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

ITA 167/PUN/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88811 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 27-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Maximum Marginal Rate; Non-deduction of tax
• Section: 12A; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.167/PN/2014 (ASSESSMENT YEAR : 2011-12) INCOME TAX OFFICER, (TDS)-2, PUNE. . APPELLANT VS. M/S NIRMAN CONSTRUCTION, OFFICE NO.1, CITY PRIDE BUILDING, SECTOR NO.25, PRADHIKARAN, NIGDI, PUNE 44. PAN : AAHFN4403H . RESPONDENT DEPARTMENT BY : SHRI B. C. MALAKAR ASSESSEE BY : NONE DATE OF HEARING : 07-01-2015 DATE OF PRONOUNCEMENT : 12-01-2015 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGA INST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V, PUNE DA TED 08.10.2013 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 05.02.2013 PASSED BY THE ASSESSING OFFICER U/S 201(1)/201(1A) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2011-12. 2. IN THIS APPEAL, REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN DELETING THE DEMAND RAISED OF RS.85,60,754/- U/S 20 1(1)/201(1A) OF THE INCOME TAX ACT, 1961 IN RESPECT OF LEASE PREMIUM PA YMENT PAID TO PIMPRI CHINCHWAD NEW TOWNSHIP DEVELOPMENT AUTHORITY (PCNTD A). 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 INTO LEASE AGREEMENT. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE DEED ENTERED INT O BY THE DEDUCTOR WITH PCNTDA WAS NOT A TRANSFER DEED BUT A LEASE DEED AND EXPLANATION TO SECTION 194-I CLEARLY STIPULATES THAT ANY PAYMENT BY WHATEV ER NAME CALLED UNDER ANY LEASE DEED/AGREEMENT IS TO BE TAKEN AS RENT FOR TDS PURPOSE. ITA NO.167/PN/2014 3. AT THE TIME OF HEARING, NONE APPEARED AND NOR AN Y ADJOURNMENT WAS SOUGHT ON BEHALF OF THE RESPONDENT-ASSESSEE INSPITE OF NOTICE FOR HEARING AND THE LD. DEPARTMENTAL REPRESENTATIVE APPEARED ON BEH ALF OF THE APPELLANT- REVENUE. THEREFORE, HAVING REGARD TO THE RULE 25 O F THE APPELLATE TRIBUNAL RULES, 1963, THE APPEAL IS BEING DISPOSED-OFF AFTER HEARING THE APPELLANT ON MERITS AND EX-PARTE QUA THE ASSESSEE-RESPONDENT. 4. IN SUM AND SUBSTANCE, THE SOLITARY DISPUTE IN TH IS APPEAL IS IN RELATION TO THE STAND OF THE ASSESSING OFFICER THAT ASSESSEE WA S LIABLE TO DEDUCT TAX AT SOURCE ON PAYMENTS MADE TO PIMPRI CHINCHWAD NEW TOW NSHIP DEVELOPMENT AUTHORITY (PCNTDA) ON LEASE PREMIUM PAID FOR A LAND TAKEN ON LEASE FOR 99 YEARS. AS PER THE ASSESSING OFFICER, ASSESSEE HAVI NG FAILED TO DEDUCT THE TAX U/S 194-I OF THE ACT WAS TO BE TREATED AS AN ASSESS EE IN DEFAULT IN TERMS OF SECTION 201(1)/201(1A) OF THE ACT. THE CIT(A) HAS DISAGREED WITH THE ASSESSING OFFICER ON THIS ASPECT ON THE GROUND THAT THE PAYMENT OF LEASE PREMIUM TO PCNTDA IN TERMS OF THE LEASE DEED FOR LA ND DID NOT AMOUNT TO RENT WITHIN THE MEANING OF SECTION 194-I OF THE A CT. IN COMING TO SUCH CONCLUSION, HE HAS RELIED UPON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF NAVI MUMBAI SEZ (P.) LTD. I N ITA NO.738 TO 7741/MUM/2012 DATED 12.08.2013. AGAINST SUCH A DEC ISION OF THE CIT(A), REVENUE IS IN APPEAL BEFORE US. 5. BEFORE US, IT WAS CONCEDED BY THE LD. DEPARTMENT AL REPRESENTATIVE THAT AN IDENTICAL CONTROVERSY HAS BEEN CONSIDERED B Y THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. CAMP EDUCATION SOCI ETY VIDE ITA NO.2134/PN/2013 DATED 27.10.2014 AND THE RELEVANT P ORTION OF THE ORDER READS AS UNDER :- 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE WAS AN EDUCATIONAL SOCIETY REGISTERED UNDER SECTION 12A OF THE ACT. THE ASSESSEE WAS RUNNING VARIOUS SCHOOLS AND COLLEGES IN THE CITY OF ITA NO.167/PN/2014 PUNE. DURING THE YEAR UNDER CONSIDERATION, IN ORDE R TO ESTABLISH ANOTHER SCHOOL IN PIMPRI CHINCHWAD AREA, THE ASSESSEE IN RE PLY TO AN ADVERTISEMENT BY PCNTDA, APPLIED FOR A PLOT ON LEASEHOLD BASIS. AS PER THE BID DOCUMENT, WHERE THE BID QUOTED BY A PARTY ACCEPTED, THE SAID PARTY WAS REQUIRED TO PAY THE QUOTED AMOUNT I.E. THE PREMIUM WITHIN 3 MONTHS OF THE LETTER OF ALLOTMENT. IN CASE SUCH PREMIUM WAS NOT PAID WITHIN PERIOD OF 3 MONTHS, 25% OF THE TENDER DEPOSIT WAS TO BE FORTIFIED AND BALANCE AMOU NT WAS TO BE REFUNDED WITHOUT ANY INTEREST. THE TENDER DOCUMENT STATED T HAT THE TENDER WAS FOR THE PURPOSE OF SALE OF RESERVED PLOTS AND AS PER THE DO CUMENT FULL PREMIUM WAS TO BE PAID TO PCNTDA AND LEASE AGREEMENT WOULD BE E NTERED WITH THE PARTY. THE ASSESSEE ENTERED INTO A LEASE AGREEMENT WITH PC NTDA FOR 99 YEARS AND THE LEASE RENT WAS RS.100/- PER ANNUM FOR THE PERIO D OF 99 YEARS. THE ASSESSEE ACCORDINGLY, DEPOSITED THE PREMIUM AMOUNT OF RS.2,20,24,860/-. AFTER RECEIVING THE PREMIUM AMOUNT, THE LICENSER I. E. PCNTDA AGREED TO EXECUTE LEASE DEED TO CONVEY / TRANSFER / ASSIGN TH E LEASEHOLD RIGHTS. THE LEASE DEED AUTHORIZES THE ASSESSEE TO BUILD / CONST RUCT ANY BUILDING ON THE SAID PLOT OF LAND. THE CASE OF THE ASSESSEE WAS TH AT THE PAYMENT OF PREMIUM WAS A PRE-CONDITION FOR OBTAINING THE LEASE RIGHTS AND IT WAS ONLY AFTER PAYMENT OF THE LEASE PREMIUM, THE LEASE AGREEMENT W AS ENTERED INTO AND BUNDLE OF RIGHTS WERE OBTAINED BY THE ASSESSEE. 7. THE ASSESSING OFFICER HELD THE ASSESSEE TO BE DE FAULT IN RESPECT OF THE TDS PAYABLE ON SUCH LEASE RENT PAYME NT TO PCNTDA. RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE C HENNAI BENCH OF THE TRIBUNAL IN FOX CONN INDIA DEVELOPER (P) LTD. (SUPR A). THE ASSESSEE WAS HELD TO BE IN DEFAULT FOR NON-DEDUCTION OF TAX ON S OURCE UNDER SECTION 194I OF THE ACT ON THE LEASE PREMIUM PAID TO PCNTDA AND DEM AND UNDER SECTION 201(1) OF THE ACT WAS RAISED AND INTEREST UNDER SEC TION 201(1A) OF THE ACT WAS CHARGED, RAISING A DEMAND OF RS.22,90,585/-. 8. THE CIT(A) VIDE PARA 8 REFERRED TO THE PRELIMINA RY CLAUSES OF THE AGREEMENT ENTERED INTO BETWEEN ASSESSEE AND PCN TDA AND POINTED OUT THAT THE LEASE PREMIUM FINDS MENTION IN THE LEASE D EED BUT THE SAID PAYMENT OF LEASE PREMIUM WAS A PRE-CONDITION FOR ENTERING I NTO LEASE AGREEMENT. THE CIT(A) THUS, HELD THAT SAME WAS NOT UNDER THE LEASE DEED AND THE PAYMENT OF LEASE PREMIUM FALLS OUTSIDE THE PURVIEW OF DEFINITI ON OF RENT AS SPECIFIED IN SECTION 194I OF THE ACT. THE CIT(A) FURTHER OBSERV ED FROM THE RATIO LAID DOWN IN THE CASE OF FOX CONN INDIA DEVELOPER (P) LTD. (S UPRA) WAS DISTINGUISHABLE ON THE FACTS AS IN THAT CASE ISSUE IN QUESTION WAS UPFRONT PAYMENT AND NOT LEASE PREMIUM. FURTHER, UPFRONT PAYMENT WAS PART O F CONSIDERATION FOR ACQUIRING LEASEHOLD RIGHTS UNLIKE THE PRESENT CASE WHERE PAYMENT OF LEASE PREMIUM WAS PRE-CONDITION FOR ENTERING INTO LEASE A GREEMENT AND THEREFORE THE FACTS OF THE CASE WERE CLEARLY DISTINGUISHABLE. FURTHER RELIANCE WAS PLACED ON THE SERIES OF DECISIONS, UNDER WHICH SUCH SIMILA R PAYMENT OF LEASE PREMIUM WAS HELD TO BE NOT SUBJECT TO DEDUCTION OF TAX AT SOURCE UNDER SECTION 194I OF THE ACT. 9. WE FIND THAT SIMILAR ISSUE OF PAYMENT OF LEASE P REMIUM AROSE BEFORE THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF NAVI MUMBAI SEZ (P) LTD. IN ITA NOS.738 TO 740/MUM/2012 FOR ASSESSMENT YEARS 2006-07 TO 2009- 10, WHEREIN THE TRIBUNAL IN ITS ORDER DATED 12.08.2 013, HELD THAT LEASE PREMIUM PAID BY THE ASSESSEE TO THE CITY AND INDUST RIAL DEVELOPMENT CORPORATION OF MAHARASHTRA LTD. (CIDCO) FOR ACQUIRI NG DEVELOPMENT AND LEASEHOLD RIGHTS FOR A PERIOD OF 60 YEARS, WAS NOT REQUIRED TO BE SUBJECT TO DEDUCTION AT SOURCE UNDER SECTION 194I OF THE ACT. FURTHER ANOTHER BENCH OF THE MUMBAI TRIBUNAL IN THE CASE OF M/S. WADHWA ASSO CIATES IN ITA NO.695/MUM/2012, VIDE ORDER DATED 03.07.2013, HELD THAT TDS WAS NOT ITA NO.167/PN/2014 REQUIRED TO BE DEDUCTED UNDER SECTION 194I OF THE A CT IN RESPECT OF PAYMENT OF LEASE PREMIUM TO M/S. MMRD LTD. 10. IN VIEW OF ABOVE SAID FACTS AND CIRCUMSTANCES, WHEREIN THE LEASE PREMIUM WAS PAID TO PCNTDA BY THE ASSESSEE AS A PRE-CONDITION FOR ENTERING INTO A LEASE AGREEMENT, THE SAME CANNOT BE SAID TO HAVE BEEN PAID CONSEQUENT TO THE LEASE AGREEMENT EXECUTED BETWEEN THE PARTIES. FURTHER, THE CIT(A) HAS GIVEN A FINDING THAT STAMP DUTY HAD BEEN PAID ON THE MARKET VALUE OF THE PLOT REPRESENTED BY THE LEASE PREMIUM, WHICH HAS NOT BEEN CONTROVERTED BY THE LEARNED DEPARTMENTAL REPRESENTA TIVE FOR THE REVENUE. RELYING UPON THE RATIO LAID DOWN BY THE MUMBAI BENC H OF THE TRIBUNAL IN THREE DIFFERENT CASES, WE UPHOLD THE ORDER OF CIT(A) IN H OLDING THAT THE LEASE PREMIUM PAID BY THE ASSESSEE IS OUTSIDE THE PURVIEW OF SECTION 194I OF THE ACT AND THE ASSESSING OFFICER WAS NOT JUSTIFIED IN RAISING THE DEMAND UNDER SECTION 201(1) AND 201(1A) OF THE ACT. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE THUS, DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 6. FOLLOWING THE AFORESAID PRECEDENT, WE HEREBY AFF IRM THE ORDER OF THE CIT(A) AND THE REVENUE HAS TO FAIL ACCORDINGLY. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JANUARY, 2015. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 12 TH JANUARY, 2015. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-V, PUNE; 4) THE CIT-V, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE