CRORE S IN ASSESSMENT YEAR 2008-09 AND RS.146.82 CRORES IN ASSESSMENT YEA R 2009-10. AO HAS FURTHER STATED THAT THE ASSESSEE IS ALSO LIABLE TO PAY INTEREST U/S 201(1A) OF THE ACT. ACCORDINGLY, AO HAS STATED THE TAX AND INTEREST LIABILITY OF THE ASSESSEE FOR THE ASSESSMENT YEARS UNDER CONSIDERATION AS UNDER : ASSESSMENT YEAR SECTION 201(1) SECTION 201(1A) TOTA L 2006-07 8,49,75,000 5,86,32,750 14,36,07,750 2007-08 212,29,50,187 1,01,90,16,048 3,14,19,66,235 2008-09 2,34,21,65,994 1,00,33,40,347 3,34,55,06,34 1 2009-10 33,26,96,202 10,37,80,071 43,64,76,273 7. BEING AGGRIEVED, ASSESSEE FILED APPEALS BEFORE L D. CIT(A) AGAINST AFORESAID ORDERS OF AO PASSED U/S 201(1) AND 201(1A ) OF THE ACT ALL DATED 14.3.2011 8. L.D CIT(A) IN THE IMPUGNED ORDER(S) HAS STATED T HAT THE ASSESSEE FILED THE WRITTEN SUBMISSIONS STATING THE NON-APPLI CABILITY OF PROVISIONS FOR SECTION 194-I OF THE ACT ON LEASE PR EMIUM PAID TO CIDCO IN RESPECT OF LAND ALLOTTED TO IT. L.D CIT(A) HAS STATED THAT THE ASSESSEE EXECUTED LEASE AGREEMENTS WITH CIDCO. CIDC O HAS ALSO ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 8 EXECUTED THE DEVELOPMENT AGREEMENT WITH THE ASSESSE E WHICH OUTLINES AND RIGHTS AND OBLIGATIONS OF THE ASSESSEE WITH REGARD TO DESIGNING, PLANNING, FINANCING, MARKETING, DEVELOPM ENT OF NECESSARY INFRASTRUCTURE PROVISIONS OF NECESSARY SERVICES, OP ERATIONS AND MAINTENANCE OF INFRASTRUCTURE ADMINISTRATION AND MA NAGEMENT OF THE NMSEZ ALONG-WITH THE RIGHTS TO DETERMINE, LEV Y, COLLECT, RETAIN AND UTILIZE THE USER CHARGES, FEES FOR PROVISION OF SERVICES AND/OR TARIFFS IN ACCORDANCE WITH THE TERMS THEREIN. ON BE HALF OF THE ASSESSEE IT WAS CONTENDED THAT RENT AS DEFINED IN SECTION 19 4-I OF THE ACT IS ESSENTIALLY A PAYMENT ONLY FOR THE USE OF ANY LAND OR BUILDING. HOWEVER, THE PREDOMINANT OBJECTIVE FOR PAYMENT OF L EASE PREMIUM UNDER THE LEASE DEED(S) ISACQUISITION OF LEASEHOLD RIGHTS IN THE SAID LEASEHOLD PLOTS AND NOT FOR THE USE OF THE PLOTS. L EASE PREMIUM ARE CONSIDERATION FOR PURCHASE OF LARGER INTEREST IN TH E SAID LEASEHOLD PLOTS WHICH COMPRISES OF BUNDLE OF RIGHTS INCLUDING BUT NOT LIMITED TO RIGHT OF POSSESSION, RIGHT OF LONG TERM ENJOYMENT, RIGHT OF DEVELOPMENT BY WAY OF CONSTRUCTION OF BUILDING THER EON, RIGHT TO SALE CONSTRUCTED PREMISES ON OWNERSHIP BASIS, RIGHT TO C OLLECT AND APPROPRIATE THE SALE PROCEEDS, ETC. THAT GRANT OF L EASE BY CIDCO IN FAVOUR OF ASSESSEE IS A CAPITAL ASSETS. HENCE THE C ONSIDERATION RECEIVED BY CIDCO IS A CAPITAL RECEIPT AND NOT INCO ME BY WAY OF RENT. THE LD. CIT(A) HAS ALSO STATED THAT ASSESSEE FURTHE R SUBMITTED BEFORE HIM AS UNDER : RENT AS DEFINED IN SECTION 194-I OF THE INCOME-TA X ACT, 1961 ENVISAGES SUCH PAYMENTS MADE UNDER A LEASE ONLY FOR USE OF LAND, WITHOUT THERE BEING ANY CORRESPONDING ACQUISITION O F LARGER RIGHTS IN THE SAID LEASEHOLD PLOTS. HENCE THE LEASE PREMIUM P AID BY US TO CIDCO ARE CLEARLY DISTINCT FROM RENT. FURTHER TO THE ABOVE EXPLANATION, SECTION 105 OF T HE TRANSFER OF PROPERTY ACT, 1882 DEFINES A LEASE OF AN IMMOVABLE PROPERTY AS TRANSFER OF RIGHT TO ENJOY THE PROPERTY, MADE A CER TAIN TIME IN CONSIDERATION OF A PRICE. THE SECTION FURTHER DISTI NGUISHES BETWEEN LEASE PREMIUM AND RENT. RENT IS DEFINED U/S 105 OF THE TRANSFER OF PROPERTY ACT, 1882 TO MEAN MONEY PAID PERIODICALLY OR ON SPECIFIED OCCASION TO THE TRANSFEROR OF LAND. PREMIUM ON THE OTHER HAND MEANS A CONSIDERATION OF A PRICE PAID FOR TRANSFER OF A R IGHT TO ENJOY THE ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 9 PROPERTY. THUS, THERE IS A DIFFERENCE BETWEEN RENT AND PREMIUM. PREMIUM IS NOT PAID FOR THE USE OF LAND. WHEN THE INTEREST OF THE LESSOR IS PARTED WITH FOR A PRICE, THE PRICE PAID IS CALLED LEASE PREMIUM. BUT, THE PERIODICAL P AYMENTS MADE FOR THE CONTINUOUS ENJOYMENT OF THE BENEFIT UNDER THE L EASE IS IN THE NATURE OF RENT. THE AFORESAID VIEW HAS ALSO BEEN EN DORSED BY THE SUPREME COURT IN ITS DECISION IN THE CASE OF A.R. K RISHNAMURTHY V/S CIT REPORTED -176 ITR 417. THE SUPREME COURT IN THE CASE OF A. R KRISHNAMURTH Y V/S OT (SUPRA) HAS HELD THAT IF WHAT IS PAID IS THE COST OF ACQUIS ITION OF RIGHT IN A PROPERTY KNOWN AS LEASEHOLD RIGHTS IT IS NOT RENT B UT A PREMIUM WHICH IS A CAPITAL RECEIPT FOR THE RECIPIENT. CONSEQUENTLY, SECTION 2(14) OF THE INCOME-TAX ACT, 1961 ALSO RECOGNIZES LEASEHOLD INTEREST AS A SEPARATE, DISTIN CT AND INDEPENDENT RIGHT IN AN IMMOVABLE PROPERTY CAPABLE OF BEING TRA NSFERRED FOR A CONSIDERATION. BASED ON THE FOREGOING DECISION, THE PAYMENT MADE B Y THE LESSEE TO THE LESSOR WILL ACCORDINGLY BE CONSTRUED AS A CAPIT AL PAYMENT FOR ACQUISITION OF LEASEHOLD RIGHTS IN AN IMMOVABLE PRO PERTY AND HENCE THE PREMIUM FOR TRANSFER OF LAND UNDER LEASE WILL B E TAXABLE IN THE FORM OF CAPITAL GAINS U/S. 45 OF THE ACT IN THE HAN DS OF THE LESSOR. IT IS SUBMITTED THAT UNDER THE PROVISIONS OF THE IN COME TAX ACT, 1961, DIFFERENT TREATMENT CANNOT BE GIVEN TO SAME PAYMENT UNDER DIFFERENT SECTIONS OF THE INCOME- TAX ACT, 1961 I. E. IN THE HANDS OF LESSOR AS CONSIDERATION TAXABLE UNDER THE HEAD CAPITAL GAINS U/S. 45, IN THE HANDS OF LESSEE AS RENTFOR THE PURPOSE OF DEDUCTION OF TAX U/S 194-I THE ABOVE CONTENTION SEEMS VERY ABSURD AND AUTHORIT Y CANNOT TAKE SEPARATE STAND FOR TREATING A PAYMENT MADE BY APPEL LANT. THE BASIC MOTIVE FOR MAKING PAYMENT OF LEASE PREMIU M UNDER THE LEASE DEED IS TOWARDS TRANSFER OF LARGER INTEREST/ RIGHT (LEASEHOLD RIGHT) BY CIDCO TO US IN THE SAID LEASEHOLD PLOTS A RID NOT JUST FOR ITS USE AS ENVISAGED UNDER SECTION 194-I OF THE INCOME- TAX ART. 1961. ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 10 TAKING INTO ACCOUNT THE ABOVE REFERRED DISCUSSION, PAYMENTS MADE TOWARDS LEASE PREMIUM FOR ACQUISITION OF LAND AND H ENCE ARE NOT RENT FOR THE PURPOSE OF TDS U/S 194-I OF THE INCOME TAX ACT. THUS, QUESTION OF DEDUCTION OF TDS ON ABOVE PAYMENT WILL NOT ARISE. 8.1 IT IS ALSO OBSERVED ON PERUSAL OF ORDER OF LD. CIT(A) THAT ASSESSEE ALSO REFERRED CLAUSES (V) AND (VI) OF SUB-SECTION ( 47) OF SECTION 2 AND SECTION 269UA(D) OF THE INCOME TAX ACT AND STATED T HAT LEASE OF LAND IS CONSIDERED AS AN IMMOVABLE PROPERTY AND THE LEAS E PREMIUM PAID TO CIDCO IS CONSIDERATION FOR TRANSFER OF IMMOVABLE PROPERTY WHICH IS TAXABLE UNDER SECTION 45 AS CAPITAL GAINS ON SALE O F CAPITAL ASSETS. THEREFORE, IN THE HANDS OF PURCHASER CONSIDERATION PAID BY WAY OF LEASE PREMIUM IS FOR ACQUISITION OF A CAPITAL ASSET . THEREAFTER, ASSESSEE REFERRED THE CASES BEFORE LD. CIT(A) WHICH ARE DISCUSSED BY LD. CIT(A) AT PAGES 20 TO 23 OF THE IMPUGNED ORDER( S) WHICH WE CONSIDER RELEVANT TO REPRODUCE HEREINBELOW: 1. WHEN LEASE PREMIUM IS PAID IN RESPECT OF LEASE HOLD LAND ON LEASE FOR A PERIOD OF 60 YEARS THE APPELLANT CANNOT CLAIM WRITE-OFF OF THE LEASE PREMIUM ON PROPORTIONATE BASIS. IN THE CASE O F JCIT SPECIAL RANGE 23 V/S NATIONAL STOCK EXCHANGE OF INDIA, HON BLE ITAT, MUMBAI IN ITA NO. 1955/M/99, 2181/M/99, 4853/M/04, 4485/M/04, 4854/M/04, 356/M/01, 5850/M/00 UPHELD TH E AOS CONTENTION THAT LEASE PREMIUM IS CAPITAL IN NATURE AND CANNOT BE ALLOWED ON PROPORTIONATE BASIS OVER THE PERIOD OF L EASE. 2. REVENUES STAND THAT PREMIUM OF RS.62,500 IN AD DITION TO INCREASED RENT FOR CONVERTING TEMPORARY LEASE INTO A LONG TERM ONE, FOR A PERIOD OF 30 YEARS PAYABLE IN INSTALLMENTS WH ERE LEASE AGREEMENT PROVIDED FOR LESSOR TO TAKE BACK POSSESSI ON IN CERTAIN CONTINGENCIES WAS NOT ADVANCE RENT AND WAS CAPITAL EXPENDITURE WHICH WAS CONFIRMED BY THE HONBLE BOMBAY HIGH COUR T IN THE CASE OF COMMISSIONER OF INCOME-TAX V. PROJECT AUTOMOBILE S (1983) 15 TAXMAN 227 (BOM.). 3. WHEN THE ASSESSEE CLAIMED THAT COST OF LAND PAID TO THE LIQUIDATOR FOR THE LEASE LAND FROM MIDC SHOULD BE ALLOWED TO B E CONSIDERED FOR 71 YEARS OF LEASE PERIOD ON A PROPORTIONATE BASIS; THE DEPT REJECTED THE CLAIM OF THE ASSESSEE WHICH WAS UPHELD BY THE H ONBLE HIGH COURT ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 11 OF BOMBAY IN THE CASE OF CIT V/S KHIMLINE PUMPS LTD [258 ITR 459 (BOM)(2002). 4. ASSESSEE FIRM HAD ACQUIRED A PLOT OF LEASE FOR 3 0 YEARS AND IT HAD TO PAY PREMIUM IN 12 INSTALLMENTS AND ALSO 5% OF SUCH PREMIUM ANNUALLY AS GROUND RENT. THE ASSESSEE PAID THE INST ALLMENTS OF THE AFORESAID PREMIUM IN THE RELEVANT YEARS AND CLAIMED THE SAME AS DEDUCTABLE REVENUE EXPENDITURE. THE REVENUE TOOK A VIEW THAT THE PAYMENTS MADE BY THE ASSESSEE TOWARDS PREMIUM REPRE SENTED CAPITAL EXPENDITURE AND NOT REVENUE EXPENDITURE. TH IS VIEW OF THE DEPT. WAS UPHELD BY THE HON'BLE MADHYAPRADESH HIGH COURT IN THE CASE OF CIT V/S PROJECT AUTOMOBILES LTD [35 TAXMAN 181 (MP) 5. THE REVENUE DISALLOWED THE CLAIM OF THE ASSESSE E THAT EXPENDITURE OF RS.1,25,OOO PAID TO MIDC FOR PREMIUM ON LEASEHOL D LAND IS IN THE NATURE OF ADVANCE RENT. THE PERIOD OF LEASE IN THIS CASE WAS FOR 99 YEARS AND THE LEASE WAS ALSO FROM MIDC AS IN THE CA SE OF THE ASSESSEE. 6. THE PUNE TRIBUNAL UPHELD THE STAND OF THE REVEN UE IN THE CASE OF DEVI CONSTRUCTION CO. [IT APPEAL NO. 1769(PUNE)] TH AT THE EXPENDITURE CLAIMED BY THE ASSESSEE-COMPANY WAS CAP ITAL IN NATURE. IN THE AFORESAID JUDGMENTS VARIOUS COURTS HAVE CONF IRMED THE DEPT'S VIEW THAT LEASE PREMIUM IS A CAPITAL EXPENDITURE. T HEREFORE, WHEN IT COMES TO A DEDUCTIBILITY OF TDS ON SUCH PAYMENT, TH E DEPARTMENT CANNOT TAKE A STAND THAT IT IS A REVENUE EXPENDITUR E. THEREFORE, TDS IS DEDUCTABLE U/ S.194-I. FURTHER IN THE FOLLOWING CASES LEASE PREMIUM RECEIV ED HAS BEEN HELD AS A CAPITAL RECEIPT AND NOT IN THE NATURE OF ADVAN CE RENT. 1. DECISION OF SUPREME COURT IN THE CASE OF COMMIS SIONER OF INCOME- TAX V/S PANBARI TEA CO. LTD. OF INDIA (1965) 57 ITR 422 (SC) SECTION 4 OF THE INCOME-TAX ACT, 1961 [CORRESPONDING TO SEC TION 3 OF THE INDIAN INCOME-TAX ACT, 1922J - INCOME - CHARGEABLE AS - ASSESSMENT YEAR 1952-53- ASSESSEE COMPANY LEASED OUT TEA ESTAT ES ALONG WITH MACHINERY AND BUILDINGS AND RECEIVED PREMIUM -ITO M ADE ASSESSMENT TREATING PREMIUM AS A REVENUE RECEIPT - WHETHER SINCE, THERE WAS A TRANSFER OF SUBSTANTIVE INTEREST OF LES SOR IN ESTATES TO ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 12 LESSEE AND A CONFERMENT OF A RIGHT ON LESSEE TO USE SAID ESTATES BY EXPLOITING SAME, PREMIUM RECEIVED BY ASSESSEE AND B ALANCE IN SPECIFIED NUMBER OF HALF-YEARLY INSTALLMENTS WAS A CAPITAL RECEIPT - HELD, YES. 2. DECISION OF PATNA HIGH COURT IN THE CASE OF SRI SRI RAJA SHIVA PRASAD SINGH OF JHARIA & RATA JYOTI PRASAD SINGH DE O OF PANCHKOTE V/S CROWN SIR DAWSON MILLER KT, K.C., CJ. AND FOSTE R. J. (1924) 1 ITC 384 (PAT). SECTION 4 OF THE INCOME-TAX ACT, 1961 [CORRESPONDIN G TO SECTION 3 OF THE LNDIAN INCOME-TAX ACT, 1922) - INCOME CHARGEA BLE AS - ASSESSEE RECEIVED CERTAIN AMOUNT BY WAY OF SALAMI OR PREMIUM FOR GRANT OF LEASES OF MINERAL RIGHTS OIL PORTION OF HIS ESTATE - BESIDES, CERTAIN RENT AND ROYALTIES WERE ALSO PAID BY LESSEES OF MINING L EASES UPON COAL RAISED - WHETHER IN VIEW OF FACT THAT A LUMP SUM PA ID UNDER NAME OF SALAMI FOR GRANT OF LEASE, WAS MORE IN NATURE OF AN OUT AND OUT SALE OF PROPERTY, SUM SO RECEIVED BY ASSESSEE WAS IN NOSENS E INCOME WITHIN MEANING OF ACT - HELD, YES - WHETHER, HOWEVER, ANNU AL RENT AND ROYALTY RECEIVED FROM LESSEES ON QUANTITY OF COAL E XTRACTED WAS INCOME CHARGEABLE TO TAX - HELD, YES. 3. DECISION OF CALCUTTA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. PURNENDU MULLICK [1979] 116 ITR 591 ( CAL.) SECTION 4 OF INCOME-TAX ACT; 1961 - INCOME - CHARGEABLE AS - ASSESSMENT YEAR 1964-65 - ASSESSEE, ON EXECUTING A LEASE DEED IN RE SPECT OF CERTAIN PREMISES IN FAVOUR OF A COMPANY, RECEIVED A LUMP SU M AMOUNT BESIDES MONTHLY RENT - ASSESSEE CLAIMED THAT SAID S UM RECEIVED AS SALAMI OR PREMIUM CONSTITUTED CAPITAL RECEIPT AND T HEREFORE,WAS NOT TAXABLE AS INCOME - TRIBUNAL ACCEPTED ASSESSEE'S CL AIM - ON INSTANT REFERENCE, IT WAS SEEN THAT LUMP SUM AMOUNT PAID WA S DESCRIBED AS SALAMI OR PREMIUM AND NOT RENT - THERE WAS NO CLAUS E FOR REPAYMENT OF SAID AMOUNT OR ADJUSTMENT OF SAID AMOUNT AGAINST RENT - THERE WAS NOTHING ON RECORD TO SHOW THAT PREMIUM OR SALAM I PAID HAD ANY CHARACTERISTIC OF RENT - WHETHER IN AFORESAID CIRCU MSTANCES, IT COULD BE CONCLUDED THAT AMOUNT RECEIVED BY ASSESSEE AS SA LAMI WAS A CAPITAL RECEIPT, AND NOT LIABLE TO TAX - HELD, YES IN VIEW OF THE ABOVE SUBMISSION THE APPELLANT WAS NOT LIABLE TO DEDUCT T AX AT SOURCE U/S 194-1 FROM THE AFORESAID PAYMENTS MADE TO MMRDA SIN CE THE ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 13 PAYMENT WAS TOWARDS PURCHASE OF THE LEASEHOLD RIGHT IN THE LAND AND FOR THE PURCHASE OFTHE ADDITIONAL BUILT-UP AREA. TH EREFORE, THE SAME CANNOT BE CONSTRUED AS INCOME BY WAY OF RENT FOR TH E PURPOSES OF S.194-I. IF AT ALL, IT IS INCOME BY WAY OF CAPITAL GAINS IN THE HANDS OF MMRDA AND ACCORDINGLY IT IS NOT LIABLE TO DEDUCTION OF TAX AT SOURCE 8.2 L.D CIT(A) FORWARDED THE WRITTEN SUBMISSIONS OF THE ASSESSEE TO THE AO FOR HIS COMMENTS. LD. CIT(A) HAS STATED THAT THE AO SUBMITTED HIS DETAILED PARAWISE COMMENTS ON THE SUBMISSIONS O F THE ASSESSEE VIDE LETTER DATED 19.10.2011. THAT AO IN HIS SUBMIS SION REITERATED THE STAND THAT THE AMENDED DEFINITION OF RENT CONTAIN ED IN SECTION 194-I OF THE ACT W.E.F. 13.7.2007 IS VERY WIDE AND COMPRE HENSIVE AND COVERS ANY PAYMENT BY WHATEVER NAME CALLED UNDER ANY LEAS E, SUB-LEASE, TENANCY OR OTHER AGREEMENT OR ARRANGEMENT AND LEAV ES NO SCOPE FOR ANY INTERPRETATION. THAT ALL THE PAYMENTS UNDER THE LEASE BY WHATEVER NAME CALLED ARE RENT WITHIN THE MEANING OF SECTION 194-I OF THE ACT. AO HAS STATED THAT ONE HAS TO LOOK AT SUBS TANCE AND NOT THE FORM OF THE TRANSACTION WHILE CONSIDERING THE PROVI SION OF LAW. THE AO ALSO PLACED RELIANCE ON THE DECISION OF THE HON BLE CALCUTTA HIGH COURT IN THE CASE OF BRAITHWAITE AND CO. INDIA LTD, 111 ITR 542 AND KARNATAKA HIGH COURT JUDGMENT IN THE CASE OF CIT V/ S HMT LTD (SUPRA). LD.CIT(A) HAS ALSO STATED THAT LD.ADDL. CI T ALSO CONTENDED IN THE PERSONAL HEARING THAT TDS PROVISIONS ARE A SEPA RATE CODE IN THEMSELVES. THAT WHILE APPLYING THESE PROVISIONS, O NE HAS TO LOOK INTO THE LIABILITY OF THE DEDUCTOR ONLY, IRRESPECTIVE OF THE TAX LIABILITY OF THE DEDUCTEE. IT WAS SUBMITTEDTHAT IT IS NOT NECESSARY THAT CAPITAL EXPENDITURE IN THE HANDS OF ONE PARTY IS ALSO A CAP ITAL RECEIPT IN THE HANDS OF OTHER PARTY. AO IN THE WRITTEN SUBMISSIONS ALSO SUBMITTED THAT THE LEASE AGREEMENT SIGNED BY CIDCO WITH THE A SSESSEE CONTAINS VARIOUS RESTRICTIVE COVENANTS WHICH DO NOT GIVE ANY ABSOLUTE RIGHT TO THE LAND BUT REDUCED IT TO A RENTAL ARRANGEMENT FOR USE OF THE LAND. LD. CIT(A) HAS STATED THAT THE AO ALSO CITED THE CA SES, THE DETAILS OF WHICH HE HAS MENTIONED IN PARA 5.9 OF THE IMPUGNED ORDER (S) 8.3 LD. CIT(A) HAS FURTHER STATED THAT AO VIDE LETT ER DATED 2.11.2011 FURNISHED SUPPLEMENTARY ARGUMENTS FOR ALL THE ASSES SMENT YEARS UNDER CONSIDERATION AND STATED THAT AS THE PREMIUM IS NOTHING BUT ADVANCE LEASE RENT AND REFERRED THE DECISION OF HON BLE APEX COURT IN THE CASE OF AGARWAL CHAMBERS OF COMMERCE V/S GANPAT RAI HIRALAL, ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 14 REPORTED IN 33 ITR 245 WHEREIN IT HAS BEEN HELD THA T PERSONS WHO ARE RESPONSIBLE FOR DEDUCTION OF TAX AT SOURCE ARE NOT CONCERNED WITH THE ULTIMATE RESULT OF THE ASSESSMENT. 8.4 LD. CIT(A) HAS STATED IN PARA 5.11 OF THE IMPU GNED ORDER (S) THAT A COPY OF WRITTEN SUBMISSION FILED BY AO WAS PROVID ED TO THE ASSESSEE FOR THEIR COMMENTS AND THE ASSESSEE FILED ITS REJOI NDER COMMON FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION ON 25.10.2 011, REITERATING ITS STAND THAT THE LEASE PREMIUM PAID CONSTITUTES C APITAL PAYMENT FOR ACQUIRING LEASEHOLD RIGHT IN THE PROPERTY AND DOES NOT REPRESENT RENT FOR USE OF LAND AS CONTEMPLATED U/S 194-I OF THE AC T. LD. CIT(A) HAS STATED THAT ASSESSEE RELIED UPON THE LEASE DEED(S) AND RELATED DOCUMENTS WHICH REFERRED TO THE PAYMENT AS PREMIUM FOR ACQUIRING RIGHT IN LEASEHOLD LAND. THE ASSESSEE ALSO STATED T HAT VARIOUS CLAUSES IN THE LEASE DEED(S) REFERRED BY AO AS RESTRICTIVE COVENANTS, ARE IN FACT REGULATORY CLAUSES OF PLANNED DEVELOPMENT OF THE AR EA AND FOR PROVIDING COMMON AMENITIES AND CO-EXISTENCE OF THE OCCUPANTS. THAT THESE REGULATORY CLAUSES ARE APPLICABLE EVEN TO FRE EHOLD LAND WHEN THE CORPORATION OR DEVELOPMENT AUTHORITIES UNDERTAK ES TO IMPLEMENT PLANNED DEVELOPMENT. THOUGH THESE CLAUSES IN LEASE DEED(S) DO NOT IN ANY MANNER CONVERT A PREMIUM FOR LEASEHOLD RIGHT IN TO AN ADVANCE RENT FOR USE OF LAND. LD. CIT(A) HAS STATED THAT TH E ASSESSEE SUMMARISES THE SUBMISSIONS AND THE SAME HAVE BEEN S TATED AT PAGES 28 TO 30 OF THE IMPUGNED ORDER(S) OF LD.CIT(A) AS U NDER : TO SUMMARIES THE SUBMISSIONS, THE APPELLANT RESPEC TFULLY SUBMITS THAT : I) THE PAYMENT MADE BY THE APPELLANT (LESSEE) TO TH E CIDCO LESSER IS FORACQUIRING THE RIGHT IN THE LEASE PREMISES AND NO T AN ADVANCE RENT FOR USE OF THE LEASE PREMISES OVER A PERIOD OF 60 Y EARS; II) THE LEASE PREMIUM HAS BEEN PAID FOR GETTING PO SSESSION OF THE LEASE PROPERTY BEFORE THE LEASE AGREEMENT IS ENTERE D INTO. III) THE APPELLANT (LESSEE) HAS A RIGHT TO OWN AND TRANSFER THE LEASE PROPERTY FOR A CONSIDERATION SUBJECT TO COMPLIANCE OF CONDITIONS STIPULATED IN THE LEASE AGREEMENT. ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 15 IV) THE LEASE PROPERTY UNDER THE AGREEMENT CAN BE INHERITED OR SUCCEEDED BY THE LEGAL HEIR OR SUCCESSOR; V) THE CLAUSES IN THE LEASE AGREEMENT REFER TO THE PAYMENT MADE BY THE APPELLANT (LESSEE) AS A PREMIUM BEING CONSIDERA TION FOR ACQUIRING THE LEASE HOLD PROPERTY. NONE OF THE CLAU SES IN THE LEASE AGREEMENT REFERS TO THE PREMIUM PAID BY THE APPELLA NT (LESSEE) AS ADVANCE RENT; VI) THE APPELLANT(LESSEE) WILL HAVE NO RIGHT TO GET ANY REFUND OF PREMIUM PAID FOR ACQUIRING THE LEASE HOLD RIGHT ON ITS SURRENDER BEFORE THE EXPIRY DATE. VII) THE VARIOUS CLAUSES OF THE LEASE AGREEMENT WHI CH ARE REFERRED BY THE AO IN ITS SUBMISSION BEFORE YOUR HONOUR AS REST RICTIVE CLAUSES, ARE IN FACT REGULATORY CLAUSES INCORPORATED IN THE LEAS E AGREEMENT FOR DESIRED DEVELOPMENT OF THE LEASED AREA IN A PARTICU LAR MANNER AND A PARTICULAR PURPOSE AS REGULATORY AUTHORITY PROVIDES COMPLETE INFRASTRUCTURE AND GIVE EFFECT TO THE INTENTION OF THE GOVERNMENT TO DEVELOP THE AREA. VIII) KARNATAKA HIGH COURT JUDGEMENT IN THE CASE OF HMT LTD. HAS BEEN DECIDED BY THE HON'BLE COURT ON A FINDING OF F ACT BY THE ITAT THAT THE PAYMENT MADE BY THE LESSEE CONSTITUTES AN ADVANCE RENT AND HENCE THE SAME SHALL BE ALLOWED AS DEDUCTION U/S 37 ( 1) OF THE 1. T. ACT. MOREOVER THE VARIOUS DECISIONS OF THE BOMBAY H IGH COURT AND THE 1TAT HAVE CLEARLY DISTINGUISHED THE HMT'S CASE AND ITS APPLICABILITY TO THE PREMIUM PAID FOR ACQUIRING LEA SE HOLD RIGHT. THE HON'BLE ITAT MUMBAI SPECIAL BENCH IN THE CASE OF MU KUND LTD. HAS DISCUSSED IN DETAIL THE JUDGEMENT OF HMT LTD. AND H ELD THAT PREMIUM PAID FOR ACQUIRING THE LEASEHOLD RIGHT DOES NOT CON STITUTE AN ADVANCE RENT. HON'BLE ITAT MUMBAI, SPECIAL BENCH HAS FOLLOW ED THE JURISDICTIONAL HIGH COURT'S VIEW IN THE CASE OF KHI MLIN PIPES LTD. WHEREIN THE JURISDICTIONAL HIGH COURT HAS HELD THAT PREMIUM PAID FOR ACQUIRING THE LEASE HOLD RIGHT CONSTITUTES A CAPITA L EXPENDITURE AND NOT ANADVANCE PAYMENT OF RENT FOR THE LEASE PERIOD. IX) SECTION 194-I OF THE IT ACT CLEARLY PROVIDES TH AT PAYMENT MADE BY A PERSON SHOULD BE IN THE NATURE OF 'AN INCOME BY W AY OF RENT'. THIS ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 16 EXPRESSION EXPRESSLY REQUIRES THAT THE RECEIPT IN T HE HANDS OF THE LESSER/ OWNER MUST CONSTITUTE THE INCOME BY WAY OF RENT IN THE HANDS OF THE RECIPIENT. X) THE DEFINITION OF RENT CONTAINED IN EXPLANATION TO SECTION 194-I ALSO CLEARLY PROVIDE THAT THE PAYMENT MADE MUST BE 'FOR THE USE OF . LAND 'NOWHERE THE DEFINITION OF RENT ROPES IN THE C ONSIDERATION PAID FOR ACQUIRING LEASEHOLD RIGHT. THE APPELLANT (LESSE E) REITERATES ITS CONTENTION THAT THE PREMIUM PAID FOR ACQUIRING LEAS EHOLD RIGHT IS NOT 'AN INCOME BY WAY OF RENT' OF THE RECIPIENT FOR USE OF LAND. XI) THE VARIOUS JUDGMENTS RELIED UPON BY THE APPELL ANT(LESSEE) IN SUPPORT OF ITS CONTENTION CLEARLY CONFIRMS THE VIEW THAT THE PREMIUM PAID FOR ACQUIRING LEASEHOLD RIGHTS IN LAND CONSTIT UTES A CONSIDERATION OF CAPITAL NATURE AND NOT AN ADVANCE RENT FOR USE O F THE LAND OVER THE LEASE PERIOD. ON THE PLAIN READING OF THE LEASE AGR EEMENT THE PREVAILING FACTS OF THE CASE AND TAKING A WHOLISTIC VIEW OF FACTS AND CIRCUMSTANCES OF THE CASE AND THE POSITION IN LAW, SUCH LEASE PREMIUM PAID CANNOT BE CONSIDERED TO BE A RENT WITHIN THE M EANING OF SECTION 194-I. THE APPELLANT ONCE AGAIN SUBMITS THAT ITS SU BMISSION CONCERNING LEASE PREMIUM PAID IS FULLY SUPPORTED BY VARIOUS JUDICIAL PRONOUNCEMENTS WHICH ARE DISCUSSED IN DETAIL BY THE HONBLE ITAT SPECIAL BENCH, MUMBAI IN THE CASE OF MUKUND LTD ... XII) RECENTLY THE HONBLE ITAT, MUMBAI HAD AN OCCAS ION TO CONSIDER SIMILAR ISSUE WHEREIN THE LEASE PREMIUM PAID BY NAT IONAL STOCK EXCHANGE OF INDIA LTD. TO MMRDA FOR ACQUIRING LEASE HOLD RIGHT IN LAND AT BANDRA KURLA COMPLEX WAS CLAIMED TO BE A DE DUCTIBLE ADVANCE RENT OVER THE LEASE PERIOD. THE HONBLE ITA T FOLLOWING MUKUND LTDS CASE AND CLEARLY HELD THAT SUCH PAYMEN T OF LEASE PREMIUM CONSTITUTES A CAPITAL EXPENDITURE FOR ACQUI RING LEASE HOLD RIGHT AND NOT AN ADVANCE RENT FOR A LEASE PERIOD. IN VIEW OF THE ABOVE SUBMISSIONS IT IS RESPECTFULLY SUBMITTED THAT THE LEASE PREMIUM PAID BY THE APPELLANT (LESSEE) CANNOT BE CONSIDERED TO BE AN ADVANCE RENT WITHIN THE MEANING OF SECTION 19 4-I OF THE I. T. ACT AND THE ORDER PASSED BY THE AO U/S 201/201(1A) SHAL L BE VACATED ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 17 9. LD. CIT(A) HAS STATED THAT HE HAS CONSIDERED AO S ORDER, SUBMISSIONS AS WELL AS THE ASSESSEES SUBMISSIONS A ND REJOINDER. HE HAS STATED THAT HE HAS STUDIED THE DEVELOPMENT AGRE EMENT AND THE LEASE DEED(S) EXECUTED BETWEEN THE ASSESSEE AND THE CIDCO AS WELL. LD. CIT(A) HAS STATED IN PARA 5.17 OF THE IMPUGNED ORDER THAT FROM THE ANALYSIS OF DEVELOPMENT AGREEMENT AND LEASE DEE D(S) ENTERED INTO BETWEEN THE ASSESSEE AND CIDCO, WRITTEN SUBMIS SIONS OF THE ASSESSEE AND THE ASSESSING OFFICER AND THE ASSESSME NT ORDER AND VARIOUS OTHER RELATED DOCUMENTS FOLLOWING FACTS EME RGE: I. THE GOVERNMENT OF MAHARASHTRA THROUGH A RESOLUT ION DATED 18.03.1970 DECIDED THAT A SUBSIDIARY COMPANY OF THE STATE INDUSTRIAL INVESTMENT CORPORATION OF MAHARASHTRA LTD. SHOULD B E ENTRUSTED THE TASK OF DEVELOPMENT OF TRANS-THANA AND TRANS-HARBOU R AREAS IN URAN, PANVEL AND THANA WITH A VIEW TO DECONGEST AND PROVI DE RELIEF TO MUMBAI CITY AND ALSO TO ENSURE THE INTEGRATED DEVEL OPMENT OF THE REGION ALONG WITH ITS INDUSTRIAL DEVELOPMENT LATER, CITY AND INDUSTRIAL DEVELOPMENT CORPORATION OF MAHARASHTRA L TD (CIDCO) WHICH WAS CREATED AND ESTABLISHED UNDER THE COMPANI ES ACT, 1956, WAS DESIGNATED ASNEW TOWN DEVELOPMENT AUTHORITY FOR THIS TASK II. IT WAS DECIDED BY THE GOVERNMENT THAT PRIVATELY OWNED LANDS IN THE PROJECT AREA SHALL BE ACQUIRED BY THE GOVERNMENT AN D WILL BE PLACED AT THE DISPOSAL OF CIDCO. CIDCO WAS REQUIRED TO UND ERTAKE ALL THE DEVELOPMENT WORK, PROVIDE NECESSARY INFRASTRUCTURE ON BEHALF OF THE GOVERNMENT AND DISPOSE-OFF THE LAND, RESIDENTIAL, C OMMERCIAL ARID SOCIAL STRUCTURES AND COLLECT SERVICE CHARGES ETC T O THE EXTENT REQUIRED. III. LATER, FOR PROMOTION OF THE ABOVE OBJECTIVE. A NOTHER RESOLUTION WAS PASSED BY GOVERNMENT OF MAHARASHTRA ON 15.09.20 00, WHEREIN CIDCO WAS APPOINTED THE NODAL AGENCY FOR SETTING UP A SPECIAL ECONOMIC ZONE AT NAVI MUMBAI I.E THE NMSEZ. FOR THI S PURPOSE. THE APPELLANT COMPANY HAS BEEN JOINTLY PROMOTED AS A SP ECIAL PURPOSE VEHICLE (SPV) BY CIDCO AND DRONAQIRI 'INFRASTRUCTUR E PVT LIMITED (DIPL) TO DEVELOP AND OPERATE THE SPECIAL ECONOMIC ZONE AT NAVI MUMBAI. IV. AS PER DEVELOPMENT AGREEMENT BETWEEN THE APPELL ANT AND CIDCO, THE APPELLANT IS REQUIRED TO MAKE PAYMENT OF LEASE PREMIUM IN ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 18 RESPECT OF THE LAND WHICH IS BEING ACQUIRED BY CIDC O AND BEING ALLOTTED TO THE APPELLANT FROM TIME TO TIME. V. AS PER THIS DEVELOPMENT AGREEMENT, THE APPELLANT IS AUTHORIZED TO DEVELOP AND MARKET THE NMSEZ. VI. DURING THE CURRENT YEAR, THE APPELLANT WAS ALLO TTED 450 HECTARES OF LAND AS DESCRIBED IN PARA 5.2 ABOVE FOR AN AGGREGAT E AMOUNT OF LEASE PREMIUM OF RS.285.87 CRORES, VIDE LEASE DEED DATED 16.3.2006. OUT OF THIS AMOUNT, AN AMOUNT OF RS.50 CRORES HAS BEEN PAI D BY THE APPELLANT IN THE CURRENT YEAR. VII. BY VIRTUE OF THE SAID LEASE DEED(S), THE APPE LLANT HAS ACQUIRED LEASEHOLD RIGHT IN THE LAND FOR THE PURPOSE OF DEVE LOPING, DESIGNING, PLANNING, FINANCING, MARKETING, DEVELOPING NECESSAR Y INFRASTRUCTURE, PROVIDING NECESSARY SERVICES, OPERATING AND MAINTAI NING THE INFRASTRUCTURE, ADMINISTERING AND MANAGING THE SEZ. THE APPELLANT ALSO HAS ACQUIRED THE RIGHTS TO DETERMINE, LEVY, CO LLECT. RETAIN AND UTILIZE THE USER CHARGES, FEES FOR PROVISION OF SER VICES AND / OR TARIFFS IN ACCORDANCE WITH THE TERMS LAND CONDITIONS PROVID ED IN THE DEVELOPMENT AGREEMENT AND THE LEASE DEED(S). VIII. THE LEASE DEED(S) AS WELL AS THE DEVELOPMENT AGREEMENT, ASSIGNED TO THE APPELLANT RIGHTS TO DEVELOP, CONSTR UCT AND DISPOSE OFF RESIDENTIAL AND COMMERCIAL SPACES AS PER TERMS AND CONDITIONS PROVIDED THEREIN. IX. THE APPELLANT IS ALSO ENTITLED TO GRANT SUB-LE ASES IN RESPECT OF THE PORTIONS OF THE DEMISED (LEASED) LAND, IN ACCORDANC E WITH THE APPLICABLE LAW, AND AS PER THE PROVISIONS OF THE LE ASE DEED. X. SIMILARLY, THE LEASE DEED(S) ALSO GRANT THE APPE LLANT POWER TO ASSIGN ITS RIGHTS, TITLE OR INTEREST OR CREATE A SE CURITY INTEREST IN RESPECT OF ITS RIGHTS, EITHER FULLY OR IN PARTS THE REOF IN FAVOUR OF THE LENDERS INCLUDING GRANTING OF STEP-IN RIGHTS IN THE EVENT OF DEFAULT UNDER THE FINANCING AGREEMENT FOR THE PURPOSE OFOBT AINING FINANCE. XI. THE APPELLANT HAS ALSO ACQUIRED SOLE RIGHTS FO R MARKETING OF THE NMSEZ AND THE INDUSTRIAL/ COMMERCIAL PROJECTS TO PO TENTIAL TENANTS. ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 19 10. IN VIEW OF ABOVE, LD. CIT(A) HAS STATED THAT TH E ASSESSEE HAS BEEN ALLOTTED LAND FOR A PERIOD OF 60 YEARS ON THE PAYME NT OF LEASE PREMIUM. THAT THE LEASE DEED(S) AND THE DEVELOPMENT AGREEMENT, ASSIGNS TO THE ASSESSEE LEASE HOLD RIGHTS WHICH INC LUDES A BUNDLE OF RIGHTS, SOME OF WHICH ARE OUTLINED ABOVE. ASSESSEE MADE PAYMENT OF LEASE PREMIUM TO CIDCO WITHOUT DEDUCTING TDS AND TH E AO HAS HELD THAT THE PAYMENT OF LEASE PREMIUM IS NOTHING BUT RE NT COVERED UNDER THE DEFINITION OF RENT PROVIDED U/S 194-I OF THE AC T AND HENCE THE DEDUCTION OF TAX AT SOURCE WAS REQUIRED. LD. CIT(A) HAS THEREAFTER REPRODUCED SECTION 194-I OF THE ACT WHICH IS AS UND ER : RENT. 194-I. ANY PERSON, NOT BEING AN INDIVIDUAL OR A HIN DU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO [A RESIDEN T] ANY INCOME BY WAY OF RENT, SHALL, AT THE TIME OF CREDIT OF SUCH I NCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN C ASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVE R IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATE OF (A) TWO PER CENT FOR THE USE OF ANY MACHINERY OR PL ANT OR EQUIPMENT; AND (B) TEN PER CENT FOR THE USE OF ANY LAND OR BUI LDING (INCLUDING FACTORY BUILDING) OR LAND APPURTENANT TO A BUILDING (INCLUDING FACTORY BUILDING) OR FURNITURE OR FITTINGS: PROVIDED THAT NO DEDUCTION SHALL BE MADE UNDER THIS SECTION WHERE THE AMOUNT OF SUCH INCOME OR, AS THE CASE MAY BE, T HE AGGREGATE OF THE AMOUNTS OF SUCH INCOME CREDITED OR PAID OR LIKE LY TO BE CREDITED OR PAID DURING THE FINANCIAL YEAR BY THE AFORESAID PERSON TO THE ACCOUNT OF, OR TO, THE PAYEE, DOES NOT EXCEED [ONE HUNDRED AND EIGHTY THOUSAND RUPEES] : [PROVIDED FURTHER THAT AN INDIVIDUAL OR A HINDU UND IVIDED FAMILY, WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LI MITS SPECIFIED UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURI NG THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WH ICH SUCH INCOME BY WAY OF RENT IS CREDITED OR PAID, SHALL BE LIABLE TO DEDUCT INCOME-TAX UNDER THIS SECTION.] EXPLANATION.FOR THE PURPOSES OF THIS SECTION, ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 20 [(I) RENT MEANS ANY PAYMENT, BY WHATEVER NAME CAL LED, UNDER ANY LEASE, SUB-LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR THE USE OF (EITHER SEPARATELY OR TOGETHER) ANY, (A) LAND; OR (B) BUILDING (INCLUDING FACTORY BUILDING); OR (C) LAND APPURTENANT TO A BUILDING (INCLUDING FACTO RY BUILDING); OR (D) MACHINERY; OR (E) PLANT; OR (F) EQUIPMENT; OR (G) FURNITURE; OR (H) FITTINGS, WHETHER OR NOT ANY OR ALL OF THE ABOVE ARE OWNED BY THE PAYEE;] (II) WHERE ANY INCOME IS CREDITED TO ANY ACCOUNT, W HETHER CALLED SUSPENSE ACCOUNT OR BY ANY OTHER NAME, IN THE BOO KS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH INCOME, SUCH CREDITIN G SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE P AYEE AND THE PROVISIONS OF THIS SECTION SHALL APPLY ACCORDINGLY. 11. LD.CIT(A) VIDE PARAS 5.20 TO 5.28 HAS HELD THA T LEASE PREMIUM PAID BY THE ASSESSEE UNDER LEASE IS PAID FOR OBTAIN ING THE LEASE AND IT CANNOT BE EQUATED WITH THE RENT. WE CONSIDER IT NEC ESSARY TO REPRODUCE PARAS 5.20 TO 5.28 OF THE IMPUGNED ORDER( S) OF LD. CIT(A) WHICH ARE AS UNDER : 5.20 THIS SECTION THUS REQUIRES THAT A PERSON WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT COME BY WAY OF RENT' 'FOR THE USE OF' LAND ETC. SHALL AT THE TIME OF CREDIT OR PAYMENT OF SUCH INCO ME DEDUCT TAX AT SOURCE AT REQUIRED RATE. ALTHOUGH THIS MEANING IS V ERY WIDE SO AS TO INCLUDE ALL TYPES OF TRANSACTIONS WHICH FALL IN THI S CATEGORY, STILL THE LEGISLATURE HAS INTENTIONALLY INCLUDED THE WORDS 'F OR THE USE OF' SO THAT THE MEANING OF THE RENT' IS NOT INTERPRETED BE YOND ITS MEANING IN COMMON PARLANCE. IN COMMON PARLANCE, RENT IS A CONS IDERATION PAID BY A TENANT TO THE LAND LORD IN RESPECT OF A PROPER TY OR ASSET TAKEN ON RENT. THE RENT IS PAID OBVIOUSLY FOR THE USE OF THE SAID PROPERTY AS OTHERWISE, IF THE PROPERTY IS NOT USED, THERE WOULD BE NO NEED TO TAKE THE PROPERTY ON RENT. THE WORD 'USE' HERE IS THEREF ORE OF UTMOST ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 21 IMPORTANCE IN ANY TRANSACTION WHERE THE CONSIDERATI ON PAID FOR THE PROPERTY WOULD BE TERMED AS 'RENT'. HOWEVER, THE ME ANING OF WORD 'USE' HERE HAS TO BE INTERPRETED IN THE MOST SIMPLE AND COMMON MANNER, KEEPING IN VIEW THE RELATIONSHIP BETWEEN A LANDLORD AND A TENANT. 5.21 THIS IS SO BECAUSE, IF THE WORD 'USE' WAS ALSO MEANT TO INCLUDE EXPLOITATION OF PROPERTY BY CHANGING ITS IDENTITY/ SHAPE AND THEN SELLING IT OFF, THERE WOULD BE NO DIFFERENCE BETWEE N A SALE TRANSACTION AND A TRANSACTION AKIN TO THE TRANSACTION BETWEEN A LANDLORD AND A TENANT SO FAR AS ABOVE TDS PROVISIONS OF SECTION 19 4-I, ARE CONCERNED. A TRANSACTION OF LEASE MAY HAVE STIPULATIONS WHICH MAKE IT A TRANSACTION IDENTICAL TO THE TRANSACTION BETWEEN A LANDLORD AND A TENANT ( REFER TO THE DECISION OF CALCUTTA HIGH COU RT IN THE CASE OF BRAITHWAITE & CO INDIA LTD, 111 ITR 542). AND THAT IS WHY VARIOUS TERMS LIKE SUB-LEASE, TENANCY OR ANY OTHER AGREEMEN T OR ARRANGEMENT HAVE BEEN USED IN THE SECTION SO AS TO COVER ALL SU CH CASES, WHERE A CONSIDERATION IS PAID FOR THE USE OF BUILDING, MACH INERY, ETC. UNDER AN ARRANGEMENT WHICH IS SIMILAR TO A TRANSACTION BETWE EN A LANDLORD AND A TENANT. HOWEVER IN MANY CASES, A LEASE TRANSA CTION MAY NOT NECESSARILY BE SIMILAR OR IDENTICAL TO THE TRANSACT ION BETWEEN A LANDLORD AND A TENANT; AND INSTEAD IT MAY INDICATE A SALE TRANSACTION IN THE SENSE THAT CERTAIN MORE VALUABLE RIGHTS IN T HE PROPERTY ARE TRANSFERRED. AS PER LEGAL UNDERSTANDING OF THE TERMS, THE TRANSA CTION IN WHICH LICENCE ' IS GRANTED TO THE TRANSFEREE FOR USE OF THE PROPERTY IS MORE OFTEN LIKELY TO BE TO THE TRANSACTION BETWEEN A LAN DLORD AND A TENANT WHEREAS IN A 'LEASE' TRANSACTION PERTAINING TO AN I MMOVABLE PROPERTY, IT MAY NOT BE SO VERY OFTEN. THEREFORE, I N MY OPINION, ALTHOUGH THE MEANING OF TERM 'RENT' USED IN THE ABO VE SECTION ISVERY WIDE, STILL CANNOT BE APPLIED TO ALL AND ANY OF THE TRANSACTIONS OUT OF CONTEXT INDISCRIMINATELY. 5.22 THEREFORE, IF THE TENANT/ LESSEE/ LICENSEE OF THE PROPERTY USES THE PROPERTY FOR HIS OWN PURPOSE OR EMPLOYS IT FOR HIS OWN BENEFIT, THE CONSIDERATION PAID WOULD BE 'RENT'. HOWEVER, IF THE PROPERTY IS EXPLOITED IN A MANNER THAT ITS IDENTITY DOES NOT RE MAIN THE SAME AND THEREAFTER IT IS SOLD FOR A PROFIT, I'M AFRAID, IT WOULD NOT BE CALLED 'USE' ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 22 OF PROPERTY BY THE TENANT; RATHER IT WOULD BE EXPLO ITATION OF THE PROPERTY BY VIRTUE OF CERTAIN RIGHTS, WHICH WOULD B E OVER AND ABOVE THE RIGHTS OF A TENANT (WHICH ARE FOR MERE USE OF T HE PROPERTY MAY BE WITH CERTAIN MODIFICATIONS). IN THE CASE OF THE APP ELLANT, THE RIGHTS ARE NOT MERE USE OF THE PROPERTY (LAND) BY THE APPE LLANT ITSELF; RATHER THE RIGHTS ARE FOR EXPLOITATION OF THE PROPERTY BY DEVELOPING AND CONSTRUCTING RESIDENTIAL/ COMMERCIAL SPACES AS WELL AS INDUSTRIAL PROJECTS AND/OR PROVIDE INFRASTRUCTURE FOR SUCH PRO JECTS AND SELLING SUCH SPACES AT A PROFIT. THIS TRANSACTION THEREFORE CANNOT BE STRETCHED BEYOND ITS MEANING AND IT CANNOT BE CATEG ORIZED AS A TRANSACTION WHICH IS IN-BETWEEN A LANDLORD AND A TE NANT. THIS IS SO BECAUSE THE APPELLANT IS NOT BOUND TO USE THE PROPE RTY ITSELF AND HENCE CONSIDERATION PAID IS NOT RENT WITHIN THE MEA NING OF EXPLANATION BELOW SECTION 194-I. THE APPELLANT HAS THUS ACQUIRED A CAPITAL RIGHT TO DEVELOP THE LAND AND EXPLOIT THE S AME. 5.23 IT IS ALSO SEEN THAT THE AMOUNT CHARGED BY THE CIDCO AS LEASE PREMIUM HAS NO CONNECTION WITH THE RENTAL VALUE OF LAND. THUS, THE WHOLE TRANSACTION TOWARDS GRANT OF LEASEHOLD RIGHTS TO THE APPELLANT IS NOTHING BUT A TRANSACTION OF TRANSFER OF PROPERT Y AND THE LEASE PREMIUM IS THE CONSIDERATION FOR THE PURCHASE OF TH E SAID LEASEHOLD RIGHTS, WHICH COMPRISES OF A BUNDLE OF RIGHTS, INCL UDING RIGHT OF POSSESSION, RIGHT OF EXPLOITATION OF PROPERTY AND I TS LONG-TERM ENJOYMENT. 5.24 IN THIS CONTEXT, THE DECISION OF HONBLE SUPR EME COURT IN THE CASEOF A.R.KRISHNAMURTHY (SUPRA) IS VERY MUCH RELEV ANT WHERE THE ASSESSEE, AFTER PURCHASING TWO PIECES OF LAND, HAD GRANTED A MINING LEASE IN FAVOUR OF A COMPANY. WHEN THE AO ASSESSED THE INCOME FROM THE SAID TRANSACTION UNDER THE HEAD 'CAPITAL GAINS' TREATING THE TRANSACTION OF LEASE AS TRANSFER OF A CAPITAL ASSET IN THE FORM OF A VALUABLE RIGHT, THE ASSESSEE CHALLENGED THE SAME UP TO THE SUPREME COURT. HONOURABLE SUPREME COURT HELD THAT WHEN THE ASSESSEE PURCHASED THE LAND, HE HAD NOT ONLY ACQUIRED THE LA ND, BUT ALSO HAD ACQUIRED A BUNDLE OF RIGHTS IN THE SAID LAND INCLUD ING THE RIGHT TO GRANT LEASE. HENCE THE AO WAS RIGHT IN CHARGING TO CAPITAL GAINS TAX UNDER SECTION 45 OF THE ACT, THE PROFITS ARISING OU T OF THE SAID TRANSACTION OF LEASE. IN THE CASE OF THE APPELLANT ALSO, THE MMRDA BEING THE OWNER OF THE LAND, HAS TRANSFERRED ITS RI GHT OF DEVELOPMENT ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 23 AND EXPLOITATION OF LAND TO THE APPELLANT AND THESE RIGHTS ARE THEREFORE CAPITAL IN NATURE. 5.25 I DO AGREE WITH THE LD. ADDL CIT AND THE AO T HAT THE TDS PROVISIONS ARE A SEPARATE CODE IN THEMSELVES. I ALS O AGREE THAT IT IS NOT DESIRABLE OR PERMISSIBLE TO PICK OUT A WORD OR SENT ENCE FROM THE JUDGEMENT OF A COURT DIVORCED FROM THE CONTEXT OF T HE QUESTION UNDER CONSIDERATION AND TREAT IT TO BE THE COMPLETE LAW D ECLARED BY THE COURT (REFER CIT VS. SUN ENGINEERING (SUPRA)]. HOWE VER, EVERYTHING WOULD DEPEND UPON THE FACTS OF EACH CASE AND THE FA CTS OF THE CASES CITED AS WELL AS THE CONTEXT IN WHICH THE CITED DEC ISIONS HAVE BEEN DELIVERED. - 198 ITR 297(SC) 5.26 ALTHOUGH THE TERM 'RENT' HAS BEEN DEFINED IN T HE ABOVE SECTION OF THE ACT. OTHER TERMS LIKE 'LEASE', 'LEASE PREMIUM', 'LESSOR' AND 'LESSEE' ETC. HAVE NOT BEEN DEFINED IN THE ACT. IT MAY BE US EFUL TO REFER TO THE MEANING OF THESE TERMS AS PROVIDED IN THE TRANSFER OF PROPERTY ACT, 1882. SECTION 105 OF THE TRANSFER OF PROPERTY ACT D EFINES THE TERM LEASE AS 'A LEASE OF IMMOVEABLE PROPERTY IS A TRANS FER OF A RIGHT TO ENJOY SUCH PROPERTY, MADE FOR A CERTAIN TIME, EXPRE SS OR IMPLIED, OR IN PERPETUITY, IN CONSIDERATION OF A PRICE PAID OR PRO MISED, OR OF MONEY, A SHARE OF CROPS, SERVICE OR ANY OTHER THING OF VAL UE, TO BE RENDERED PERIODICALLY OR ON SPECIFIED OCCASIONS TO THE TRANS FEROR BY THE TRANSFEREE, WHO , ACCEPTS THE TRANSFER ON SUCH TERM S. IN THE CASE OF LEASE, PRICE IS CALLED THE PREMIUM, AND THE MONEY, SHARE, SERVICE OR OTHER THING TO BE RENDERED IS CALLED THE RENT; THE TRANSFERORS IS CALLED THE LESSOR AND THE TRANSFEREE IS CALLED THE LESSEE . 5.27 THE SECTION THEREFORE BRINGS OUT THE DISTINCTI ON BETWEEN A PRICE PAID FOR A TRANSFER OF RIGHT TO ENJOY THE PROPERTY AND THE RENT TO BE PAID PERIODICALLY TO THE LESSOR WHEN THE INTEREST O F THE LESSOR IS PARTED WITH FOR A PRICE, THE PRICE PAID IS PREMIUM OR SALAMI. BUT THE PERIODICAL PAYMENTS MADE FOR THE CONTINUOUS ENJOYME NT OF THE BENEFITS UNDER THE LEASE ARE IN THE NATURE OF RENT. IT WOULD, THEREFORE TRANSPIRE THAT A PREMIUM IS NOT PAID UNDER A LEASE, BUT IS PAID AS A PRICE FOR OBTAINING THE LEASE; HENCE, IT PRECEDES T HE GRANT OF LEASE THEREFORE, IT CANNOT BE EQUATED WITH THE RENT. WHIC H IS PAID PERIODICALLY. ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 24 5.28 FURTHERMORE, IF THE LEASE PREMIUM WAS IN THE NATURE OF ADVANCE RENT, THEN, IF FOR ANY REASON THE LEASE IS TERMINAT ED EARLIER THAN THE PRESCRIBED PERIOD, THE ADVANCE RENT WOULD HAVE TO B LE REFUNDED. HOWEVER, IN THE CASE OF APPELLANT, THE LEASE DEED D OES NOT PROVE FOR ANY REFUND OF LEASE PREMIUM. IT IS THUS SEEN THAT T HERE IS NO PROVISION IN THE LEASE FOR TERMINATION OF LEASE AT THE INSTAN CE OF THE LESSEE AND HENCE FOR REFUND OF THE LEASE PREMIUM. 12. LD. CIT(A) HAS THEREAFTER DISCUSSED IN PARAS 5.30 TO 5.45 OF IMPUGNED ORDER(S) THE CASE LAWS AS REFERRED BY AO AS WELL AS BY THE ASSESSEE IN THEIR WRITTEN SUBMISSION S AND ALSO POINTED OUT AT THE TIME OF HEARING. WE CONSIDER IT PRUDENT TO REPRODUCE SAID PARAS WHICH ARE AS UNDER : 5.30 WHILE CONSIDERING THE TREATMENT OF RENT AND L EASE PREMIUM UNDER THE INCOME TAX ACT, IT IS NOTED THAT THE DIST INCTION BETWEEN THE LEASE PREMIUM AND RENT WAS FIRST BROUGHT OUT BY THE JUDICIAL COMMITTEE IN THE CASE OF RAJA BAHADUR KAMAKHYA NARA IN SINGH OF RAMGARH VS. COMMISSIONER OF INCOME TAX, 11 ITR 513 (PC) WHEREIN IT HAS BEEN HELD THAT: THE PAYMENTS WHICH UNDER THE LEASE WERE EXIGIBLE B Y THE LESSOR MAY BE CLASSED UNDER THREE CATEGORIES: (I) THE SALAMI O R PREMIUM ; (II) THE MINIMUM ROYALTY ; (III) THE ROYALTIES PER TON. THE SALAMI HAS BEEN RIGHTLY TREATED AS A CAPITAL RECEIPT. IT WAS A SING LE PAYMENT MADE FOR THE ACQUISITION OF THE RIGHT OF THE LESSEES TO ENJO Y THE BENEFITS GRANTED TO THEM BY THE LEASE. THAT GENERAL RIGHT MAY PROPER LY BE REGARDED AS A CAPITAL ASSET, AND THE MONEY PAID TO PURCHASE IT MAY PROPERLY BE HELD TO BE A PAYMENT ON CAPITAL ACCOUNT. BUT THE RO YALTIES WERE ON A DIFFERENT FOOTING. 5.31 IN THE MEMBER FOR THE BOARD OF AGRICULTURAL IN COME TAX ASSAM V/S SINDHURANI CHAUDHRANI AND ORS, 32 ITR 169, THE HONBLE SUPREME CHARACTERIZED A LEASE PREMIUM (SALAMI) AS A LUMPSUM NON-RECURRING PAYMENT. IT HAS BEEN HELD : WHERE SALAMI IS IN TH E FORM OF A LUMPSUM-NON- RECURRING PAYMENT MADE BY A PROSPECTIV E TENANT TO THE LANDLORD AS A CONSIDERATION FOR THE SETTLEMENT OF AGRICULTURAL LAND AND PARTING WITH CERTAIN RIGHTS OF THE LAND IN THE LAND IN FAVOUR OF THE ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 25 PROSPECTIVE TENANTS, AND IS PAID ANTERIOR TO THE CO NSTITUTION OF RELATIONSHIP OF LANDLORD AND TENANT, IT IS NOT REN T WITHIN THE MEANING OF THE WORD USED IN THE DEFINITION OF AGRI CULTURAL INCOME IN SECTION 2(1)(A) OF THE ASSAM AGRICULTURAL INCOME TA X ACT, 1939. IT HAS ALL THE CHARACTERISTICS OF A CAPITAL PAYMENT AN D IT IS NOT REVENUE. IT IS, THEREFORE, NOT AGRICULTURAL INCOME WITHIN THE MEANING OF THAT ACT. 5.32 SIMILARLY IN THE CASE OF CHINTAMANI SARAN NATH SAH DEO V/S COMMISSIONER OF INCOME-TAX [1961] 41 ITR 506 (SC) T HE SUPREME COURT HELD THAT : HELD, ON THE FACTS, THAT THE LICENCE WAS NOT MEREL Y A GRANT FOR THE USE OF THE CAPITAL OF THE ASSESSEE BUT IT WAS REALLY A GRANT OF A RIGHT TO A PORTION OF THE CAPITAL IN THE SHAPE OF A GENERAL RI GHT TO THE CAPITAL ASSET. THE AMOUNTS RECEIVED BY THE ASSESSEE WERE CA PITAL RECEIPTS AND WERE NOT ASSESSABLE TO INCOME-TAX 5.33 THE MATTER WAS AGAIN CONSIDERED BY THE HONBL E SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V/S PANBA RI TEA CO. LTD.(1965) 57 ITR 422 (SC). IN THIS JUDGMENT, THE S UPREME COURT HAS CONSIDERED VARIOUS DECISIONS AVAILABLE ON THE ISSUE AND HELD THAT SINCE THERE WAS A TRANSFER OF SUBSTANTIVE INTEREST OF LESSOR IN ESTATES IN FAVOUR OF THE LESSEE AND THERE WAS A CONFERMENT OF A RIGHT ON THE LESSEE TO USE THE SAID ESTATES BY EXPLOITING THEM, PREMIUM RECEIVED BY THE ASSESSEE WAS A CAPITAL RECEIPT IN THE HANDS OF THE LESSOR. IT WOULD BE USEFUL TO CONSIDER THE RATIO OF THE SAID DECISIO N, WHICH IS AS UNDER : THE REAL TEST OF A SALAMI OR PREMIUM IS WHETHER T HE AMOUNT PAID, IN A LUMPSUM OR IN INSTALMENTS IS THE CONSIDERATION PA ID BY THE TENANT FOR BEING LET INTO POSSESSION. WHEN THE INTEREST OF THE LESSOR IS PARTED WITH FOR A PRICE, THE PRICE PAID IS PREMIUM OR SALA MI. BUT THE PERIODICAL PAYMENTS MADE FOR THE CONTINUOUS ENJOYME NT OF THE BENEFITS UNDER THE LEASE ARE IN THE NATURE OF RENT. THE FORMER IS A CAPITAL RECEIPT, AND THE LATTER ARE REVENUE RECEIPT S. THERE MAY BE CIRCUMSTANCES WHERE THE PARTIES MAY CAMOUFLAGE THE REAL NATURE OF THE TRANSACTION BY USING CLEVER PHRASEOLOGY. ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 26 5.34. WHILE DECIDING THE ISSUE THE HON'BLE SUPREME COURT OBSERVED THAT : 'UNDER SECTION 105 OF THE TRANSFER OF PROPERTY ACT, A LEASE OF IMMOVABLE PROPERTY IS A TRANSFER OF A RIGHT TO ENJO Y THE PROPERTY MADE FOR A CERTAIN TIME, EXPRESS OR IMPLIED, OR IN PERPETUITY, IN CONSIDERATION OF A PRICE PAID OR PROMISED, OR OF MO NEY, A SHAREOF CROPS, SERVICE OR ANY OTHER THING OF VALUE, TO BE R ENDERED PERIODICALLY OR ON SPECIFIED OCCASIONS TO THE TRANSFEROR BY THE TRANSFEREE, WHO ACCEPTS THE TRANSFER ON SUCH TERMS. THE TRANSFEROR IS CALLED THE LESSOR, THE TRANSFEREE IS CALLED THE LESSEE, THE PRICE IS C ALLED THE PREMIUM, AND THE MONEY, SHARE, SERVICE OR OTHER THING TO BE SO R ENDERED IS CALLED THE RENT. THIS SECTION, THEREFORE, BRINGS OUT THE DISTI NCTION BETWEEN A PRICE PAID FOR A TRANSFER OF A RIGHT TO ENJOY THE P ROPERTY AND THE RENT TO BE PAID PERIODICALLY TO THE LESSOR. WHEN THE INT EREST OF THE LESSOR IS PARTED WITH FOR A PRICE, THE PRICE PAID IS PREMIUM OR SALAMI. BUT THE PERIODICAL PAYMENTS MADE FOR THE CONTINUOUS ENJOYME NT OF THE BENEFITS UNDER THE LEASE ARE IN THE NATURE OF RENT. THE FORMER IS A CAPITAL INCOME AND THE LATTER A REVENUE RECEIPT. 5.35 THE COURT FURTHER OBSERVED THAT : 'IN SOME CASES, THE SO-CALLED PREMIUM IS IN FACT AD VANCE RENT AND IN OTHERS RENT IS DEFERRED PRICE. IT IS NOT THE FORM B UT THE SUBSTANCE OF THE TRANSACTION THAT MATTERS. THE NOMENCLATURE USED MAY NOT BE DECISIVE OR CONCLUSIVE BUT IT HELPS THE COURT, HAVI NG REGARD TO THE OTHER CIRCUMSTANCES, TO ASCERTAIN THE INTENTION OF THE PARTIES. AFTER CONSIDERING VARIOUS FACTS AND PROVISIONS OF L AW, THE SUPREME COURT, WHILE APPROVING THE ORDER OF HIGH COUT HELD THAT THE RECEIPT OF PREMIUM IS CAPITAL RECEIPT AND NOT REVENUE RECEIPT. 5.36 HON'BLE BOMBAY HIGH COURT IN THE CASE OF KHIML INE PUMPS LTD., 258 ITR 459 HAVE ON THE BASIS OF IDENTICAL FACTS AN D CIRCUMSTANCES HELD THAT, AN AMOUNT OF RS.45 LAKHS PAID BY THE ASS ESSEE TO M/S APVE LTD (WHICH WAS BEING WOUND UP) FOR ACQUISITION OF L EASEHOLD LAND WAS A CAPITAL EXPENDITURE AND HENCE THE SAME WAS NOT DE DUCTIBLE. THE APPELLATE TRIBUNAL COULD NOT HAVE DIRECTED THE DEPA RTMENT TO APPORTION THE AMOUNT OVER A PERIOD OF 71 YEARS. IN THIS CASE, A PLOT OF ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 27 LAND MEASURING 20,300 SQUARE METRES IN DISTRICT THA NE WAS LEASED OUT BY MIDC TO A COMPANY KNOWN AS APV EQUIPMENTS LT D FOR A PERIOD OF 95 YEARS, COMMENCING FROM AUGUST 1965 ON A PAYME NT OF RENT OF RS.1 (PER YEAR) AND IN CONSIDERATION OF PAYMENT OF RS.1,62,400/- AS PREMIUM. AT THE END OF THE LEASE, THE LESSEE WAS TO QUIETLY DELIVER TO THE LESSOR THE LAND. THE LESSEE WAS ALSO ENTITLED T O REMOVE ANY BUILDINGS, ERECTIONS OR STRUCTURES PUT UP BY THE LE SSEE ON THE LAND. UNDER THE LEASE, IT WAS FURTHER PROVIDED THAT WITHO UT THE PERMISSION OF THE LESSOR, THE LESSEE SHALL NOT ASSIGN, UNDER L ET OR PART WITH THE POSSESSION OF THE PREMISES. LATER, SINCE THE SAID C OMPANY M/S APVE LTD WENT INTO LIQUIDATION, THE ASSETS OF THE COMPAN Y WERE SOLD TO THE ASSESSEE ON A PRICE OF RS.75 LAKHS OUT OF WHICH RS. 45 LAKHS RELATED TO ACQUISITION OF LEASEHOLD LAND. THE ASSESSEE CONTEND ED BEFORE THE AO THAT RS.45 LAKHS WAS PAID AS ADVANCE RENT TOWARDS T HE LEASEHOLD LAND AND HENCE THE SAME WAS DEDUCTIBLE. IN THE LIGHT OF ABOVE FACTS AND CIRCUMSTANCES, HON'BLE BOMBAY HIGH COURT AS ALREADY STATED ABOVE, HELD THAT THE PAYMENT OF RS.45 LAKHS BY THE ASSESSE E WAS A CAPITAL EXPENDITURE AND HENCE THE SAME WAS NOT DEDUCTIBLE. 5.37 THE SPECIAL BENCH OF MUMBAI TRIBUNAL IN THE CA SE OF JCIT VS. MUKUND LTD., (106 ITR 231] ALSO HAD AN OCCASION TO CONSIDER THE SIMILAR ISSUE I.E. 'WHETHER THE PREMIUM PAID FOR AC QUIRING LEASEHOLD RIGHT IN LAND IS REVENUE OR CAPITAL'. THE SPECIAL B ENCH OF THE JURISDICTIONAL TRIBUNAL HAS SIMILARLY HELD ASUNDER: 21. IN THE CASE BEFORE US THE LEASE IS FOR A PERIO D OF 99 YEARS, WHICH IS AS GOOD AS A PERPETUAL LEASE IN FAVOUR OF THE ASSES SEE. THERE IS NO MATERIAL ON RECORD TO SUGGEST THAT THE AMOUNT OF RS . 2.04 CRORES PAID TO THE GOVERNMENT CONCERN MIDC WAS AN ADVANCE PAYME NT OF RENT FOR THE PERIOD OF LEASE PAID IN LUMP SUM BY THE ASSESSE E-COMPANY. THE TERMS OF AGREEMENT DATED 5- 3-1992 ENTERED INTO BET WEEN ASSESSEE- COMPANY AND THE GOVERNMENT BODY M/S. MIDC CLEARLY M ENTIONS THAT A SUM OF RS. 2.04 CRORES IS THE AMOUNT OF DEPOSIT T O BE ADJUSTED TOWARDS 'PREMIUM' PAYABLE BY THE LICENSEE FOR THE A LLOTMENT OF 50 ACRES OF LAND IN KALVA INDUSTRIAL AREA. THE PLEA OF THE ASSESSEE THAT THE LEASE AGREEMENT WAS NOT ENTERED INTO TILL DATE AND HENCE, THE STATUS OF THE ASSESSEE IS THAT OF A LICENSEE ONLY, MAKES NO DIFFERENCE, SINCE ON PAGE-2 OF THE AGREEMENT OF THE ASSESSEECOM PANY WITH MIDC DATED 5-3-1992, IT IS SPECIFICALLY MENTIONED THAT T HE LICENSEE SHALL BE ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 28 DEEMED TO BE BARE LICENSEE ONLY OF THE PREMISES AT THE SAME RENT AND SUBJECT TO SAME TERMS AS IF THE LEASE HAD BEEN ACTU ALLY EXECUTED. A READING OF THE AGREEMENT DATED 5-3-1992 ENTERED INT O WITH MIDC CLEARLY SHOWS THAT THE AMOUNT OF RS. 2.04 CRORES WE RE PAID BY THE ASSESSEE-COMPANY TO MIDC AS 'PREMIUM' OR 'SALAMI' F OR THE ACQUISITION OF THE PREMISES OF LEASE FOR A PERIOD O F 99 YEARS. IN REPLY TO A SPECIFIC QUERY FROM THE BENCH, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE COST OF BOUNDARY WALLS ON THIS 5 0 ACRES OF LAND WAS CAPITALIZED IN THE ACCOUNT BOOKS OF THE ASSESSEE AN D DEPRECIATION WAS CLAIMED BY THE ASSESSEE. THE ACTION OF THE ASSESSIN G OFFICER IN ALLOWING PROPORTIONATE RENT IN THE SUBSEQUENT ASSES SMENT YEARS 1995-96 AND 1996-97, SHALL NOT ALTER THE CHARACTER OF THE AMOUNT PAID BY THE ASSESSEE TO MIDC FOR ACQUISITION OF THE PREMISES. WE ARE AWARE THAT MERE USE OF THE WORD 'PREMIUM' IN THE AG REEMENT DATED 5-3-1992 SHALL NOT MAKE THE CHARACTER OF THE AMOUNT OF RS. 2.04 CRORES PAID TO MIDC AS 'PREMIUM', IF THE COMBINE RE ADING OF THE AGREEMENT LEADS TO SOME OTHER CONCLUSION. IN THIS C ASE, NOT ONLY THE WORD 'PREMIUM' HAS BEEN USED IN ALL RELEVANT TERMS OF THE AGREEMENT DATED 5-3-1992 WITH GOVERNMENT CONCERN MIDC, BUT AL SO CONSIDERING THE TERMS OF THE AGREEMENT DATED 5-3-1992 AS A WHOL E IT IS CLEAR THAT THE AMOUNT OF RS. 2.04 CRORES WAS PAID AS 'PREMIUM' FOR ACQUISITION OF LEASEHOLD RIGHTS IN THE PREMISES. THE CLAUSE 5(B )( I) OF THE SAID AGREEMENT DATED 5-3-1992 PROVIDES THAT IN CASE OF T ERMINATION OF LEASE, THE 'PREMIUM' IS NON-REFUNDABLE. IT PROVIDES THAT IN CASE THE LICENSEE FAILS TO COMPLETE THE SAID FACTORY BUILDIN G WITHIN THE TIME AFORESAID AND IN ACCORDANCE WITH THE STIPULATIONS P ROVIDED THEREIN, THE MIDC WITHOUT MAKING ANY COMPENSATION OR ALLOWAN CE TO LICENSEE FOR THE SAME AND WITHOUT MAKING ANY PAYMENT TO THE LICENSEE FORREFUND OR REPAYMENT OF THE PREMIUM AFORESAID OR ANY PART THEREOF, CAN RESUME THE LAND IN QUESTION. THUS, IN CASE OF T ERMINATION OF LEASE, THE 'PREMIUM' IS NON-REFUNDABLE AND THEREFORE, THE SAME CANNOT BE CONSIDERED AS ADVANCE PAYMENT OF RENT. THERE IS NO CLAUSE IN THIS AGREEMENT TO SHOW THAT THE AMOUNT OF RS. 2.04 CRORE S WAS PAID BY THE ASSESSEE AS ADVANCE RENT FOR ALL FUTURE YEARS AND T HE LUMP SUM PAYMENT OF FUTURE YEARS RENT HAS BEEN PAID TO AVAI L SOME CONCESSION FOR ADVANCE PAYMENT OF RENT OR FOR SOME OTHER BUSIN ESS CONSIDERATION. THE LAND IN QUESTION IS INHERITABLE ALSO AS PER THE TERMS AND CONDITIONS OF THE AGREEMENT WITH MIDC. TH EREFORE, CONSIDERING THE TERMS OF AGREEMENT DATED 5-3-1992 A S A WHOLE, WE ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 29 HOLD THAT THE CONSIDERATION OF RS. 2.04 CRORES WAS PAID TO MIDC AS A PRICE FOR OBTAINING THE LEASEHOLD RIGHTS FOR A PERI OD OF 99 YEARS FROM MIDC IN FAVOUR OF THE ASSESSEE. 5.38 IN THE ABOVE DECISION, THE SPECIAL BENCH HAS C LEARLY HELD THAT THE AMOUNT OF RS.2.04 CRORES PAID BY THE ASSESSEE COMPA NY TO THE GOVT. CONCERN MIDC CANNOT BE CONSIDERED AS ADVANCE PAYMEN T OF RENT FOR THE PERIOD OF LEASE THE SPECIAL BENCH STRONGLY RELI ED UPON AND FOLLOWED THE PRINCIPLES LAID DOWN BY THE SUPREME CO URT IN THE CASE OF PANBARI TEA CO. LTD (SUPRA) AND BY THE BOMBAY HIGH COURT IN THE CASE OF KHIMLINE PUMPS LTD (SUPRA). SIMILARLY, IN T HE CASE OF R.K.PALSHIKAR, 172 ITR 311 HONBLE SUPREME COURT HE LD THAT THE PREMIUM RECEIVED FOR GRANT OF LEASE OF A PLOT OF LA ND FOR 99 YEARS IS CHARGEABLE AS CAPITAL GAINS AS THE ASSESSEE HAD T RANSFERRED AN ASSET OF ENDURING NATURE VIZ RIGHT OF POSSESSION AND ENJO YMENT OF THE PROPERTY. THUS VARIOUS JUDGMENTS DELIVERED BY THE C OURTS AND TRIBUNALS BRINGS OUT A DISTINCTION BETWEEN THE LEAS E PREMIUM AND RENT UNDER THE INCOME TAX LAWS WHICH ARE ALSO IN LI NE WITH THE PRINCIPLES OF GENERAL LAW LAID DOWN UNDER TRANSFER OF PROPERTY ACT. 5.39 THE AO HAS CITED CASES WHERE THE TERM RENT W AS GIVEN WIDE MEANING AS ENVISAGED IN SECTION 194-I OF THE ACT AN D IN VIEW OF THE FACTS AND THE CIRCUMSTANCES OF THE CASE. IN ALL THE SE CASES, THE DECISION GIVEN IS NOT AT ALL IN CONFLICT WITH THE DISCUSSION AND THE FINDING ARRIVED AT PARAS 5.20 TO 5.22 ABOVE. IN THE CASE OF KRISHNA OBEROI V/S UNION OF INDIA (SUPRA), THE AMOUNT PAID FOR USE AND OCCUPATION OF HOTEL ROOMS WAS CONSIDERED AS RENT WITHIN THE MEANI NG OF SECTION 194-I OF THE ACT. IT WAS HELD THAT THERE WAS NO WEI GHTY OR SOUND REASON TO LIMIT THE MEANING OF WORK RENT OCCURRIN G IN EXPLANATION TO SECTION 194-I ONLY TO THE PAYMENT MADE BY A TENA NT OR LESSEE FOR THE USE OF LAND OR BUILDINGS DEMISED TO HIM. FURTHE R IN THE CASE OF UNITED AIRLINES V/S CIT (SUPRA), IT WAS HELD THAT T HE TERM RENT HAS A WIDER MEANING AND IT INCLUDES AGREEMENT OR ARRANGEM ENT FOR USE OF LAND. THE AO HAS ALSO REFERRED TO THE DECISION IN T HE CASE OF CIT V/S REEBOK INDIA CO.(SUPRA), WHEREIN THE SECURITY DEPOS IT WAS CONSIDERED AS RENT IN THE FACTS OF THE GIVEN CASE. SIMILAR IS THE CASE OF SMT. BISAKHA SARKAR (SUPRA), WHERE ALSO, A BANK (NAMELY BANK OF INDIA) WAS THE TENANT OF A PROPERTY, WHICH WAS JOINTLY OWN ED BY 4 PERSONS, THE LANDLORDS MADE A CLAIM THAT NO TAX IS DEDUCTIBL E BECAUSE THEIR ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 30 INDIVIDUAL SHARE OF RENT IS BELONG THE DEDUCTIBLE L IMIT. HONBLE HIGH COURT HELD THAT IT WAS A JOINTLY OWNED PROPERTY AND HENCE THE LANDLORDS WERE AN AMALGAM OF 4 PERSONS. THEREFORE, THE TAX UNDER SECTION 194-I WAS TO BE DEDUCTED @20%. IN NONE OF T HESE CASE, THE ISSUE OF LEASE PREMIUM AS IN THE CASE OF THE APPE LLANT VIS--VIS RENT HAS BEEN CONSIDERED. 5.40 LD. ADDL. CIT, IN SUPPO RT OF HIS ARGUMENTS HAS ALSO FURNISHED A COPY OF THE DECISION DATED 02. 02.2010 OF LD. CIT(A)-IV, CHENNAI IN THE CASE OF FOXCONN INDIA DEV ELOPERS PVT.LTD WHEREIN SIMILAR ISSUE WAS INVOLVED AND THE DECISION OF AO (TDS OFFICER) HAS BEEN UPHELD. I HAVE CONSIDERED THIS DE CISION OF LD.CIT(A)- IV, CHENNAI. HOWEVER, I RESPECTFULLY DO NOT AGREE W ITH THE SAME. FIRSTLY, IT IS SEEN THAT MOST OF THE DECISIONS DISC USSED ABOVE WERE NEITHER CITED BY THE AO/ ASSESSEE IN THAT CASE, NOR CONSIDERED BY THE LD. CIT(A). FURTHERMORE, IT IS NOT KNOWN AS TO WHET HER OR NOT IN THAT CASE, THE ASSESSEE WAS GRANTED DEDUCTION TOWARDS LE ASE RENT IN ASSESSMENT PROCEEDINGS. THE AO HAS ALSO STATED THAT FOR DEDUCTION OF TAX AT SOURCE, IT IS NOT NECESSARY THAT THE PAYMENT SHOULD BE OF THE REVENUE NATURE ONLY. FOR THIS PURPOSE, HE HAS POINT ED OUT THAT IN SECTION 194-LA, ALTHOUGH THE PAYMENT OF COMPENSATIO N FOR ACQUISITION OF IMMOVABLE PROPERTY IS OF CAPITAL NAT URE, STILL THE TAX IS LIABLE TO BE DEDUCTED. I DO NOT THINK THAT THIS ARG UMENT HAS ANY RELEVANCE HERE BECAUSE THE PROVISION UNDER CONSIDER ATION IS THAT OF SECTION 194-I, WHICH IS FOR THE PURPOSE OF TAX DEDU CTION AT SOURCE IN RESPECT OF PAYMENT OF RENT. THE 'RENT' IS OBVIOUSLY IN THE NATURE OF A REVENUE EXPENDITURE. 5.41 I HAVE ALSO CONSIDERED THE OTHER CASES RELIED UPON BY THE AO. THESE CASES LAY DOWN GENERAL PRINCIPLES OF INTERPRE TATION OF LAW. I FIND THAT IN NONE OF THE ABOVE CASES THE COURT HAS HELD THAT THE LEASE PREMIUM IN SIMILAR CIRCUMSTANCES IS IN THE NATURE O F ADVANCE RENT AND HENCE LIABLE FOR DEDUCTION OF TDS U/S 194-I OF THE ACT. THE CASES RELIED UPON BY THE AO ARE THUS DISTINGUISHABLE ON F ACTS AND IN LAW AND THE SAME CANNOT BE MADE APPLICABLE TO THE FACTS OF THE PRESENT CASE WHERE THE ISSUE RAISED IS COMPLETELY DIFFERENT . I THEREFORE DO NOT FIND ANY MERIT IN THE SUBMISSION OF THE AO SO FAR A S THE CASE LAWS CITED BY HIM ARE CONCERNED. 5.42 THE AO HAS CITED THE DECISION OF CALCUTTA HIGH COURT IN THE CASE OF BRAITHWAITE & CO INDIA LTD, 111 ITR 542 WHERE TH E ASSESSEE HAD ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 31 TAKEN ON LEASE, A WHOLE UNDERTAKING FOR 99 YEARS ON PAYMENT OF RENT OF RS.4 LAKHS PER ANNUM FROM ANGUS CO LTD THE ASSES SEE CLAIMED THE SAME AS THE REVENUE EXPENDITURE IN ITS INCOME TAX R ETURN WHICH WAS NOT ACCEPTED BY THE AO, WHO HELD THAT THE ABOVE ARR ANGEMENT WAS IN EFFECT A SALE OF THE UNDERTAKING TO THE ASSESSEE. O N THESE FACTS, HON'BLE HIGH COURT HELD THAT THE ASSESSEE IS ENTITLED FOR D EDUCTION OF RENT, WHICH WAS HELD TO BE REVENUE EXPENDITURE IT IS EVID ENT FROM THE FACTS OF THIS CASE THAT WHAT WAS TAKEN ON LEASE BY THE AS SESSEE WAS NOT THE LAND OR LEASEHOLD RIGHT IN LAND. THE LEASE WAS FOR THE WHOLE UNDERTAKING WHICH WAS TO BE USED BY THE ASSESSEE IT SELF. THE FACTS OF THIS CASE DO NOT SUGGEST THAT THE ASSESSEE WAS ALSO ENTITLED TO EXPLOIT THE LAND THROUGH RECONSTRUCTION AND SALE OF THE PRO PERTY THEREAFTER. HENCE THE FACTS IN THIS CASE ARE TOTALLY DIFFERENT FROM THE FACTS OF THE CASE OF THE APPELLANT WHERE THE LEASE IS IN RESPECT OF THE LAND FOR EXPLOITATION OF (HE SAME THROUGH CONSTRUCTION OF BU ILDINGS AND SALE THEREOF. HENCE, THIS DECISION DOES NOT SUPPORT THE FINDING OF THE AO IN THE CASE OF THE APPELLANT. 5.43 THE AO HAS FURTHER RELIED UPON KARNATAKA HIGH COURT JUDGEMENT IN THE CASE OF CIT VS. HMT L.TD. 203 ITR 820 WHEREIN THE SAID HON'BLE HIGH COURT HAS HELD THAT THE AMOUNT PA ID BY THE LESSEE TO THE LESSOR FOR GRANTING THE LEASE IS DEDUCTIBLE REVENUE EXPENDITURE. ON CLOSE SCRUTINY OF THIS CASE OF KARNATAKAHIGH COU RT RELIED UPON BY THE AO AND OTHER JUDGEMENTS RELIED UPON BY THE APPE LLANT, I AM OF THE CONSIDERED OPINION THAT HMTS CASE IS DISTINGUISHAB LE ON FACTS AND IN LAW. THE HON'BLE HIGH COURT HAS PROCEEDED ON THE FI NDING OF THE FACT RECORDED BY THE TRIBUNAL THAT THE PAYMENT MADE BY T HE ASSESSEE IS A RENT AND HENCE SHALL BE ALLOWED AS BUSINESS EXPENDI TURE. MOREOVER WITH DUE RESPECT THE KARNATAKA HIGH COURT JUDGEMENT IN THE HMTS CASE IS INCONSISTENT WITH THE EARLIER DECISIONS OF THE HIGH COURTS AND THE SUPREME COURT. IN THIS JUDGEMENT HONBLE HIGH C OURT HAS NOT CONSIDERED THESE OTHER DECISIONS OF HIGH COURTS AND THE SUPREME COURT WHICH RENDERS IT 'PER-INCURIAM' AS IT IS DELI VERED IN IGNORANCE OF THE DECISION OF OTHER HIGH COURTS AND SUPREME COURT [THIS PRINCIPLE OF 'PERINCURIAM' HAS BEEN ILLUSTRATED BY HON'BLE SU PREME COURT IN THE CASE OF PUNJAB LAND DEVELOPMENT AND RECLAMATION COR PORATION LTD. V/S PRESIDING OFFICER (LABOUR COURT), 3 SCC 682. IT HAS TO BE UNDERSTOOD THAT SUBSEQUENT JUDGEMENTS OF VARIOUS HI GN COURTS INCLUDING THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT ARE OF A ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 32 BINDING NATURE AND HAVE TO BE FOLLOWED. ALSO. THIS DECISION IS CONTRARY TO AT LEAST 6 SUPREME COURT DECISIONS AND 5 HIGH CO URT DECISIONS, AS POINTED OUT BY LD.AR OF THE APPELLANT (REFER TO PAG E-22 OF THIS ORDER WHERE THE APPELLANTS SUBMISSIONS HAVE BEEN QUOTED) . ALSO IT HAS TO BE KEPT IN MIND THAT THE APPELLATE AUTHORITIES ARE BOUND TO FOLLOW THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT WHERE AS THE DECISION OF NON-JURISDICTIONAL HIGH COURTS IS NOT BINDING. 5.44 SINCE THE PRINCIPLES LAID DOWN IN ALL THE CASE S ARE SIMILAR, I HAVE NOT DISCUSSED ALL THE DECISIONS CITED BY THE TWO SI DES AND HAVE QUOTED ONLY A FEW LANDMARK JUDGMENTS SO AS TO AVOID REPETI TION (IT MAY BE NOTED THAT THE DECISION OF CALCUTTA HIGH COURT IN T HE CASE OF PURNENDU MULICK 116 ITR 591 AND PATNA HIGH COURT IN THE CASE OF SRI SRI RAJA SHIVA PRASAD SINGH OF JHARIA & RAJA JYOTI PRASAD SINGH DEO OF 1 ITC 384 (ALL SUPRA) ARE ALSO NOTEWORTHY]. HOWE VER, IT IS WORTHWHILE TO NOTE THAT SIMILAR ISSUE CAME UP VERY RECENTLY BEFORE THE HONBLE ITAT, MUMBAI IN THE CASE OF M/S NATIONA L STOCK EXCHANGE OF INDIA LIMITED IN ITA NOS. 1955/M/99, 21 81/M/99, 4853/M/04, 4485/M/04, 4854/M/04, 356/M/01, 5850/M/0 0. THE FACTS OF THIS CASE ARE THAT THE BOMBAY METROPOLITAN REGION DEVELOPMENT AUTHORITY (BMRDA) [NOW KNOWN AS MUMBAI REGIONAL DEVELOPMENT AUTHORITY I.E MMRDA] HAD GIVEN ON LEASE A PLOT OF LAND IN G-BLOCK OF THE BANDRA KURLA COMPLEX TO NATIONAL STOCK EXCHANGE FOR A TOTAL LEASE PREMIUM OF RS.90.60 CRORES FOR A PERIOD OF 80 YEARS. THE ASSESSEE IN ITS COMPUTATION OF TOTAL INCOME HAD GIVEN A NOTE EXPLAINING THAT A CLAIM FOR WRITE OFF OF LEASE HOLD LAND OF RS.7,75,736/- IS MADE ON ACCOUNT OF LEASE PREMIUM P AID IN RESPECT OF LEASE HOLD LAND ACQUIRED FROM BMRDA AMOUNTING TO RS .90.60 CRORES WHICH IS AMORTIZED OVER A LEASE PERIOD OF 80 YEARS WITH EFFECT FROM 07.03 1995. THE CLAIM FOR WRITE OFF WAS FOR THE PER IOD FROM 7.3.1995 TO 31.3.1995 ON PROPORTIONATE BASIS. THUS, THE ASSE SSEE IN IS COMPUTATION OF TOTAL INCOME CLAIMED THE LEASE PREMI UM PAID TO BMRDA AS REVENUE EXPENDITURE I.E. RENT. HOWEVER T HE AO IN THAT CASE DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND DISALLOWED RS.7,75,736/- TREATING THE PAYMENT OF LEASE PREMIUM AS CAPITAL EXPENDITURE. ON APPEAL BY THE ASSESSEE THE CIT(A) C ONFIRMED THE STAND TAKEN BY THE AO. ON FURTHER APPEAL OF THE ASS ESSEE THE HONBLE MUMBAI TRIBUNAL DISMISSED THE APPEAL OF THE ASSESSE E RELYING UPON THE JUDGEMENT OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 33 MUKUND LTD (SUPRA) AND DECISION OF THE HONBLE BOMB AY HIGH COURT IN THE CASE OF KHIMLINE PUMPS LTD(SUPRA). 5.45 IN THE PRESENT CASE THE ASSESSEE HAS CAPITALIZ ED THE LEASE PREMIUM IN ITSBOOKS OF ACCOUNTS AND TREATED THE SAM E AS CAPITAL EXPENDITURE FOR TAX PURPOSES AND THE SAME WAS ACCEP TED BY THE DEPARTMENT IN ITS REGULAR INCOME TAX ASSESSMENT. HO WEVER, THE AO (DURING TDS PROCEEDINGS) CAME-UP WITH THE ARGUMENT THAT LEASE PREMIUM PAID TO CIDCO IS IN THE NATURE OF RENT LI ABLE FOR TDS U/S 194-I OF THE ACT. THIS STAND TAKEN BY THE AO CANNOT BE ACCEPTED AS IT IS CONTRARY TO THE DECISION OF VARIOUS HIGH COURTS, SUPREME COURT AND THE TRIBUNAL AND IS AGAINST THE BASIC PRINCIPLES OF LAW 13. THUS, LD. CIT(A) HAS STATED THAT VARIOUS CLAUS ES OF LEASE AGREEMENT ARE STANDARD REGULATORY CLAUSES WHICH DO NOT AFFECT LEASEHOLD RIGHT OF THE ASSESSEE IN ANY MANNER. THEY ARE ONLY REGULATORY IN NATURE AND ARE MEANT FOR THE PURPOSE OF PROPER DEVELOPMENT OF THE AREA. SUCH RESTRICTION WOULD BE IMPOSED BY THE LOCAL AUTHORITY WHILE GRANTING PERMISSION FOR CONST RUCTION OF BUILDING EVEN IN THE CASE OF FREEHOLD OWNERSHIP. HENCE THE A MOUNT PAID BY THE ASSESSEE IS LEASE PREMIUM FOR ACQUIRING LEASEHOLD R IGHTS IN RESPECT OF LEASE LAND AND THE SAME IS NOT IN THE NATURE OF REN T AS CONTEMPLATED U/S 194-I OF THE ACT. LD. CIT(A) HAS HELD THAT ASSE SSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE U/S 194-I OF THE A CT. THUS, DEMAND RAISED BY THE AO BY INVOKING THE PROVISIONS OF SECT IONS 201(1) /201(1A) OF THE ACT IN RESPECT OF ALL THE ASSESSMEN T YEARS UNDER CONSIDERATION ARE DELETED BY HIM. HENCE THESE APPEA LS BY THE DEPARTMENT BEFORE THE TRIBUNAL. 14. LD. DR WHILE SUPPORTING THE ORDER(S) OF THE AO SUBMITTED THAT ASSESSEE ACQUIRED RIGHT TO USE LAND FOR A PERIOD OF 60 YEARS UNDER LEASE DEED(S) ENTERED INTO BETWEEN THE ASSESSEE AND THE CIDCO. THAT THE ASSESSEE HAS NOT ACQUIRED THE OWNERSHIP RIGHT F OR THE LAND. THUS, THE AO HAD RIGHTLY TREATED SO CALLED LEASE PREMIUM AS RENT. HENCE THE SAID LEASE PREMIUM PAID BY THE ASSESSEE TO CIDCO IS COVERED WITHIN THE MEANING OF RENT AS PER SECTION 194-I OF THE ACT . HE SUBMITTED THAT THE DEFINITION OF RENT PROVIDED U/S 194-I OF THE AC T IS EXTENSIVE AND THE WORD ANY PAYMENT IMPLIES THAT IT WOULD INCLUD E ALL SORTS OF PAYMENTS MADE UNDER ANY AGREEMENT/ARRANGEMENT. HE S UBMITTED ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 34 THAT THE ASSESSEE MADE THE LUMP SUM PAYMENT FOR USE OF LAND FOR A PERIOD OF 60 YEARS AND THEREFORE, IT IS A RENT UNDE R SECTION 194-I OF THE ACT. HE SUBMITTED THAT SUCH LUMPSUM PREMIUM PAID BY THE ASSESSEE IS AN ADVANCE RENT AND THEREFORE, THE ASSESSEE WAS REQ UIRED TO DEDUCT TAX AT SOURCE U/S 194-I OF THE ACT. LD. DR SUBMITTE D THAT A SIMILAR ISSUE WAS CONSIDERED BY THE CHENNAI BENCH OF THE TR IBUNAL IN THE CASE OF FOXCONN INDIA DEVELOPER (P) LTD V/S ITO (2012)53 SOT 213( CHENNAI) WHEREIN IT IS HELD THAT UPFRONT CHARGES PA ID BY THE ASSESSEE FOR LEASE OF LAND FOR A PERIOD OF 99 YEARS TO CIDCO LTD. UNDER THE LEASE AGREEMENT WAS COVERED U/S 194-I OF THE ACT. HENCE, ASSESSEE WAS OBLIGED TO DEDUCT TAX AT SOURCE. SINCE ASSESSEE HAV ING NOTDEDUCTED SUCH TAX AT SOURCE, IT WAS HELD THAT RIGORS OF SECT ION 201(1) AND 201(1A) ARE ATTRACTED. 15. ON THE OTHER HAND, LD. AR STRONGLY SUPPORTED TH E ORDER(S) OF LD. CIT(A). LD. AR SUBMITTED THAT THE PREMIUM IS PAID F OR OBTAINING THE LEASE OF LAND. THEREFORE, THE SAID PREMIUM WAS PAID FOR ACQUIRING LEASEHOLD RIGHTS AND NOT FOR USE OF LAND. THAT SAID PREMIUM PAID DOES NOT FALL UNDER THE DEFINITION OF RENT U/S 194-I O F THE ACT. LD. AR SUBMITTED THAT DELHI BENCH OF THE TRIBUNAL WHILE CO NSIDERING THE SIMILAR ISSUE IN THE CASE OF ITO V/S THE INDIAN NEW S PAPERS SOCIETY IN ITS ORDER DATED 20.6.2013 IN ITA NO.5207/DEL/2012 ( AY-2007-08) CONFIRMED THE ORDER OF THE LD. CIT(A) THAT LEASE PR EMIUM PAID BY ASSESSEE TO MMRDA CANNOT BE SUBJECTED TO TAX DEDUCT ION AT SOURCE U/S 194-I OF THE ACT. HE FILED A COPY OF THE SAID O RDER OF THE TRIBUNAL AND SUBMITTED THAT THE TRIBUNAL AFTER CONSIDERING T HE DECISION OF THE HONBLE APEX COURT IN THE CASE OF A.R.KRISHNAMURTHY (SUPRA) AND THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN MUKUND LTD (SUPRA) HAS HELD THAT THE PREMIUM PAID ON ACQUISITION OF LEASEH OLD RIGHTS IN LAND CONSTITUTES CAPITAL EXPENDITURE AND IT DOES NOT CON STITUTES ADVANCE RENT. LD. AR FURTHER SUBMITTED THAT SIMILAR ISSUE H AS AGAIN COME UP BEFORE THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ITO V/S M/S WADHWA AND ASSOCIATES REALTORS PVT LTD. IN ITA NO.6 95/MUM/2012 (AY-2008-09)DATED 3.7.2013 IN WHICH IT HAS BEEN HEL D THAT THE LEASE PREMIUM PAID BY THE ASSESSEE TO MMRDA FOR GRANT OF LEASEHOLD RIGHTS IS NOTHING BUT A TRANSACTION OF TRANSFER OF PROPERT Y AND THE LEASE PREMIUM IS THE CONSIDERATION FOR THE PURCHASE OF TH E SAID LEASEHOLD RIGHT, AFTER CONSIDERING THE DECISION OF THE HONBL E JURISDICTIONAL HIGH COURT IN THE CASE OF KHIMLINE PUMPS LTD (SUPRA) AND THE DECISION OF ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 35 THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MU KUND LTD (SUPRA). LD. AR SUBMITTED THAT TRIBUNAL IN THE CASE OF M/S N ATIONAL STOCK EXCHANGE OF INDIA, HONBLE ITAT, MUMBAI IN ITA NO. 1955/M/99, 2181/M/99, 4853/M/04, 4485/M/04, 4854/M/04, 356/M/0 1, 5850/M/00 ALSO CONSIDERED THE SIMILAR ISSUE ON IDEN TICAL FACTS AND HELD THAT CONSIDERATION PAID FOR ACQUIRING LEASEHOL D RIGHTS IN LAND IS A CAPITAL EXPENDITURE AND NOT RENT. LD. AR SUBMITTE D THAT THE SAID DECISION OF M/S NATIONAL STOCK EXCHANGE OF INDIA (S UPRA) AND OF MUMBAI BENCH OF THE TRIBUNAL ARE CONSIDERED BY LD. CIT(A) IN PARAGRAPH 5.44 OF THE IMPUGNED ORDER(S) AND ALSO BY THE TRIBUNAL IN ITS DECISION IN THE CASE OF M/S WADHWA AND ASSOCIAT ES REALTORS PVT LTD. (SUPRA) TO HOLD THAT PROVISIONS OF SECTION 194 -I DO NOT APPLY TO THE PAYMENT FOR ACQUIRING LEASEHOLD LAND AS IT IS A CAPITAL EXPENDITURE. LD. AR SUBMITTED THAT ISSUE IS SQUAREL Y COVERED IN FAVOUR OF THE ASSESSEE BY AFORESAID DECISIONS OF THE TRIBU NAL WHICH HAVE BEEN DECIDED BY FOLLOWING THE DECISIONS OF THE HONBLE A PEX COURT AND THE DECISIONS OF JURISDICTIONAL HIGH COURT AS WELL AS O THER HIGH COURTS(SUPRA). THEREFORE, THE DECISION OF THE LD. C IT(A) IS RIGHT AND THE SAME MAY BE CONFIRMED. 16. LD. DR IN HIS REJOINDER SUBMITTED THAT THE SAID DECISIONS RELIED UPON BY THE LD. AR (SUPRA) ARE DISTINGUISHABLE AS T HE SAME HAVE BEEN DECIDED ON THE ISSUE AS TO WHETHER PAYMENT MADE BY THE ASSESSEE UNDER LEASE AGREEMENT IS A CAPITAL EXPENDITURE OR N OT. THEREFORE, THE SAID DECISIONS ARE NOT APPLICABLE TO CONSIDER THE Q UESTION AS TO WHETHER LEASE PREMIUM PAID BY THE ASSESSEE TO ACQUI RE LEASE LAND COULD BE CONSIDERED AS RENT U/S 194-I OF THE ACT OR NOT. 17. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES, ORDERS OF THE AUTHO RITIES BELOW AND THE CASES RELIED UPON (SUPRA). WE HAVE ALSO CAREFULLY C ONSIDERED THE PROVISIONS OF SECTION 194-I WHICH DEAL WITH THE PRO VISIONS FOR DEDUCTION OF INCOME TAX AT SOURCE FROM INCOME BY WA Y OF RENT. THE EXPLANATION (I) TO SECTION 194-I OF THE ACT DEFINES THE EXPRESSION RENT. IT IS WORTHWHILE AND RELEVANT TO STATE SECT ION 194-I WHICH IS A SUBJECT MATTER OF DISPUTE. IT READS AS UNDER : [RENT. 194-I. ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO [A RESIDENT] ANY ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 36 INCOME BY WAY OF RENT, SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER M ODE, WHICHEVER IS EARLIER, [DEDUCT INCOME-TAX THEREON AT THE RATE OF [(A) TWO PER CENT FOR THE USE OF ANY MACHINERY OR PLANT OR EQUIPMENT; AND (B) TEN PER CENT FOR THE USE OF ANY LAND OR BUI LDING (INCLUDING FACTORY BUILDING) OR LAND APPURTENANT TO A BUILDING (INCLUDING FACTORY BUILDING) OR FURNITURE OR FITTINGS:]] PROVIDED THAT NO DEDUCTION SHALL BE MADE UNDER THIS SECTION WHERE THE AMOUNT OF SUCH INCOME OR, AS THE CASE MAY BE, THE AGGREGATE OF THE AMOUNTS OF SU CH INCOME CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID D URING THE FINANCIAL YEAR BY THE AFORESAID PERSON TO THE ACCOUNT OF, OR TO, THE PAYEE, DOES NOT EXCEED [ONE HUNDRED AND EIGHTY THOUSAND RUPEES] : [PROVIDED FURTHER THAT AN INDIVIDUAL OR A HINDU UND IVIDED FAMILY, WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LI MITS SPECIFIED UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURI NG THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WH ICH SUCH INCOME BY WAY OF RENT IS CREDITED OR PAID, SHALL BE LIABLE TO DEDUCT INCOME-TAX UNDER THIS SECTION.] EXPLANATION.FOR THE PURPOSES OF THIS SECTION, [(I) 'RENT' MEANS ANY PAYMENT, BY WHATEVER NAME CAL LED, UNDER ANY LEASE, SUB-LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR THE USE OF (EITHER SEPARATELY OR TOGETHER) ANY, (A) LAND; OR (B) BUILDING (INCLUDING FACTORY BUILDING); OR (C) LAND APPURTENANT TO A BUILDING (INCLUDING FACT ORY BUILDING); OR (D) MACHINERY; OR (E) PLANT; OR (F) EQUIPMENT; OR (G) FURNITURE; OR (H) FITTINGS, WHETHER OR NOT ANY OR ALL OF THE ABOVE ARE OWNED BY THE PAYEE;] (II) WHERE ANY INCOME IS CREDITED TO ANY ACCOUNT, WHETHE R CALLED 'SUSPENSE ACCOUNT' OR BY ANY OTHER NAME, IN THE BOO KS OF ACCOUNT OF ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 37 THE PERSON LIABLE TO PAY SUCH INCOME, SUCH CREDITIN G SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE P AYEE AND THE PROVISIONS OF THIS SECTION SHALL APPLY ACCORDINGLY. ] 18. ON PERUSAL OF THE EXPLANATION, WE AGREE WITH TH E LD. DR THAT THE WORD RENT AS DEFINED U/S 194-I HAS A WIDE MEANING THAN THE RENT IN COMMON PARLANCE. 19. IN THE CASE BEFORE US, THE ASSESSEE HAS ENTERED IN TO LEASE AGREEMENTS WITH CIDCO FOR ACQUISITION OF LEASEHOLD RIGHTS IN THE LAND TO DEVELOP AND OPERATE THE SPECIAL ECONOMIC ZONE AT NAVI MUMBAI. ASSESSEE HAS PAID PREMIUM FOR DEMISED LEASE LAND. T HE QUESTION BEFORE US IS AS TO WHETHER THE SAID LEASE PREMIUM P AID BY THE ASSESSEE TO CIDCO TO ACQUIRE LEASEHOLD RIGHTS FOR 60 YEARS U NDER THE LEASE DEED(S) IS LIABLE FOR DEDUCTION OF TAX AT SOURCE BE ING RENT WITHIN THE MEANING OF SECTION 194-I OF THE ACT OR NOT. AO HAS STATED THAT THE SAID PAYMENT MADE BY ASSESSEE UNDER LEASE AGREEMENTS QUA LIFIES FOR RENT FOR THE PURPOSE OF SECTION 194-I OF THE ACT AS IT P ARTAKES ALL THE CHARACTERISTICS OF RENT AND WHEREAS THE ASSESSEE HA S CONTENDED THAT THE ASSESSEE HAS OBTAINED LEASEHOLD RIGHTS IN THE S AID LEASEHOLD LANDS ON PAYMENT OF LEASE PREMIUM AND THE SAID LEASE PREM IUM IS NOT PAID UNDER A LEASE. HENCE, IT IS A CAPITAL EXPENDITURE A ND NOT AN ADVANCE RENT. WE OBSERVE THAT THE MAIN THRUST OF THE AO TO HOLD THE PREMIUM PAID BY ASSESSEE TO HOLD IT AS RENT IS ON THE DEFIN ITION OF RENT UNDER SECTION 194-I OF THE ACT THAT IT CREATES A LEGAL FI CTION AND THE LEASE DEED(S) ENTERED INTO CONTAIN VARIOUS RESTRICTIVE CO VENANTS. THAT THE SAID PAYMENTS IN SUBSTANCE ARE FOR CONSIDERATION FO R USE OF LAND UNDER THE LEASE DEED(S), HENCE PROVISIONS OF SECTIO N 194-I OF THE ACT IS ATTRACTED. 20. ON THE OTHER HAND, WE OBSERVE THAT GOVERNMENT O F MAHARASHTRA APPOINTED CIDCO AS THE NODAL AGENCY FOR SETTING UP OF SPECIAL ECONOMIC ZONE AT NAVI MUMBAI NMSEZ. THAT THE ASSE SSEE HAS BEEN JOINTLY PROMOTED AS A SPECIAL PURPOSE VEHICLE (SPV) BY CIDCO AND DRONAGIRI INFRASTRUCTURE PVT LIMITED (DIPL) TO DEVE LOP AND OPERATE THE SPECIAL ECONOMIC ZONE AT NAVI MUMBAI. PURSUANT THERETO ASSESSEE AND CIDCO ENTERED INTO DEVELOPMENT AGREEME NT AND THE ASSESSEE IS REQUIRED TO MAKE PAYMENT OF LEASE PREMI UM IN RESPECT OF THE LAND WHICH WAS BEING ACQUIRED BY CIDCO AND BEIN G ALLOTTED TO ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 38 ASSESSEE FROM TIME TO TIME. AS PER DEVELOPMENT AGRE EMENT, THE ASSESSEE IS TO DEVELOP AND MARKET NMSEZ. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS ACQUIRED LEASEHOLD RIGHT IN THE LAND FOR THE PURPOSE OF DEVELOPING, DESIGNING, PLANNING, FINANCI NG, MARKETING, DEVELOPING NECESSARY INFRASTRUCTURE, PROVIDING NECE SSARY SERVICES, OPERATING AND MAINTAINING INFRASTRUCTURE ADMINISTRA TING AND MANAGING SEZ. BY VIRTUE OF SAID LEASE DEED(S), TH E ASSESSEE HAS ACQUIRED THE RIGHTS TO DETERMINE, LEVY, COLLECT, RE TAIN, UTILIZE USER CHARGES FEE FOR PROVISION OF SERVICES AND /OR TARIF FS IN ACCORDANCE WITH TERMS AND CONDITIONS PROVIDED IN THE DEVELOPME NT AGREEMENT AND THE LEASE DEED (S) ENTERED INTO. THEREFORE, WE AGREE WITH LD. CIT(A) THAT LEASE DEED(S) AND THE DEVELOPMENT AGREE MENT HAVE ASSIGNED TO THE ASSESSEE LEASEHOLD RIGHT WHICH INCL UDES BUNDLE OF RIGHTS. THE ASSESSEE HAS PAID THE PREMIUM FOR LEASE DEED(S) FOR THE DEMISED LAND TO ACQUIRE ENTIRE RIGHTS OF THE LAND F OR A PERIOD OF 60 YEARS. THEREFORE, WE ARE OF THE CONSIDERED VIEW THA T THE SAID PAYMENT OF LEASE PREMIUM IS A PAYMENT FOR ACQUISITION OF LE ASEHOLD LAND AND NOT MERELY FOR USE OF LAND. THE ASSESSEE HAS MADE P AYMENT FOR ENTERING INTO LEASE AGREEMENTS TO ACQUIRE LEASE HOL D RIGHTS IN THE LAND FOR A PERIOD OF 60 YEARS AND NOT UNDER A LEASE . SIMILAR ISSUE CAME UP BEFORE THE SPECIAL BENCH ITAT MUMBAI IN THE CASE OF MUKUND LTD. (SUPRA). THE ASSESSEE ACQUIRED A LAND O N LEASE FOR A PERIOD OF 99 YEARS FROM THE MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION (MIDC) AND PAID RS.2.04 CRORES AS PREMI UM OF LEASEHOLD LAND AND APART FROM FIXING ANNUAL RENT AT RS.1 PER ANNUM. THE ASSESSEE CLAIMED THAT THE SAID PREMIUM ON LEASEHOLD LAND IS A REVENUE EXPENDITURE, WHICH WAS DISALLOWED BY THE AO HOLDING IT AS A CAPITAL IN NATURE. LD. CIT(A) HELD THAT THE PREMIUM CANNOT BE TREATED AS CAPITAL EXPENDITURE AS THE ASSESSEE DID NOT ACQU IRE OWNERSHIP OF LAND. IT WAS HELD THAT IT WAS AN EXPENDITURE RELATA BLE TO 99 YEARS AND SHOULD BE ALLOWED ON PROPORTIONATE BASIS. HOWEVER, ON FURTHER APPEAL TO THE TRIBUNAL, THE TRIBUNAL HELD THAT THE BENEFIT CONFERRED ON THE ASSESSEE ON LEASE HOLD RIGHTS IN 99 YEARS AG AINST LUMP SUM PAYMENT OF THE PREMIUM WAS OF AN ENDURING NATURE. I T WAS HELD THAT THERE WAS NO MATERIAL ON RECORD TO SUGGEST THAT THE SUM OF RS.2.04 CRORES HAD BEEN PAID BY WAY OF ADVANCE RENT NOR THE RE WAS ANY PROVISION FOR ITS ADJUSTMENT TOWARDS RENT OR FOR IT S RE-PAYMENT TO THE ASSESSEE. IT WAS HELD THAT THE CONSIDERATION PAID B Y THE ASSESSEE WAS ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 39 CAPITAL EXPENDITURE AND ACCORDINGLY THE ISSUE WAS D ECIDED AGAINST THE ASSESSEE. 21. IN THE CASE BEFORE US ALSO THE ASSESSEE HAS PAI D LEASE PREMIUM TO ACQUIRE THE DEMISED LEASEHOLD LAND AND THERE IS NO MATERIAL ON RECORD THAT THE SAID LEASE PREMIUM PAID BY THE ASSE SSEE IS REFUNDABLE TO THE ASSESSEE AND/OR IS IN THE NATURE OF ADVANCE RENT OR MERELY FOR USE OF LAND. WE OBSERVE THAT THE TERM RENT THOUGH HAS BEEN DEFINED IN SECTION 194-I OF THE ACT, BUT OTHER TERMS LIKE, LEASE, LEASE PREMIUM, LESSOR AND LESSEE ETC HAVE NOT BEEN DEFINED UNDER T HE INCOME TAX ACT. THE LD. CIT(A) HAS RIGHTLY STATED IN THE IMPUGNED O RDER THAT THE MEANING OF THESE TERMS AS PROVIDED IN THE TRANSFER OF PROPERTY ACT, 1882 HAVE TO BE CONSIDERED. THE TERM LEASE IS DEFIN ED UNDER SECTION 105 OF TRANSFER OF PROPERTY ACT, 1882 AS 'A LEASE O F IMMOVEABLE PROPERTY IS A TRANSFER OF A RIGHT TO ENJOY SUCH PRO PERTY, MADE FOR A CERTAIN TIME, EXPRESS OR IMPLIED, OR IN PERPETUITY, IN CONSIDERATION OF A PRICE PAID OR PROMISED, OR OF MONEY, A SHARE OF CRO PS, SERVICE OR ANY OTHER THING OF VALUE, TO BE RENDERED PERIODICALLY O R ON SPECIFIED OCCASIONS TO THE TRANSFEROR BY THE TRANSFEREE, WHO , ACCEPTS THE TRANSFER ON SUCH TERMS. IN THE CASE OF LEASE PRICE IS CALLED THE PREMIUM, AND THE MONEY, SHARE, SERVICE OR ANY OTHER THING TO BE RENDERED IS CALLED THE RENT; THE TRANSFEROR IS CALLED LESSOR AND THE TRANSFEREE IS C ALLED LESSEE. 21.1 THEREFORE, THE ABOVE SECTION BRINGS OUT THE DI STINCTION BETWEEN PRICE PAID FOR A TRANSFER OF RIGHT TO ENJOY THE PRO PERTY AND THE RENT TO BE PAID PERIODICALLY TO THE LESSOR. WHEN THE INTERE ST OF THE LESSOR IS PARTED WITH FOR A PRICE, THE PRICE PAID IS CALLED L EASE PREMIUM OR SALAMI. BUT THE PERIODICAL PAYMENTS MADE FOR THE CO NTINUOUS ENJOYMENT OF THE BENEFIT UNDER THE LEASE ARE IN THE NATURE OF RENT. THE HONBLE APEX COURT HAS HELD IN THE CASE OF A.R. KRI SHNAMURTHY (SUPRA) THAT LEASE OF LAND IS TRANSFERRED OF INTERE ST IN THE LAND AND CREATES A RIGHT IN REM : AND THERE IS A TRANSFER OF TITLE IN FAVOUR OF THE LESSEE THOUGH THE LESSOR HAS THE RIGHT OF REVERSION AFTER THE PERIOD OF LEASE TERMINATES. IT WAS HELD THAT GRANT OF MINING LEASE AT A PREMIUM IS A CAPITAL ASSET. THE HONBLE DELHI HIGH COURT AL SO BROUGHT OUT THE DIFFERENCE BETWEEN THE AMOUNT PAYABLE FOR ACQUIRING LEASE HOLD RIGHTS AS PREMIUM AND THE AMOUNT WHICH WOULD BE PAY ABLE FOR USE OF ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 40 ASSETS AS RENT IN BHARAT STEEL TUBES LTD V/S CIT (2 001) 252 ITR 622(DEL). THEIR LORDSHIPS HAVE HELD THAT WHEN THE P REMIUM IS PAID AT THE BEGINNING OF THE MINING LEASE FOR A LONG PERIOD , ORDINARILY REPRESENTS THE PURCHASE OF AN OUT AND OUT SALE OF T HE PROPERTY AND THE SUM RECEIVED IS CAPITAL AND NOT INCOME, BUT RENT OR ROYALTY PAID PERIODICALLY IS INCOME. IT WAS HELD THAT THE PRINCI PLE IS THE SAME, WHETHER THE PREMIUM IS FOR A SIMPLE LEASE OF LAND O R FOR A LEASE OF MINERAL RIGHTS. THEREFORE, WHEN THE INTEREST OF THE LESSEE IS PARTED WITH FOR A PRICE, THE PRICE PAID IS PREMIUM OR SALA MI. BUT THE PERIODICAL PAYMENTS MADE FOR THE CONTINUOUS ENJOYME NT OF THE BENEFITS UNDER THE LEASE ARE IN THE NATURE OF RENT. THAT THE FORMER IS CAPITAL AND THE LATER IS REVENUE IN NATURE. THEIR L ORDSHIPS OF THE HONBLE DELHI HIGH COURT STATED THAT RENT IS ALLOWA BLE AS DEDUCTION U/S 30 OF THE ACT. IT IS STATED THAT SECTION 105 OF THE TRANSFER OF PROPERTY ACT, 1882 ALSO MAKE A DISTINCTION BETWEEN THE RENT AND PREMIUM PAYABLE UNDER LEASE. WHEN THE INTEREST OF T HE LESSOR IS CHARGED WITH FOR A PRICE, THE PRICE PAID IS PREMIUM OR SALAMI BUT THE PERIODICAL PAYMENT MADE FOR THE CONTINUOUS ENJOYMEN T OF THE BENEFITS UNDER LEASE ARE IN THE NATURE OF RENT. THE IR LORDSHIPS HELD THAT FORMAL IS CAPITAL AND LATER IS REVENUE IN NATU RE. A SIMILAR ISSUE ALSO CAME UP BEFORE THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF KHIMLINE PUMPS LTD (SUPRA). IN THE SAID CASE OPE N PLOT OF LAND WAS LEASED OUT TO APVE LTD, A COMPANY FOR A PERIOD OF 9 5 YEARS ON PAYMENT OF A PREMIUM OF RS.1,62,400/- AND YEARLY RE NT OF RS.1. IN THE LEASE, THE COMPANY HAD, AT THE END OF 95 YEARS TO D ELIVER A VACANT POSSESSION OF THE LAND. THE COMPANY WAS ENTITLED TO REMOVE ANY BUILDING, ERECTIONS OR STRUCTURES PUT UP BY IT ON T HE LAND. THE COMPANY HAD ERECTED BUILDING, PLANT AND MACHINERY T HEREON. APVE LTD. WERE TO BE WOUND UP AND ITS ASSETS WERE SOLD U NDER DIRECTION OF HONBLE HIGH COURT. THE ASSESSEE COMPANY OFFERED RS . 75 LAKHS OF WHICH THE AO HELD THAT RS.45 LAKHS RELATED TO ACQUI SITION OF LEASE HOLD LAND. BUT THAT AMOUNT COULD NOT BE DEDUCTED AS IT W AS CAPITAL EXPENDITURE. THE TRIBUNAL HELD IT WAS CAPITAL EXPEN DITURE, BUT WITHOUT GIVING REASONS, HELD THAT SINCE BENEFIT OF THE EXPENDITURE WOULD BE EXISTED IN 71 YEARS, A PROPORTIONATE AMOUN T RELATABLE TO EACH YEAR VIZ RS.63,380/- MIGHT BE ALLOWED AS DEDUC TION ON ACCOUNT OF PAYMENT OF RENT. ON APPEAL TO THE HONBLE HIGH C OURT THE HONBLE JURISDICTIONAL HIGH COURT AGREED WITH THE AO THAT R S.45 LAKHS WAS A CAPITAL EXPENDITURE. THEREFORE THE TRIBUNAL COULD N OT DIRECT THE ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 41 DEPARTMENT TO APPORTION THE AMOUNT OVER A PERIOD OF 71 YEARS. THEIR LORDSHIPS HELD THAT IN ORDER TO ASCERTAIN TRUE CHAR ACTER AND PURPORT OF THE PAYMENT THE COURT HAS TO GO BY THE SUBSTANCE OF TRANSACTION AND NOT BY MANNER IN WHICH THE ASSESSEE ALLOCATES T HE ITEMS FOR ACCOUNTING PURPOSES. 21.2 WE OBSERVE THAT IN THE CASE BEFORE US, THERE IS A TRANSFER OF SUBSTANTIVE INTEREST OF LESSOR FOR THE LEASEHOLD LA ND IN FAVOUR OF THE ASSESSEE. THAT THERE IS A CONFERMENT OF RIGHT ON TH E LESSEE BY ACQUIRING LEASEHOLD LAND AND THE PREMIUM HAS BEEN P AID IN LIEU THEREOF AND NOT FOR THE PURPOSE OF USE OF LAND. THE CASE CITED BY THE LD. CIT(A) OF RAJA BAHADUR KAMAKHYA NARAIN SINGH OF RAM GARH (SUPRA) AND THE CASE OF THE HONBLE APEX COURT IN THE CASE OF PANBARI TEA CO. LTD. OF INDIA (SUPRA) SQUARELY APPLY TO THE FACTS O F THE CASE BEFORE US THAT THE LEASE PREMIUM PAID BY THE ASSESSEE TO CIDC O FOR ACQUIRING LEASEHOLD LAND IS CAPITAL EXPENDITURE TO ACQUIRE CA PITAL ASSET AND NOT FOR THE USE OF LAND. THEREFORE, WE AGREE WITH LD. A R THAT THE LEASE PREMIUM PAID BY THE ASSESSEE FOR ACQUIRING LEASEHOL D LAND WITH A RIGHT TO DEVELOP AND MARKET, NMSEZ, CANNOT BE SAID TO BE AN ADVANCE PAYMENT OF RENT. ACCORDINGLY, PREMIUM PAID BY THE A SSESSEE FOR ACQUIRING LEASEHOLD LAND UNDER THE LEASE DEED(S) EN TERED INTO, ALTHOUGH WITH RESTRICTIVE COVENANTS IS A CAPITAL EX PENDITURE, AND IT DOES NOT FALL WITHIN THE AMBIT OF RENT UNDER SECTIO N 194-I OF THE ACT. 21.3 WE OBSERVE THAT SIMILAR ISSUE HAS ALSO BEEN CO NSIDERED RECENTLY BY THE MUMBAI BENCH OF TRIBUNAL VIDE ORDER DATED 3. 7.2013 (SUPRA) IN THE CASE OF M/S WADHWA AND ASSOCIATES REALTORS P VT LTD.(SUPRA) AND THE TRIBUNAL VIDE PARA 5 OF THE SAID ORDER HAS HELD THAT THE LD. CIT(A) IS JUSTIFIED TO HOLD THAT THE WHOLE TRANSACT ION TOWARDS GRANT OF LEASEHOLD TRANSACTION RIGHT TO THE ASSESSEE IS NOTH ING BUT A TRANSACTION OF TRANSFER OF PROPERTY AND THE LEASE P REMIUM IS THE CONSIDERATION FOR THE PURCHASE OF SAID LEASEHOLD RI GHTS. IT IS RELEVANT TO STATE THAT THE TRIBUNAL IN THE ABOVE ORDER HAS A LSO CONSIDERED THE DECISION OF THE HONBLE CALCUTTA HIGH COURT, AND TH E DECISION OF KARNATAKA HIGH COURT (SUPRA) ON WHICH THE AO HAS PL ACED RELIANCE . WE CONSIDER IT PRUDENT TO STATE PARA 5 OF THE SAID ORDER OF THE TRIBUNAL WHICH READS AS UNDER : ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 42 5. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS AND THE NATURE OF TRANSACTION, THE LD. CIT(A) OBSERVED THAT THE AMOUN T CHARGED BY MMRD AS LEASE PREMIUM IS EQUAL TO THE RATE PREVALEN T AS PER STAMP DUTY RECOVERY FOR ACQUISITION OF THE COMMERCIAL PRE MISES. THESE RATES ARE PRESCRIBED FOR TRANSFER OF PROPERTY AND NOT FOR THE USE AS LET OUT TENANTED PROPERTY. THE LD. CIT(A) FURTHER OBSERVED THAT EVEN THE ADDITIONAL FSI GIVEN FOR ADDITIONAL CHARGES AS PER READY RECKONER RATES ONLY. IT IS THE FINDING OF THE LD. CIT(A) THA T THE WHOLE TRANSACTION TOWARDS GRANT OF LEASEHOLD TRANSACTION RIGHTS TO THE ASSESSEE IS NOTHING BUT A TRANSACTION OF TRANSFER O F PROPERTY AND THE LEASE PREMIUM IS THE CONSIDERATION FOR THE PURCHASE OF THE SAID LEASEHOLD RIGHTS. THE LD. CIT(A) WENT ON TO DISCUSS THE JUDICIAL DECI SIONS RELIED UPON BY THE AO OF HONBLE CALCUTTA AND KARNATAKA HIGH COURT AND OBSERVED THAT BOTH THE DECISIONS PERTAIN TO THE SAME ISSUE I .E. WHETHER LEASE PREMIUM WAS A REVENUE OR A CAPITAL EXPENDITURE. THE LD. CIT(A) ALSO DISCUSSED THE DECISION IN THE CASE OF RAJA BAHADUR KAMAKSHYA NARAIN SINGH OF RAMGARH V. COMMISSIONER OF INCOME-TAX 11 I TR 513 PC WHEREIN IT HAS BEEN HELD THAT THE PAYMENT WHICH UND ER THE LEASE IS EXIGIBLE BY THE LESSER MAY BE CLASSED UNDER 3 CATEG ORIES (1) PREMIUM OR SALARY (2) THE MINIMUM ROYALTY AND (3) THE ROYAL TY PER TON . THE SALAMI HAVE BEEN RIGHTLY TREATED AS CAPITAL RECEIPT . IT IS A SINGLE PAYMENT MADE FOR THE ACQUISITION OF THE RIGHT OF TH E LESSEES TO ENJOY THE BENEFITS GRANTED BOTH BY THE LEASE. THE LD. CIT (A) HAS ALSO CONSIDERED THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF MEMBER FOR THE BOARD OF AGRICULTURAL INCOME TAX, AS SAM VS SINDHURANI CHAUDHRANI & ORS 32 ITR 169 WHEREIN IT H AS BEEN HELD THAT SALAMI IS IN THE FORM OF A LUMP SUM NON RECURR ING PAYMENT MADE BY A PROSPECTIVE TENANT TO THE LANDLORD AS A C ONSIDERATION AND IS PAID ANTERIOR TO THE CONSTITUTION OF RELATIONSHI P OF LANDLORD AND TENANT, IT IS NOT RENT WITHIN THE MEANING OF THE WORD USED IN THE DEFINITION OF AGRICULTURAL INCOME IN SECTION 2(1) (A) OF THE I.T. ACT. IT HAS ALL THE CHARACTERISTICS OF A CAPITAL PAYMENT AN D IT IS NOT REVENUE. THE LD. CIT(A) FURTHER DISCUSSED CERTAIN OTHER JUDI CIAL DECISIONS AND IN PARTICULAR THE DECISION OF THE HONBLE JURISDICT IONAL HIGH COURT IN THE CASE OF CIT VS KHIMLINE PUMPS LTD., 258 ITR 459 WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT AN AMOUNT OF RS. 45 LAKHS PAID BY THE ASSESSEE TO M/S. APVE LTD., FOR A CQUISITION OF ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 43 LEASEHOLD LAND WAS A CAPITAL EXPENDITURE AND HENCE THE SAME WAS NOT DEDUCTIBLE. THE LD. CIT(A) HAS FURTHER CONSIDERED T HE DECISION OF THE SPECIAL BENCH OF MUMBAI TRIBUNAL IN THE CASE OF JCI T VS MUKUND LTD. 106 ITD 231 WHEREIN THE ISSUE WAS WHETHER THE PREMI UM PAID FOR ACQUIRING LEASEHOLD RIGHT IN LAND IS REVENUE OR CAP ITAL . THE SPECIAL BENCH HAS HELD THAT THE SAME IS CAPITAL EXPENDITURE . 5.2. THE LD. CIT(A) HAS DISTINGUISHED THE FACTS OF THE CASES RELIED UPON BY THE AO AT PAGE-53 PARA 5.39 OF HIS ORDER AND AFT ER DISTINGUISHING THE CASES CAME TO THE CONCLUSION THAT IN NONE OF TH ESE CASES, THE ISSUE OF LEASE PREMIUM AS IN THE CASE OF THE ASSESSEE VI S--VIS RENT HAS BEEN CONSIDERED. AT PARA 5.41 OF HIS ORDER AT PAGE- 54, THE LD. CIT(A) SAYS THAT I HAVE ALSO CONSIDERED THE OTHER CASES R ELIED UPON THE AO. THESE CASES LAY DOWN GENERAL PRINCIPLES OF INTERPRE TATION OF LAW. I FIND THAT NONE OF THE ABOVE CASES THE COURT HAS HEL D THAT THE LEASE PREMIUM IN SIMILAR CIRCUMSTANCES IS IN THE NATURE O F ADVANCE RENT AND HENCE LIABLE FOR DEDUCTION OF TDS U/S. 194-I OF THE ACT. THE CASES RELIED UPON BY THE AO ARE THUS DISTINGUISHABLE ON F ACTS AND IN LAW AND THE SAME CANNOT BE MADE APPLICABLE TO THE FACTS OF THE PRESENT CASE WHERE THE ISSUE RAISED IS COMPLETELY DIFFERENT . 5.3. THE LD. CIT(A) FINALLY CONSIDERED THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. NATIONAL STOCK EXCHANGE OF INDIA L TD. IN ITA NOS. 1955/M/99, 2181/M/99, 4853/M/04, 4485/M/04, 4854/M/ 04, 356/M/01AND 5850/M/00. AT PARA 5.45 OF HIS ORDER ON PAGE 57, THE LD. CIT(A) HAS GIVEN A COMPARATIVE CHART OF THE FAC TS IN THE CASE OF THE ASSESSEE AND THAT IN THE CASE OF NSE AND AFTER COMPARING THE FACTS FINALLY CONCLUDED THAT THE FACTS OF THE CASE OF THE NSE ARE IDENTICAL TO THE FACTS OF THE CASE OF THE ASSESSEE AND OBSERVED THAT IN THE CASE OF NSE, THE STAND OF THE DEPARTMENT AS WELL AS THE DEC ISION OF THE TRIBUNAL WAS THAT THE CONSIDERATION PAID FOR ACQUIR ING LEASEHOLD RIGHTS IN LAND IS A CAPITAL EXPENDITURE AND NOT RE NT. 5.4. THE LD. CIT(A) FINALLY CONCLUDED THAT THE AMOU NT PAID BY THE ASSESSEE IS LEASE PREMIUM FOR ACQUIRING LEASEHOLD R IGHTS AND ADDITIONAL FSI IN RESPECT OF THE LEASED PLOT AND TH E SAME IS NOT IN THE NATURE OF RENT AS CONTEMPLATED U/S. 194-1 OF THE AC T. ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 44 ACCORDINGLY, THE ASSESSEE WAS NOT REQUIRED TO DEDUC T TAX AT SOURCE U/S. 194-1 OF THE ACT AND DELETED THE DEMAND RAISED BY THE ASSESSEE. 21.4 SIMILAR ISSUE HAS COME UP BEFORE THE DELHI BEN CH OF THE TRIBUNAL IN THE CASE OF THE INDIAN NEWS PAPERS SOCIETY (SUPR A) AND THE TRIBUNAL HAS HELD THAT THE LEASE PREMIUM PAID BY TH E ASSESSEE TO MMRDA DOES NOT FALL UNDER SECTION 194-I OF THE ACT AND THEREFORE THE PROVISIONS OF SECTION 201(1) OF THE ACT DOES NOT AP PLY BECAUSE THE SAID LEASE PREMIUM WAS CAPITAL EXPENDITURE TO ACQUIRE LA ND ON LEASE WITH SUBSTANTIAL RIGHT TO CONSTRUCT AND COVER THE BUILDI NG COMPLEX. 22. DURING THE COURSE OF HEARING LD. DR SUBMITTED T HAT THE ABOVE DECISIONS OF ITAT, DELHI BENCH AND ITAT MUMBAI BENC H (SUPRA) ARE DISTINGUISHABLE. WHEREAS THE DECISION OF ITAT, CHEN NAI BENCH IN THE CASE OF FOXCONN INDIA DEVELOPERS PVT.LTD (SUPRA) SH OULD BE CONSIDERED AND BE FOLLOWED . WE OBSERVE THAT THE SA ID DECISION OF ITAT HAS BEEN CONSIDERED BY THE LD. CIT(A) IN PARA 5.40 OF THE IMPUGNED ORDER. ON PERUSAL OF THE SAID ORDER OF ITA T, CHENNAI BENCH, WE OBSERVE THAT IN THE SAID ORDER OF CHENNAI BENCH ONLY THE PROVISIONS OF SECTION 194-I HAS BEEN CONSIDERED IN RESPECT OF UPFRONT CHARGES PAID IN RESPECT OF LEASE OF LAND FOR A PERI OD OF 99 YEARS. ON PERUSAL OF THE FACTS OF THE CASE, IT IS OBSERVED TH AT THE ASSESSEE HAD ALREADY ENTERED INTO LEASE AGREEMENTS AND THE SAID PAYMENT WAS MADE TO SIPCOT LTD UNDER LEASE AGREEMENT. THEREFORE , THE SAID PAYMENT IS FOR LEASE OR USE OF LAND AND ACCORDINGLY THE PAYMENT COULD NOT BE SAID TO HAVE BEEN MADE FOR ACQUIRING LEASEHO LD LAND AND HENCE, IT IS OBSERVED THAT THE CHENNAI BENCH HAS HE LD THAT THE PAYMENT BY THE ASSESSEE COMPANY TO CIDCO IS RENT U/ S 194-I OF THE ACT. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ABOVE DECISION OF ITAT CHENNAI BENCH (SUPRA) RELIED UPON BY LD. DR IS NOT APPLICABLE TO THE CASE BEFORE US. ON THE OTHER HAND, THE SPECI AL BENCH DECISION OF ITAT, MUMBAI IN THE CASE OF MUKUND LTD. (SUPRA) SQU ARELY APPLY WHEREIN IT HAS BEEN HELD THAT THE PREMIUM PAID FOR ACQUIRING LEASE HOLD RIGHT IN LAND IS A CAPITAL EXPENDITURE. THE SP ECIAL BENCH DECIDED THE ISSUE AFTER CONSIDERING THE VARIOUS JUDGMENTS O F THE HONBLE JURISDICTIONAL HIGH COURT, HONBLE APEX COURT, VARI OUS DECISIONS OF THE TRIBUNAL AS DISCUSSED HEREINABOVE WHICH HAVE DISTIN GUISHED BETWEEN THE LEASE PREMIUM AND RENT UNDER THE INCOME TAX ACT . THE HONBLE APEX COURT HAS HELD IN THE CASE OF ENTERPRISING ENT ERPRISES V/S DCIT ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 45 (2007) 293 ITR 437 (SC) THAT THE ASSESSEE WHICH HAD TAKEN A QUARRY ON LEASE, THE LEASE RENT PAID WAS CAPITAL EXPENDITU RE AND THE HONBLE HIGH COURT ALSO AFFIRMED THE DECISION OF THE TRIBUN AL. THE HONBLE APEX COURT WHILE CONFIRMING THE DECISION OF THE HON BLE HIGH COURT HELD THAT PREMIUM FOR LEASE OR ANY LUMPSUM PAYMENT FOR OBTAINING A LEASE FOR A LONG PERIOD IS A PAYMENT FOR ENDURING A DVANTAGE, SO THAT IT IS A CAPITAL EXPENDITURE WHICH IS NOT DEDUCTIBLE . THE HONBLE APEX COURT ALSO CONFIRMED THE DECISION OF HONBLE MADRAS HIGH COURT THAT EVEN THE ALTERNATE CLAIM FOR PROPORTIONATE DEDUCTIO N OF THE AMOUNT, PAID DURING THE PERIOD OF LEASE IS NOT ADMISSIBLE. THEREFORE, CONSIDERING THE REASONS AS MENTIONED HEREINABOVE AN D THE DECISIONS OF ITAT, MUMBAI BENCH (SUPRA) WHEREIN IT HAS BEEN H ELD THAT SINGLE PAYMENT MADE FOR ACQUISITION OF RIGHT OF LEASE TO E NJOY LEASEHOLD RIGHTS IN THE LAND GRANTED TO THE ASSESSEE IS A CAP ITAL EXPENDITURE. SIMILARLY, ITAT DELHI BENCH (SUPRA) HAS HELD THAT T HE LEASE PREMIUM PAID BY ASSESSEE TO CIDCO IS NOT IN THE NATURE OF R ENT AS CONTEMPLATED U/S 194-I OF THE ACT. HENCE, WE AGREE WITH LD. CIT( A) THAT THE PROVISIONS OF SECTION 194-I OF THE ACT TO DEDUCT TD S ON THE LEASE PREMIUM PAID BY THE ASSESSEE IS NOT ATTRACTED. IN V IEW OF ABOVE, WE UPHOLD THE ORDER (S) OF LD. CIT(A) TO DELETE THE DE MAND RAISED BY THE AO U/S 201(1) AND 201(1A) OF THE ACT BY REJECTING T HE GROUNDS OF APPEAL TAKEN BY THE DEPARTMENT. HENCE, THE GROUNDS OF APPEAL TAKEN BY THE DEPARTMENT ARE REJECTED IN ALL THE APPEALS F OR THE ASSESSMENT YEARS UNDER CONSIDERATION. 23. IN THE RESULT, APPEALS OF THE DEPARTMENT FOR AS SESSMENT YEARS 2006-07 TO 2009- 10 ARE DISMISSED. 2.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, CONCLUSION DRAWN IN THE AFORESAID ORDER OF THE TRIB UNAL DATED 16/08/2013, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSELS, IF KEPT IN JUXTAPOSITION AND ANALYZED, WE NOTE THAT IN THE AFORESAID ORDER AN ELABORATE DISCUSSION HAS BEEN MA DE BY THE TRIBUNAL ALONG WITH CITING VARIOUS JUDICIAL ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 46 PRONOUNCEMENTS ON IDENTICAL ISSUE/FACTS AND CONCLUD ED THAT THE PROVISIONS OF SECTION 194-I ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT APPEAL TO DEDUCT TDS ON THE LEASE PR EMIUM PAID BY THE ASSESSEE. THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) IN THE IMPUGNED ORDERS HAS ALSO FOLLOWED ONE OF THE AFORESAID DECISIONS, RELIED UPON BY THE ASSESSEE AN D MORE SPECIFICALLY M/S WADHWA ASSOCIATES REALTORS PVT. LT D. (SUPRA) ALONG WITH VARIOUS OTHER DECISIONS AND FOUND THAT T HE PAYMENT TO MMRDA IS FOR ADDITIONAL BUILT UP AREA AN D ALSO FOR GRANTING FEE OF FSI AND SUCH PAYMENTS CANNOT BE EQUATED TO RENT, THUS, WE FIND NO INFIRMITY IN THE IMPUGNED ORDERS, WHEREIN, THE DECISION OF THE TRIBUNAL IN THE CASE O F NATIONAL STOCK EXCHANGE AND M/S MUKUND LTD. WERE DISCUSSED A LONG WITH THE DECISION FROM HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S KHIM LINE PUMPS LTD. WHICH IS IDENT ICAL ON FACTS, THUS, THE ADDITION MADE U/S 201(1) AND 201(1 A) OF THE ACT WAS RIGHTLY DELETED. WE AFFIRM THE STAND OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AS NO INFIRMIT Y IS FOUND THEREIN. FINALLY, BOTH THE APPEALS OF THE REVENUE ARE DISMIS SED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 23/11/2015. SD/- SD/- ( JASON P. BOAZ ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER ORIENTAL BANK OF COMMERCE ITA NO.1300 & 1301/MUM/2014 47 & ' MUMBAI; * DATED : 23/11/2015 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. +,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 & 1% ( + ) / THE CIT, MUMBAI. 4. 0 0 & 1% / CIT(A)- , MUMBAI 5. 3!4 .%' , 0 +) +' 5 , & ' / DR, ITAT, MUMBAI 6. 6# 7' / GUARD FILE. / BY ORDER, /3% .% //TRUE COPY// / (DY./ASSTT. REGISTRAR) , & ' / ITAT, MUMBAI.