Income-tax Officer, V. M/s. Lotus Developers, Pune

ITA 166/PUN/2014

• Counselvise Citation: 16624514 RSA 2014
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 27-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B D SINGH
• Assessee Lawyers: AMIT CHHAJAD
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.166/PN/2014 (ASSESSMENT YEAR: 2011-12) THE INCOME TAX OFFICER, (TDS)-2, PUNE . APPELLANT VS. M/S. LOTUS DEVELOPERS OFFICE NO.224/225, 2 ND FLOOR, KOHINOOR ARCADE, NIGDI, PUNE 411044 PAN: AACFL6726E . RESPONDENT APPELLANT BY : SHRI B.D. SINGH RESPONDENT BY : SHRI AMIT CHHAJAD DATE OF HEARING : 12-01-2015 DATE OF PRONOUNCEMENT : 16-01-2015 ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CI T(A)-V, PUNE DATED 08.10.2013 RELATING TO ASSESSMENT YEAR 2011- 12 AGAINST ORDER PASSED UNDER SECTION 201(1) / 201(1A) OF THE INCOME-TAX ACT . 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE DEMAND RAISED OF RS.31,99,050/- U/S 201(1)/201(1A ) OF THE INCOME TAX ACT,1961 IN RESPECT OF LEASE PREMIU M PAYMENT PAID TO PIMPRI CHINCHWAD NEW TOWNSHIP DEVELOPMENT AUT HORITY (PCNTDA). 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONSIDERING THE FACT THAT THE PREMIUM PAID TO PCNTD A IS UPFRONT PAYMENT AS PRE-CONDITION FOR ENTERING IN TO LEASE AGREEM ENT. ITA NO.168/PN/2014 M/S. METRO DEVELOPERS 2 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN NOT APPRECIATING THE FACT THAT THE DEED ENTERED INTO BY THE DEDUCTOR WITH PCNTDA WAS NOT A TRANSFER DEED BU T A LEASE DEED AND EXPLANATION TO SECTION 194I CLEARLY STIPULATES THAT ANY PAYMENT BY WHATEVER NAME CALLED UNDER ANY LEASE DEED/AGREEMENT IS TO BE TAKEN AS RENT FOR TDS PURPO SE. 4. THE APPELLANT CRAVES LEAVES TO ADD, ALTER OR AMEND ANY OR ALL THE GROUNDS OF APPEAL. 3. THE ASSESSEE MOVED AN APPLICATION FOR ADJOURNMENT WH ICH WAS REFUSED AS THE ISSUE RAISED IN THE PRESENT APPEAL IS COVE RED BY THE ORDERS OF TRIBUNAL. 4. THE ONLY ISSUE ARISING IN THE PRESENT APPEAL IS AGAINS T THE DELETION OF DEMAND CREATED UNDER SECTION 201(1) / 201(1A) O F THE ACT AMOUNTING TO RS.31,99,050/- IN RESPECT OF THE LEASE PREM IUM PAID TO PIMPRI CHINCHWAD NEW TOWNSHIP DEVELOPMENT AUTHORITY (PCNTDA). 5. ON THE PERUSAL OF RECORD, WE FIND THAT THE ASSESSEE WAS A BUILDER FIRM ENGAGED IN THE PROMOTION AND DEVELOPMENT OF PROPERTIE S. THE ASSESSEE HAD ENTERED INTO 99 YEARS LEASE AGREEMENT TH ROUGH ITS PARTNER SHRI SANTOSH VITTALDAS KARNAWAT WITH PCNTDA FOR USING 960 SQ. MTRS. OF LAND LOCATED AT PLOT NOS.29B AND 30A, IN SECTOR NO.ADC, CHINCHWAD, HAVELI, PUNE. THE SAID LAND COULD BE USED BOTH FOR RESIDENTIAL AND COMMERCIAL PURPOSES. THE ASSESSEE HAD PA ID LEASE PREMIUM OF RS.2,64,38,400/- AND HAD FURTHER AGREED TO PA Y SUM OF RS.100/- PER ANNUM FOR THE ENTIRE PERIOD OF LEASE. THE AS SESSING OFFICER CONSIDERED THE SAID PAYMENT AS RENT AND IN VIEW OF THE PROVISIONS OF SECTION 194 I OF THE ACT, FOR NON-DEDUCTION O F TAX AT SOURCE, THE ASSESSEE WAS HELD TO HAVE FAILED TO DEDUCT T AX ON THE SAID LEASE PREMIUM PAID TO PCNTDA. ACCORDINGLY, DEMAND UNDER SECTION 201(1) OF THE ACT WAS RAISED AT RS.26,43,840/- AND INTERE ST UNDER SECTION 201(1A) OF THE ACT WAS RAISED AT RS.5,55,210/-. ITA NO.168/PN/2014 M/S. METRO DEVELOPERS 3 6. WE FIND THAT AN IDENTICAL ISSUE AS RAISED IN THE PRESENT APPEAL, AROSE BEFORE THE TRIBUNAL IN ITO (TDS) VS. PREETAM MEDICAL FOUNDATION & RESEARCH CENTRE, IN ITA NO.190/PN/2014, VIDE ORDER OF EVEN DATE, WHEREIN IT WAS HELD AS UNDER:- 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RE LATION TO THE DEMAND RAISED UNDER SECTIONS 201(1) AND 201(1A) OF TH E ACT IN RESPECT OF THE LEASE PREMIUM PAID TO PIMPRI CHINCHWAD NEW TOWNSHIP DEVELOPMENT AUTHORITY (PCNTDA). IN THE FACTS OF THE CASE BEFORE US, THE ASSESSEE HAD ENTERED INTO 99 YEA RS LEASE AGREEMENT THROUGH ITS CHAIRMAN WITH PCNTDA FOR USING 3261 SQ. MTRS. OF LAND LOCATED ON PLOT NO.1, IN SECTOR 13, CHIKHALI , TALUKA HAVELI, PUNE. THE SAID LAND WAS TO BE USED FOR EDUC ATION PURPOSES AS PER CLAUSE (N) OF THE LEASE DEED. THE ASS ESSEE PAID LEASE PREMIUM OF RS.1,37,36,963/- FOR THE SAID PLOT AND FU RTHER AGREED TO PAY SUM OF RS.100/- PER ANNUM FOR THE ENTI RE PERIOD OF LEASE. THE ASSESSING OFFICER (TDS) WAS OF THE VIEW T HAT THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE UNDER SECT ION 194 I OF THE ACT AT THE TIME OF PAYMENT OF LEASE PREMIUM TO PCNTDA. THE ASSESSING OFFICER ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE AND ALSO ISSUED SUMMONS TO THE DEDUCTOR. IN REPLY, THE ASSESSEE EXPLAINED THAT THE TRANSACTION BETWEEN IT AND PCNTD A WAS A TRANSACTION OF SALE AND FURTHER APPROPRIATE TAX RETUR N HAD BEEN FILED BY IT. THE ASSESSING OFFICER WAS OF THE VIEW T HAT THE TRANSACTION BETWEEN THE PARTIES WAS NOT THAT OF TRA NSFER, BUT OF LEASE AND THERE WAS NO TRANSFER OF OWNERSHIP OF THE PROPERTY, BUT THE SAME WAS LEASED FOR USE EITHER FOR COMMERCIAL OR R ESIDENTIAL PURPOSES AS APPROVED BY THE LESSOR. HOWEVER, THE ASS ESSING OFFICER REFERRED TO THE VARIOUS RESTRICTIONS ON THE LESSEE / ASSESSEE PUT UP BY THE LESSOR AND IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THIS WAS NOT A CASE OF FREEH OLD TRANSFER OR SALE AND THE ASSESSEE WAS NOT THE ABSOLUTE OWNER OF T HE PROPERTY. THE ASSESSING OFFICER THUS, CONCLUDED THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE UNDER SEC TION 194 I OF THE ACT ON THE LEASE PREMIUM PAID TO PCNTDA. THE ASS ESSEE HAVING FAILED TO DEDUCT TAX AT SOURCE, WAS HELD TO BE IN DEFAULT UNDER SECTION 201(1) OF THE ACT AT RS.13,73,696/- AND FU RTHER INTEREST UNDER SECTION 201(1A) OF THE ACT WAS CHARGE D AT RS.82,416/-. RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY CHENNAI BENCH OF THE TRIBUNAL IN FOXCONN INDIA DEVELOP ER (P) LTD. VS. ITO (TDS) (SUPRA). 6. THE CIT(A) AFTER CONSIDERING THE FACTS AND REPLY F ILED BY THE ASSESSEE, OBSERVED THAT NO DOUBT, AFTER 99 YEARS OF LE ASE, THE LEASE HOLD RIGHT EXPIRED AND THE LESSOR WAS VESTED WITH THE FULL RIGHTS ON THE SAID PLOT OF LAND, WITH THE OPTION EITHE R TO RENEW THE LEASE FOR FURTHER PERIOD AND TAKE BACK THE POSSESSION OF THE LAND. HOWEVER, THE PRELIMINARY CLAUSE OF THE LEASE AGREEMEN T REFLECTS THAT THE PAYMENT OF LEASE PREMIUM WAS A PRE-CONDITION FOR ENTERING INTO LEASE AGREEMENT. THE CIT(A) HAS REPRODU CED THE ITA NO.168/PN/2014 M/S. METRO DEVELOPERS 4 PRELIMINARY CLAUSE OF THE LEASE AGREEMENT AT PAGE 7 O F THE APPELLATE ORDER, WHICH ARE NOT BEING REPRODUCED FOR TH E SAKE OF BREVITY. THE CIT(A) THUS, HELD THAT THE PAYMENT OF LEAS E PREMIUM OF RS.1,37,36,963/- WAS A PRE-CONDITION FOR ENTERING INTO THE LEASE AGREEMENT AND THE SAME WAS NOT UNDER THE LEASE DEED, THEREFORE, THE PAYMENT OF LEASE PREMIUM FELL OUTSIDE THE PURVIEW OF DEFINITION OF RENT AS PROVIDED UNDER SECTION 194 I OF THE ACT. IT WAS FURTHER POINTED OUT BY THE CIT(A) THAT THERE IS NO MERIT IN THE RELIANCE PLACED UPON THE DECISION OF CHENNAI BENCH OF THE TRIBUNAL IN FOXCONN INDIA DEVELOPER (P) LTD. VS. ITO (TDS) (SUPRA) AS THE SAME WAS DISTINGUISHABLE ON FACTS. IN THE FAC TS OF THE CASE BEFORE THE TRIBUNAL, THE ISSUE IN QUESTION WAS UPFRON T PAYMENT OF LEASE AND FURTHER THE SAID UPFRONT PAYMENT WAS PART OF THE CONDITIONS FOR ACQUIRING LEASEHOLD RIGHTS, UNLIKE THE PRESENT CASE WHERE, THE PAYMENT OF LEASE PREMIUM WAS A PRE-CONDITION FOR ENTERING INTO A LEASE AGREEMENT. THE CIT(A) PLACED R ELIANCE ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN NAVI MUM BAI SEZ(P) LTD IN ITA NO.738 TO 7741/MUM/2012, RELATING TO ASSE SSMENT YEARS 2006-07 TO 2009-10, VIDE ORDER DATED 12.08.2013, I N ORDER TO HOLD THAT THE PAYMENT OF LEASE PREMIUM TO PCNTDA BE ING A PRE-CONDITION FOR ENTERING INTO LEASE AGREEMENT, COULD NOT BE SAID TO BE PAID UNDER THE TERMS OF LEASE AGREEMENT. FURTH ER, STAMP DUTY HAD BEEN PAID ON THE MARKET VALUE OF THE PLOT REPRESE NTED BY LEASE PREMIUM. IN VIEW THEREOF, THE ASSESSING OFFICER WAS DIRECTED TO DELETE THE DEMAND CREATED UNDER SECTIONS 201(1) AND 201(1A) OF THE ACT. 7. THE ISSUE ARISING IN THE PRESENT APPEAL IS SQUAREL Y COVERED BY THE RATIO LAID DOWN BY THE CO-ORDINATE BENCH OF T HE TRIBUNAL IN ITO VS. CAMP EDUCATION SOCIETY (SUPRA), WHEREIN IT WAS HELD AS UNDER:- 6. WE HAVE HEARD .. 7. . 8. . 9. . 10. .. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE THUS, DISMISSED. 8. FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT WHERE THE LEASE PREMIUM PAID TO PCNTDA WAS A PRE-CONDITION F OR ENTERING INTO THE LEASE AGREEMENT, THE SAME NOT BEING PAID CONSEQUENT TO THE EXECUTION OF THE LEASE AGREEMENT, C ANNOT BE SAID TO BE PAYMENT IN LIEU OF RENT AS ENVISAGED UNDE R SECTION 194 I OF THE ACT. IN ADDITION, THE ASSESSEE HAD PAID STAMP DUTY ON THE MARKET VALUE OF THE PLOT REPRESENTED BY THE LEASE PREM IUM AND THE SAID FINDING OF THE CIT(A) HAVING NOT BEEN CONTR OVERTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE, W E FIND NO MERIT IN THE APPEAL FILED BY THE REVENUE. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) AND DISMISS THE GROUNDS OF APPEA L RAISED BY THE REVENUE. ITA NO.168/PN/2014 M/S. METRO DEVELOPERS 5 7. FOLLOWING THE SAME PARITY OF REASONING, WE UPHOLD THE OR DER OF CIT(A) AND DISMISS THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF JANUARY, 2015. SD/- SD/- (R.K. PANDA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 16 TH JANUARY, 2015. GCVSR COPY OF THE ORDER IS FORWARDED TO : - 1) THE DEPARTMENT; 2) THE ASSESSEE; 3) THE CIT(A)-V, PUNE; 4) THE CIT-V, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE