Income-tax Officer, V. Siddhivinayak Institute of Medical Science & Research Centre Pvt. Ltd., Pune

ITA 2001/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1731 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 11-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Keywords: Maximum Marginal Rate
• Section: 12A; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , A M . / ITA NO. 2001 /PN/201 4 / ASSESSMENT YEAR : 20 1 2 - 1 3 THE INCOME - TAX OFFICER (TDS) - 3 , PUNE . / APPELLANT VS. SIDDHIVINAYAK INSTITUTE OF MEDICAL SCIENCE & RESEARCH CENTRE PVT. LTD., 21/459 A YAMUNA NAGAR, NIGDI , PUNE 411044 . / RESPONDENT PAN: AA PCS1261H / APPELLANT BY : SHRI ANIL CHAWARE / RESPONDENT BY : NONE / DATE OF HEARING : 30 . 0 5 .201 6 / DATE OF PRONOUNC EMENT: 30 . 0 5 .201 6 DATE OF HEARING : 30 . 0 5 .201 6 DATE OF PRONOUNC EMENT: 30 . 0 5 .201 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT (A) - V , PUNE , DATED 11 . 0 8 .20 1 4 RELATING TO ASSESSMENT YEAR 20 1 2 - 1 3 AGAINST ORDER PASSED UNDER SECTION 201(1)/201(1A) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - V, PUNE ERRED IN DELETING THE DEMAND RAISED OF RS. 23 , 25 , 212 / - U/S 201(1) / 201(1A) OF THE INCOME TAX ACT, 1961 IN RESPECT OF PAYMENT MADE TOWARDS LEASE AGREEMENT FOR 99 YEARS WITH (PCNTDA) SINCE THE DEED ENTERED INTO BY THE DEDUCTOR WITH PCNTDA IS NOT A TRANSFER DEED BUT A LEASE DEED AND THERE IS NO TRANSFER OF OWNERSHIP RIGHTS OF THE PROPERTY BUT THE SAME IS LEASED F OR USE EITHER FOR COMMERCIAL OR RESIDENTIAL PURPOSES AS APPROVED BY LESSOR/DEDUCTEE . 2. THE DEDUCTEE / LESSEE HAS PUT SEVERAL RESTRICTIONS ON THE LESSEE WHICH MAKES IT CLEAR THAT THIS IS NOT A FREEHOLD TRANSFER BUT IS ONLY A LEASE. ITA NO. 2001 /PN/20 1 4 SIDDHIVINAYAK INS TITUTE OF MEDICAL SCIENCE & RESEARCH CENTRE PVT. LTD. 2 3. THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) - V, PUNE ERRED IN NOT APPRECIATING THE FACT THAT THE PAYMENT IN QUESTION WAS COVERED BY THE DEFINITION OF RENT AS PER PROVISO OF SECTION 194I OF THE INCOME TAX ACT AND TDS U/S.194I WAS REQUIRED TO BE DEDUCTED SINCE THE RENT A S DEFINED IN EXPLANATION TO SECTION 194I CLEARLY MAKES THE CASE OF TDS DEFAULT AGAINST THE LESSEE, AS ANY PAYMENT BY WHATEVER NAME CALLED UNDER ANY LEASE DEED / AGREEMENT IS TO BE TAKEN AS RENT FOR TDS PURPOSES. 3 . DESPITE SERVICE OF NOTICE, NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY APPLICATION WAS MOVED FOR ADJOURNMENT. HOWEVER, WE PROCEED TO DECIDE THE PRESENT APPEAL SINCE THE ISSUE INVOLVED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDER OF TRIBUNAL ITSELF. 4 . THE LEARNED DEPARTMENTAL R EPRESENTATIVE FOR THE REVENUE PUT FORWARD HIS CONTENTIONS. 5 . THE ISSUE RAISED IN THE PRESENT APPEAL VIS - A - VIS IS THE DEMAND RAISED UNDER SECTION 201(1) AND 201(1A) OF THE ACT AT R S . 23 , 25 , 212 / - IN RESPECT OF UNDER SECTION 201(1) AND 201(1A) OF THE ACT AT R S . 23 , 25 , 212 / - IN RESPECT OF LEASE PREMIUM PAID TO PIMPRI CHINCHWAD NEW TO WNSHIP DEVELOPMENT AUTHORITY (PCNTDA). 6 . BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS A PRIVATE LIMITED COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 . DURING THE COURSE OF TDS VERIFICATION IN THE CASE OF PIMPRI CHINCHWAD NEW TOWNSHIP DEVELO PMENT AUTHORITY (PCNTDA) ON 07. 11 .2012, IT WAS NOTED THAT THE ASSESSEE HAD ENTERED INTO LEASE AGREEMENT FOR 99 YEARS WITH PCNTDA ON THE TERMS AND CONDITIONS LAID DOWN BY THE LESSOR IN THE LEASE DEED DATED 28 . 0 4 .201 1 FOR PLOT N O . 1 IN SECTOR N O . 1 3 , WITHIN TH E VILLAGE LIMITS OF RAVET, TAL - HAVELI, DIST - PUNE . THE ASSESSING OFFICER WAS OF THE VIEW THAT AS PER THE LEASE DEED, THE PREMIUM PAID FOR ACQUISITION OF LEASEHOLD RIGHTS FOR 99 YEARS WAS NOTHING BUT RENT AND ITA NO. 2001 /PN/20 1 4 SIDDHIVINAYAK INS TITUTE OF MEDICAL SCIENCE & RESEARCH CENTRE PVT. LTD. 3 HENCE, THE PROVISIONS OF SECTION 194 I OF THE A CT WERE APPLICABLE. ACCORDINGLY, HE RAISED THE DEMAND UNDER SECTION 201(1) AND 201(1A) OF THE ACT. 7 . THE CIT(A) CONSIDERED THE ARGUMENTS OF THE ASSESSEE AND THE VIEWS TAKEN BY VARIOUS BENCHES OF TRIBUNAL AND HELD THAT THE PAYMENT OF LEASE PREMIUM MADE T O PCNTDA WAS A PRE - CONDITION FOR ENTERING INTO LEASE AGREEMENT AND THEREFORE, IT COULD NOT BE SAID THAT THE SAME WAS PAID UNDER THE TERMS OF LEASE AGREEMENT. FURTHER, THE STAMP DUTY HAD BEEN PAID ON THE MARKET VALUE OF PLOT REPRESENTED BY LEASE PREMIUM, T HEREFORE, THE DEMAND RAISED UNDER SECTION 201(1) AND 201(1A) OF THE ACT BY THE ASSESSING OFFICER WAS DIRECTED TO BE DELETED. 8 . THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 9 . WE FIND THAT SIMILAR ISSUE WHETHER TAX SHOULD BE DEDUCTED AT SOURC E UNDER 9 . WE FIND THAT SIMILAR ISSUE WHETHER TAX SHOULD BE DEDUCTED AT SOURC E UNDER SECTION 194 I OF THE ACT AND FOR SUCH NON - DEDUCTION OF TAX AT SOURCE DEMAND SHOULD BE RAISED UNDER SECTION 201(1) OF THE ACT AND INTEREST UNDER SECTION 201(1A) OF THE ACT IS CHARGEABLE IN RESPECT OF LEASE PREMIUM PAID TO PCNTDA BY THE ASSESSEE, AROS E BEFORE THE TRIBUNAL IN ITO VS. CAMP EDUCATION SOCIETY IN ITA NO.2134/PN/2013 RELATING TO ASSESSMENT YEAR 2013 - 14, ORDER DATED 27.10.2014. THE TRIBUNAL HELD AS UNDER: - 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE WAS AN E DUCATIONAL SOCIETY REGISTERED UNDER SECTION 12A OF THE ACT. THE ASSESSEE WAS RUNNING 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 REP LY 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 AMOUNT WAS TO BE REFUNDED WITHOUT ANY INTEREST. THE TENDER DOCUMENT STATED THAT THE TENDER WAS FOR THE PURPOSE OF SALE OF RESERVED PLOTS AND AS PER THE DOCUMENT FULL PREMIUM WAS TO BE PAID TO PCNTDA AND LEASE AGREEMENT WOULD BE ENTERED WITH THE PARTY. THE ASSESSEE ENTERED INTO A LEASE AGREEMENT WITH PCNTDA FOR 99 YEARS AND THE ITA NO. 2001 /PN/20 1 4 SIDDHIVINAYAK INS TITUTE OF MEDICAL SCIENCE & RESEARCH CENTRE PVT. LTD. 4 LEASE RENT WAS RS.100/ - PER ANNUM FOR THE PERIOD 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 THE LEASEHOLD RIGHTS. THE LEASE DEED AUTHORIZES THE ASSES SEE TO BUILD / CONSTRUCT ANY BUILDING ON THE 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 AGREEMENT WAS ENTERED INTO AND BUNDLE OF RIGHTS WERE OBTAINED BY THE ASSESSEE. 7. THE ASSESSING OFFICER HELD THE ASSESSEE TO BE DEFAULT IN RESPECT OF THE TDS PAYABLE ON SUCH LEASE RENT PAYMENT TO PCNTDA. RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE CHENNAI BENCH OF TH E TRIBUNAL IN FOX CONN INDIA DEVELOPER (P) LTD. (SUPRA). THE ASSESSEE WAS HELD TO BE IN DEFAULT FOR NON - DEDUCTION OF TAX ON SOURCE UNDER SECTION 194I OF THE ACT ON THE LEASE PREMIUM PAID TO PCNTDA AND DEMAND UNDER SECTION 201(1) OF THE ACT WAS RAISED AND INTEREST UNDER SECTION 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 PRELIMINARY CLAUSES OF THE AGREEMENT ENTERED INTO BETWEEN ASSESSEE AND PCNTDA AND POINTED OUT THAT THE LEASE PREMIUM FIND S 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 SPECIFIED 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 ISSUE IN QUESTION WAS UPFRONT PAYMENT AND NOT L EASE PREMIUM. FURTHER, UPFRONT PAYMENT WAS PART OF CONSIDERATION FOR ACQUIRING LEASEHOLD RIGHTS UNLIKE THE PRESENT CASE WHERE PAYMENT OF LEASE PREMIUM WAS LEASEHOLD RIGHTS UNLIKE THE PRESENT CASE WHERE PAYMENT OF LEASE PREMIUM WAS PRE - CONDITION FOR ENTERING INTO LEASE AGREEMENT AND THEREFORE THE FACTS OF THE CASE WERE CLEARLY DIS TINGUISHABLE. FURTHER RELIANCE 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 L EASE PREMIUM 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 12.08.2013, HELD THAT LEASE PREMIUM PAID BY T HE ASSESSEE TO THE CITY AND INDUSTRIAL DEVELOPMENT CORPORATION OF MAHARASHTRA LTD. (CIDCO) FOR ACQUIRING 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. FURTHE R ANOTHER BENCH OF THE MUMBAI TRIBUNAL IN THE CASE OF M/S. WADHWA ASSOCIATES IN ITA NO.695/MUM/2012, VIDE ORDER DATED 03.07.2013, HELD THAT TDS WAS NOT REQUIRED TO BE DEDUCTED UNDER SECTION 194I OF THE ACT IN RESPECT OF PAYMENT OF LEASE PREMIUM TO M/S. MMR D 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 EXE CUTED 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 REPRESENTATIVE FOR THE REVENUE. RELYING UPON THE RATIO LAID DOWN BY THE MUMBAI BENCH OF THE TRIBUNAL IN THREE DIFFERENT CASES, WE UPHOLD THE ORDER OF CIT(A) IN HOLDING 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. ITA NO. 2001 /PN/20 1 4 SIDDHIVINAYAK INS TITUTE OF MEDICAL SCIENCE & RESEARCH CENTRE PVT. LTD. 5 10 . THE ISSUE ARISING IN THE PRESENT APPEAL BEFORE US IS IDENTICAL TO THE ISSUE BEFORE THE TRIBUNAL IN ITO VS. CAMP EDUCATION SOCIETY (SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE OUT OF THE LEASE PREMIUM PAYMENTS PAID TO PCNTDA. ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT(A) IN HOLDING THAT THE LEASE PREMIUM PAID BY THE ASSESSEE WAS OUTSIDE THE PURVIEW OF SECTION 194I OF THE ACT AND THE ASSESSING OFFICER WAS NOT JUSTIFIED IN RAISING THE DEMAND UNDER SECTION 201(1) OF THE ACT AND CHARGING INTEREST UNDER SECTION 201(1A) OF THE ACT. THE G ROUNDS OF APPEAL RAISED BY THE REVENUE ARE THUS, DISMISSED. 1 1 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF MAY , 201 6 . SD/ - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 30 TH MAY , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - V , PUNE ; 4. / THE CIT (TDS), PUNE , ; 5. , , / DR A , ITAT, PU NE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE