Income-tax Officer, V. Preetam Medical Foundation & Research Centre, Pune

ITA 190/PUN/2014

• Counselvise Citation: 19024514 RSA 2014
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 29-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B D SINGH
• Keywords: Maximum Marginal Rate
• Section: 12A; 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.190/PN/2014 (ASSESSMENT YEAR: 2013-14) THE INCOME TAX OFFICER, (TDS)-2, PUNE . APPELLANT VS. PREETAM MEDICAL FOUNDATION & RESEARCH CENTRE, PRITAM HOSPITAL BUILDING, NEAR CENTURY ENKA COLONY NO.3, PUNE NASHIK ROAD, BHOSARI, PUNE 411039 PAN: AAATP7745D . RESPONDENT APPELLANT BY : SHRI B.D. SINGH RESPONDENT BY : SHRI ABHAY AVCHAT 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 30.10.2013 RELATING TO ASSESSMENT YEAR 2013- 14 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.14,56,112/- 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.190/PN/2014 PREETAM MEDICAL FOUNDATION & RESEARCH CENTRE 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 LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSES SEE AT THE OUTSET POINTED OUT THAT THE ISSUE IN THE PRESENT APPEA L IS SQUARELY COVERED BY THE RATIO LAID DOWN IN ITO VS. CAMP EDUCATION SOCIETY, IN ITA NO.2134/PN/2013, RELATING TO ASSESSMENT YEAR 2013-1 4, VIDE ORDER DATED 27.10.2014. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE ON THE OTHER HAND, POINTED OUT THAT THE ISSUE IN THE PRESENT CASE IS COVERED BY THE DECISION OF CHENNAI BENCH OF THE TRIBUNAL IN FOXCONN INDIA DEVELOPER (P) LTD. VS. ITO (TDS), IN ITA NO.492(MAD) OF 2010. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELATION TO TH E DEMAND RAISED UNDER SECTIONS 201(1) AND 201(1A) OF THE ACT IN RESP ECT OF THE LEASE PREMIUM PAID TO PIMPRI CHINCHWAD NEW TOWNSHIP DEVELO PMENT AUTHORITY (PCNTDA). IN THE FACTS OF THE CASE BEFORE US, THE ASSESSEE HAD ENTERED INTO 99 YEARS 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 EDUCATION PURPOSES AS PER CLAUSE (N) OF THE LEASE DEED. THE ASSESSEE PAID LEASE PREMIUM OF RS.1,37,36,963/- FOR THE SAID PLOT AND FURTHER AGREED TO PAY SUM OF RS.100/- PER ANNUM FOR TH E ENTIRE PERIOD OF LEASE. THE ASSESSING OFFICER (TDS) WAS OF THE VIEW THAT THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE UNDER SECTION 19 4 I OF THE ACT AT ITA NO.190/PN/2014 PREETAM MEDICAL FOUNDATION & RESEARCH CENTRE 3 THE TIME OF PAYMENT OF LEASE PREMIUM TO PCNTDA. THE ASS ESSING OFFICER ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE AND A LSO ISSUED SUMMONS TO THE DEDUCTOR. IN REPLY, THE ASSESSEE EXPLA INED THAT THE TRANSACTION BETWEEN IT AND PCNTDA WAS A TRANSACTION OF SALE AND FURTHER APPROPRIATE TAX RETURN HAD BEEN FILED BY IT. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE TRANSACTION BETWEEN THE PARTIES WAS NOT THAT OF TRANSFER, BUT OF LEASE AND THERE WAS NO TRAN SFER OF OWNERSHIP OF THE PROPERTY, BUT THE SAME WAS LEASED FOR U SE EITHER FOR COMMERCIAL OR RESIDENTIAL PURPOSES AS APPROVED BY THE LE SSOR. HOWEVER, THE ASSESSING OFFICER REFERRED TO THE VARIOUS RES TRICTIONS ON THE LESSEE / ASSESSEE PUT UP BY THE LESSOR AND IT WA S OBSERVED BY THE ASSESSING OFFICER THAT THIS WAS NOT A CASE OF FREEHOLD TRAN SFER OR SALE AND THE ASSESSEE WAS NOT THE ABSOLUTE OWNER OF THE PR OPERTY. THE ASSESSING OFFICER THUS, CONCLUDED THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE UNDER SECTION 194 I OF THE ACT O N THE LEASE PREMIUM PAID TO PCNTDA. THE ASSESSEE HAVING FAILED TO DED UCT TAX AT SOURCE, WAS HELD TO BE IN DEFAULT UNDER SECTION 201(1) OF TH E ACT AT RS.13,73,696/- AND FURTHER INTEREST UNDER SECTION 201(1A) OF THE ACT WAS CHARGED AT RS.82,416/-. RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY CHENNAI BENCH OF THE TRIBUNAL IN FOXCONN INDIA DEVELOPER (P) LTD. VS. ITO (TDS) (SUPRA). 6. THE CIT(A) AFTER CONSIDERING THE FACTS AND REPLY FILED BY THE ASSESSEE, OBSERVED THAT NO DOUBT, AFTER 99 YEARS OF LEAS E, THE LEASE HOLD RIGHT EXPIRED AND THE LESSOR WAS VESTED WITH THE FU LL RIGHTS ON THE SAID PLOT OF LAND, WITH THE OPTION EITHER TO RENEW THE LEAS E FOR FURTHER PERIOD AND TAKE BACK THE POSSESSION OF THE LAND. HOWEV ER, THE PRELIMINARY CLAUSE OF THE LEASE AGREEMENT REFLECTS THAT THE PAYMENT OF LEASE PREMIUM WAS A PRE-CONDITION FOR ENTERING INTO LEASE A GREEMENT. ITA NO.190/PN/2014 PREETAM MEDICAL FOUNDATION & RESEARCH CENTRE 4 THE CIT(A) HAS REPRODUCED THE PRELIMINARY CLAUSE OF THE LE ASE AGREEMENT AT PAGE 7 OF THE APPELLATE ORDER, WHICH ARE NO T BEING REPRODUCED FOR THE SAKE OF BREVITY. THE CIT(A) THUS, HELD THAT THE PAYMENT OF LEASE PREMIUM OF RS.1,37,36,963/- WAS A PRE-CO NDITION FOR ENTERING INTO THE LEASE AGREEMENT AND THE SAME WAS NOT UNDER THE LEASE DEED, THEREFORE, THE PAYMENT OF LEASE PREMIUM FELL OU TSIDE 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 N O 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 FACTS OF THE CASE BEFO RE THE TRIBUNAL, THE ISSUE IN QUESTION WAS UPFRONT PAYMENT OF LEAS E AND FURTHER THE SAID UPFRONT PAYMENT WAS PART OF THE CONDITIO NS FOR ACQUIRING LEASEHOLD RIGHTS, UNLIKE THE PRESENT CASE WHERE, T HE PAYMENT OF LEASE PREMIUM WAS A PRE-CONDITION FOR ENTERING INTO A LEA SE AGREEMENT. THE CIT(A) PLACED RELIANCE ON THE DECISION OF MU MBAI BENCH OF THE TRIBUNAL IN NAVI MUMBAI SEZ(P) LTD IN ITA NO.73 8 TO 7741/MUM/2012, RELATING TO ASSESSMENT YEARS 2006-07 TO 2009-10, VIDE ORDER DATED 12.08.2013, IN ORDER TO HOLD THAT THE PAYMENT OF LEA SE PREMIUM TO PCNTDA BEING A PRE-CONDITION FOR ENTERING INTO LEASE AGREEMENT, COULD NOT BE SAID TO BE PAID UNDER THE TERMS OF LEASE AGREEMENT. FURTHER, STAMP DUTY HAD BEEN PAID ON THE MARKET VALUE OF THE PLOT REPRESENTED BY LEASE PREMIUM. IN VIEW THEREOF, T HE 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 SQUARELY C OVERED BY THE RATIO LAID DOWN BY THE CO-ORDINATE BENCH OF THE TRIBU NAL IN ITO VS. CAMP EDUCATION SOCIETY (SUPRA), WHEREIN IT WAS HELD AS UNDER:- ITA NO.190/PN/2014 PREETAM MEDICAL FOUNDATION & RESEARCH CENTRE 5 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE WAS AN EDUCATIONAL SOCIETY REGI STERED UNDER SECTION 12A OF THE ACT. THE ASSESSEE WAS RUNN ING VARIOUS SCHOOLS AND COLLEGES IN THE CITY OF PUNE. DURING THE YEAR UNDER CONSIDERATION, IN ORDER TO ESTABLISH ANOTHER SCHOOL IN PIMPRI CHINCHWAD AREA, THE ASSESSEE IN REPLY TO AN ADVERTISE MENT BY PCNTDA, APPLIED FOR A PLOT ON LEASEHOLD BASIS. AS PER T HE BID DOCUMENT, WHERE THE BID QUOTED BY A PARTY ACCEPTED, T HE SAID PARTY WAS REQUIRED TO PAY THE QUOTED AMOUNT I.E. THE PREMIUM WITHIN 3 MONTHS OF THE LETTER OF ALLOTMENT. IN CASE SU CH PREMIUM WAS NOT PAID WITHIN PERIOD OF 3 MONTHS, 25% OF THE TEN DER DEPOSIT WAS TO BE FORTIFIED AND BALANCE AMOUNT WAS TO BE REFUNDED WITHOUT ANY INTEREST. THE TENDER DOCUMENT S TATED THAT THE TENDER WAS FOR THE PURPOSE OF SALE OF RESERVED P LOTS AND AS PER THE DOCUMENT FULL PREMIUM WAS TO BE PAID TO PCNTD A AND LEASE AGREEMENT WOULD BE ENTERED WITH THE PARTY. THE A SSESSEE ENTERED INTO A LEASE AGREEMENT WITH PCNTDA FOR 99 YEA RS AND THE LEASE RENT WAS RS.100/- PER ANNUM FOR THE PERIOD OF 99 YEARS. THE ASSESSEE ACCORDINGLY, DEPOSITED THE PREMIUM AMOUN T OF RS.2,20,24,860/-. AFTER RECEIVING THE PREMIUM AMOUNT, TH E LICENSER I.E. PCNTDA AGREED TO EXECUTE LEASE DEED TO CONVEY / TRANSFER / ASSIGN THE LEASEHOLD RIGHTS. THE LEASE DEED AUTH ORIZES THE ASSESSEE TO BUILD / CONSTRUCT ANY BUILDING ON TH E SAID PLOT OF LAND. THE CASE OF THE ASSESSEE WAS THAT THE PAYMENT OF PREMIUM WAS A PRE-CONDITION FOR OBTAINING THE LEASE RIGHTS AND IT WAS ONLY AFTER PAYMENT OF THE LEASE PREMIUM, THE LEASE AGREEMEN T WAS ENTERED INTO AND BUNDLE OF RIGHTS WERE OBTAINED BY THE AS SESSEE. 7. THE ASSESSING OFFICER HELD THE ASSESSEE TO BE DEF AULT IN RESPECT OF THE TDS PAYABLE ON SUCH LEASE RENT PAYMENT TO PCNTDA. RELIANCE WAS PLACED ON THE RATIO LAID DOWN B Y THE CHENNAI BENCH OF THE TRIBUNAL IN FOX CONN INDIA DEVE LOPER (P) LTD. (SUPRA). THE ASSESSEE WAS HELD TO BE IN DEFAULT F OR NON- DEDUCTION OF TAX ON SOURCE UNDER SECTION 194I OF TH E ACT ON THE LEASE PREMIUM PAID TO PCNTDA AND DEMAND UNDER SECTIO N 201(1) OF THE ACT WAS RAISED AND INTEREST UNDER SECTION 20 1(1A) OF THE ACT WAS CHARGED, RAISING A DEMAND OF RS.22,90,585/-. 8. THE CIT(A) VIDE PARA 8 REFERRED TO THE PRELIMINARY CLAUSES OF THE AGREEMENT ENTERED INTO BETWEEN ASSESSEE AND PCN TDA AND POINTED OUT THAT THE LEASE PREMIUM FINDS MENTION IN THE LEASE DEED BUT THE SAID PAYMENT OF LEASE PREMIUM WAS A PRE -CONDITION FOR ENTERING INTO LEASE AGREEMENT. THE CIT(A) THUS, HELD THAT SAME WAS NOT UNDER THE LEASE DEED AND THE PAYMENT OF LEASE PREMIUM FALLS OUTSIDE THE PURVIEW OF DEFINITION OF RENT AS SP ECIFIED IN SECTION 194I OF THE ACT. THE CIT(A) FURTHER OBSERVED FROM THE RATIO LAID DOWN IN THE CASE OF FOX CONN INDIA DEVELOPER (P) LTD. (SUPRA) WAS DISTINGUISHABLE ON THE FACTS AS IN THAT CASE ISS UE IN QUESTION WAS UPFRONT PAYMENT AND NOT LEASE PREMIUM. FURTHER, U PFRONT PAYMENT WAS PART OF CONSIDERATION FOR ACQUIRING LEAS EHOLD RIGHTS UNLIKE THE PRESENT CASE WHERE PAYMENT OF LEASE PREMI UM WAS PRE-CONDITION FOR ENTERING INTO LEASE AGREEMENT AND T HEREFORE THE FACTS OF THE CASE WERE CLEARLY DISTINGUISHABLE. FURTHE R RELIANCE ITA NO.190/PN/2014 PREETAM MEDICAL FOUNDATION & RESEARCH CENTRE 6 WAS PLACED ON THE SERIES OF DECISIONS, UNDER WHICH SUCH SIMILAR PAYMENT OF LEASE PREMIUM WAS HELD TO BE NOT SUBJECT TO DEDUCTION OF TAX AT SOURCE UNDER SECTION 194I OF THE ACT. 9. WE FIND THAT SIMILAR ISSUE OF PAYMENT OF LEASE PRE MIUM 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 TRIBU NAL IN ITS ORDER DATED 12.08.2013, HELD THAT LEASE PREMIUM PAID BY THE ASSESSEE TO THE CITY AND INDUSTRIAL DEVELOPMENT CORPOR ATION OF MAHARASHTRA LTD. (CIDCO) FOR ACQUIRING DEVELOPMENT AND LEASEHOLD RIGHTS FOR A PERIOD OF 60 YEARS, WAS NOT REQ UIRED TO BE SUBJECT TO DEDUCTION AT SOURCE UNDER SECTION 194I O F THE ACT. FURTHER ANOTHER BENCH OF THE MUMBAI TRIBUNAL IN THE CASE OF M/S. WADHWA ASSOCIATES IN ITA NO.695/MUM/2012, VIDE ORDER D ATED 03.07.2013, HELD THAT TDS WAS NOT REQUIRED TO BE DEDUCT ED UNDER SECTION 194I OF THE ACT IN RESPECT OF PAYMENT OF LEA SE PREMIUM TO M/S. MMRD LTD. 10. IN VIEW OF ABOVE SAID FACTS AND CIRCUMSTANCES, WH EREIN THE LEASE PREMIUM WAS PAID TO PCNTDA BY THE ASSESSEE AS A PRE- CONDITION FOR ENTERING INTO A LEASE AGREEMENT, THE SA ME CANNOT BE SAID TO HAVE BEEN PAID CONSEQUENT TO THE LEASE AGREE MENT EXECUTED BETWEEN THE PARTIES. FURTHER, THE CIT(A) HA S 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 REPRESENTAT IVE FOR THE REVENUE. RELYING UPON THE RATIO LAID DOWN BY THE MUM BAI BENCH OF THE TRIBUNAL IN THREE DIFFERENT CASES, WE UPHOLD TH E ORDER OF CIT(A) IN HOLDING THAT THE LEASE PREMIUM PAID BY THE A SSESSEE IS OUTSIDE THE PURVIEW OF SECTION 194I OF THE ACT AND THE ASSESSING OFFICER WAS NOT JUSTIFIED IN RAISING THE DEMAND UND ER SECTION 201(1) AND 201(1A) OF THE ACT. THE GROUNDS OF APPEAL R AISED BY THE REVENUE ARE THUS, DISMISSED. 8. FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT WHE RE THE LEASE PREMIUM PAID TO PCNTDA WAS A PRE-CONDITION FOR ENTE RING INTO THE LEASE AGREEMENT, THE SAME NOT BEING PAID CONSEQUENT TO THE EXECUTION OF THE LEASE AGREEMENT, CANNOT BE SAID TO BE P AYMENT IN LIEU OF RENT AS ENVISAGED UNDER SECTION 194 I OF THE ACT. IN ADDITION, THE ASSESSEE HAD PAID STAMP DUTY ON THE MARKET VALUE OF TH E PLOT REPRESENTED BY THE LEASE PREMIUM AND THE SAID FINDING OF T HE CIT(A) HAVING NOT BEEN CONTROVERTED BY THE LEARNED DEPARTMEN TAL REPRESENTATIVE FOR THE REVENUE, WE FIND NO MERIT IN THE AP PEAL FILED BY ITA NO.190/PN/2014 PREETAM MEDICAL FOUNDATION & RESEARCH CENTRE 7 THE REVENUE. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) A ND DISMISS THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 9. 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