ITO TDS 2(2), MUMBAI V. KEYSTONE LIFESPACES P.LTD, NAVI MUMBAI

ITA 2088/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3289 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 27-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M MURALI
• Assessee Lawyers: MANHISH J SETH
• Keywords: Maximum Marginal Rate; Capital expenditure
• Section: 37(1)

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI A BENCH , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMIT SHUKLA,JUDICIAL MEMBER /. /./. /. ITA NO. 2088 /MUM/2014, / // / ASSESSMENT YEAR-2010-11 /. /./. /. ITA NO.2089/MUM/2014, / // / ASSESSMENT YEAR-2011-12 INCOME TAX OFFICER-(TDS)-2(2) ROOM NO.707, 7 TH FLOOR SMT.,K.G. MITTAL AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD MUMBAI-400 002. VS. KEYSTONE LIFESPACES PRIVATE LIMITED , 1103, THE AFFAIRES, PLOT NO.9 , SECTOR-17,PALM BEACH ROAD, SANPADA , NAVI MUMBAI-400 705. PAN:AADCK 9010 E ( / APPELLANT) ( / RESPONDENT) /ASSESSEE BY :SHRI MANHISH J SETH / REVENUE BY : SHRI M MURALI / DATE OF HEARING : 09.03.2016 / DATE OF PRONOUNCEMENT : 16.03.2016 , 1961 1961 1961 1961 254 254 254 254( (( (1 11 1) )) ) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) !# $% PER RAJENDRA, AM - CHALLENGING THE ORDERS DTD.10.1.2014 AND 16.1.2014 OF THE CIT(A)-14,MUMBAI THE ASSESSING OFFICERS(AO.S)HAVE FILED THE APPEALS FOR ABOVE MENT IONED TWO YEARS RAISING IDENTICAL GROUNDS OF APPEAL.AS THE ISSUE INVOLVED IN BOTH THE APPEALS ARE COMMON SO WE ARE ADJUDICATING THE APPEALS BY A SINGLE COMMON ORDER. 2088/M/2014(A.Y.2010-11): 2. EFFECTIVE GROUND OF APPEAL IS ABOUT PAYMENT MADE BY THE ASSESSEE TO CIDCO . PROCEEDINGS OF SURVEY,U/S.133A OF THE ACT WAS CARRIED OUT IN TH E CASE OF CITY AND INDUSTRIAL DEVELOPMENT CORPORATION OF MAHARASHTRA LTD.(CIDCO).DURING THE C OURSE OF SURVEY PROCEEDINGS,IT WAS NOTICED THAT A PLOT OF LAND BEARING PLOT NO.49 WAS RENTED OUT TO M/S.SAI PROVISO,THAT LATER ON IT ENTERED INTO A TRIPARTITE AGREEMENT WITH THE ASSESS EE AND CIDCO, THAT IN PURSUANCE OF THE AGREEMENT THE ASSESSEE MADE PAYMENT OF RS.3.57 CROR ES TO M/S.SAI PROVISO AND RS.10.37CRORES TO CIDCO.AS PER THE AO,THE PAYMENT M ADE BY THE ASSESSEE WERE IN THE NATURE OF LEASE RENT AND THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE AS PER THE PROVISIONS OF SECTION 194-I OF THE ACT.VIDE HIS LETTER DT.14.11.2 011 THE AO ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE AMOUNT OF RS.101.37CRORES, PAI D TO CIDCO SHOULD NOT BE TREATED AS LEASE RENT AND THAT WHY IT SHOULD NOT BE TREATED AS AN ASSESSEE IN DEFAULT U/S 201 (1)/201(1A)OF THE ACT FOR NON DEDUCTION OF TAX ON T HE LEASE RENT.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,DTD.21.11.2011,THE AO HE LD THAT PAYMENT MADE TO CIDCO WAS IN THE NATURE OF RENT,THAT THE ASSESSEE SHOULD HAVE D EDUCTED TAX AS PER THE PROVISIONS OF SEC 194- I OF THE ACT.HE DETERMINED THE LIABILITY OF THE ASS ESSEE AT RS.47.35 LAKHS U/S. 201(1)/201(1A) OF THE ACT FOR THE YEAR UNDER CONSIDERATION. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).AFTER CONSIDERING THE SUB MISSION OF THE ASSESSEE AND THE ORDER OF THE AO PASSED U/S. 201(1)/201(1A),THE FAA HELD THAT PAYMENT MADE BY THE ASSESSEE WAS NOT ON ACCOUNT OF LEASE,THAT ASSESSEE HAD PAID RS.10.3 7 CRORES IN LIEU OF THE PLOT OF LAND GRANTED TO IT, THAT THE AMOUNT CHARGED BY CIDCO WAS EQUAL T O RATE PREVALENT AS PER STAMP DUTY 2088&20890KEYSTONELIFESPACES 2 READY RECKONER, THAT THE PREMIUM PAID BY THE ASSESS EE TO CIDCO WAS CAPITAL IN NATURE, THAT SAME COULD NOT BE CONSIDERED AS RENT LIABLE TO TDS U/S.194 OF THE ACT. REFERRING TO THE JUDGMENT OF M/S.SHAH GROUP BUILDERS LTD.(ITA NO.452 3/MUM/2012 DT.14.8.2013-AY 2008- 09)THE FAA GRANTED RELIEF TO THE ASSESSEE. 4. BEFORE US,THE DEPARTMENTAL REPRESENTATIVE (DR) SUPP ORTED THE ORDER OF THE AO.THE AUTHORISED REPRESNTATIVE(AR)STATED THAT SIMILAR ISS UE HAD ARISEN IN OTHER CASES AND HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE AND AGAINST THE AO. HE REFERRED TO THE CASES OF CIDCO(ITA/2985/M/2012 DATED 8.8.2012),M/S. WADHWA & ASSOCIATES REALTORS PVT. LTD.(ITA/695/MUM/2012-DATED 3.7.20130;KHIMLINE PUMP S LTD. (258 ITR 459); MUKUND LTD.(106ITD231);NAVI MUMBAI SEZ P.LTD.(DT.16.8.2013 ITA/738 TO741/MUM/2012); KRISHAK BHARATI CO-OPERATIVE LIMITED VS. DCIT(ITANO.205/201 0 DT.12.7. 2012);BHARAT PETROLEUM CORPORATION LTD. (ITA NO.4985/MUM/2013 DT.29.10.201 4).;ORIENTAL BANK OF COMMERCE(ITA NO.1300/1301/MUM/2014 DATED 23.11.2015). 5 .WE FIND THAT IN THE CASE OF ORIENTAL BANK OF COMME RCE, (SUPRA), THE BANK HAD PAID CIDCO A CERTAIN AMOUNT AND SAME WAS CONSIDERED AS RENT BY THE AO FOR TDS PURPOSES.THE TRIBUNAL REFERRED TO THE CASES OF M/S. WADHWA & ASSOCIATES REALTORS PVT. LTD. (SUPRA) AND NAVI MUMBAI SEZ P.LTD.(SUPRA) AND DECIDED THE ISSUE IN F AOVUR OF THE ASSESSEE. WE FIND THAT IN THE CASE OF M/S. WADHWA & ASSOCIATES REALTORS PVT. LTD. (SUPRA), THE TRIBUNAL HAD DEALT THE ISSUE AS UNDER :- 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERU SED THE ORDER OF THE LOWER AUTHORITIES AND THE MATERIAL EVIDENCE BROUGHT ON RECORD IN THE FORM OF PAPER BOOK AND THE JUDICIAL DECISIONS RELIED UPON BY THE RIVAL PARTIES. THE ENTIRE GRIEVA NCE REVOLVES AROUND THE PREMIUM PAID BY THE ASSESSEE TO M/S. MMRDA LTD. FOR THE LEASEHOLD RIGHT S ACQUIRED BY THE ASSESSEE THROUGH THE LEASE DEED DT. 22ND NOVEMBER, 2004. IT IS THE SAY O F THE REVENUE THAT THIS LEASE PREMIUM WAS LIABLE FOR DEDUCTION OF TAX AT SOURCE FAILING WHICH THE ASSESSEE IS TO BE TREATED AS ASSESSEE IN DEFAULT.IT IS THE SAY OF THE ASSESSEE THAT SUCH LEA SE PREMIUM IS IN THE NATURE OF CAPITAL EXPENDITURE AND THEREFORE THERE IS NO QUESTION OF D EDUCTION OF TAX AT SOURCE. FURTHER, THE SAID LEASE PREMIUM DOES NOT COME WITHIN THE PURVIEW OF T HE DEFINITION OF RENT AS PROVIDED U/S. 194-1 OF THE ACT. 10. WE HAVE CAREFULLY PERUSED THE LEASE DEED AS EXH IBITED FROM PAGE-1 TO 42 OF THE PAPER BOOK. A CAREFUL READING OF THE SAID LEASE DEED TRANSPIRES THAT THE PREMIUM IS NOT PAID UNDER A LEASE BUT IS PAID AS A PRICE FOR OBTAINING THE LEASE, HEN CE IT PRECEDES THE GRANT OF LEASE. THEREFORE, BY ANY STRETCH OF IMAGINATION, IT CANNOT BE EQUATED WI TH THE RENT WHICH IS PAID PERIODICALLY. A PERUSAL OF THE RECORDS FURTHER SHOW THAT THE PAYMEN T TO MMRD IS ALSO FOR ADDITIONAL BUILT UP ARE AND ALSO FOR GRANTING FREE OF FSI AREA, SUCH PA YMENT CANNOT BE EQUATED TO RENT. IT IS ALSO SEEN THAT THE MMRD IN EXERCISE OF POWER U/S. 43 R.W . SEC. 37(1) OF THE MAHARASHTRA TOWN PLANNING ACT 1966, MRTP ACT AND OTHER POWERS ENABLI NG THE SAME HAS APPROVED THE PROPOSAL TO MODIFY REGULATION 4A(II) AND THEREBY INCREASED T HE FSI OF THE ENTIRE G BLOCK OF BKC. THE DEVELOPMENT CONTROL REGULATIONS FOR BKC SPECIFY THE PERMISSIBLE FSI. PURSUANT TO SUCH PROVISIONS, THE ASSESSEE BECAME ENTITLED FOR ADDITI ONAL FSI AND HAS FURTHER ACQUIRED/PURCHASED THE ADDITIONAL BUILT UP AREA FOR CONSTRUCTION OF AD DITIONAL AREA ON THE AFORESAID PLOT. THUS THE ASSESSEE HAS MADE PAYMENT TO MMRD UNDER DEVELOPMENT CONTROL FOR ACQUIRING LEASEHOLD LAND AND ADDITIONAL BUILT UP AREA. THE DECISIONS OF THE TRIBUNAL IN THE CASE OF M/S. NATIONAL STOCK EXCHANGE (SUPRA) AND MUKUND LTD (SUPRA) HAVE BEEN WELL DISCUSSED BY THE LD. CIT(A) IS HIS ORDER. THE DECISION OF THE HONBLE JURISDICTION AL HIGH COURT IN THE CASE OF KHIMLINE PUMPS LTD. (SUPRA) SQUARELY AND DIRECTLY APPLY ON THE FAC TS OF THE CASE WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT PAYMENT FOR ACQUIRING LEASEHOLD LAND IS A CAPITAL EXPENDITURE. CONSIDERING THE ENTIRE FACTS IN TOTALI TY IN THE LIGHT OF THE JUDICIAL DECISIONS VIS-- VIS PROVISIONS OF SEC. 194-1, DEFINITION OF RENT AS PROVIDED UNDER THE SAID PROVISION, WE DO NOT FIND ANY REASON TO TAMPER OR INTERFERE WITH THE FIN DINGS OF THE LD. CIT(A) WHICH WE CONFIRM. 2088&20890KEYSTONELIFESPACES 3 RESPECTFULLY FOLLOWING THE ABOVE ORDER AND THE OTHE R ORDERS RELIED UPON BY THE ASSESSEE, IT IS HELD THAT PROVISIONS OF SECTION194-I ARE NOT APPLIC ABLE FOR SUCH PAYMENTS.WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER F ROM ANY LEGAL INFIRMITY.CONFIRMING HER ORDER,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAI NST THE AO. ITA NO.2089/MUM/2011(A.Y.2011-12): THE FACTS AND THE CIRCUMSTANCES FOR THE YEAR UNDER CONSIDERATION ARE IDENTICAL TO LAST AY.- EXCEPT THE AMOUNT INVOLVED.IN THE YEAR UNDER CONSID ERATION THE AO HAD DETERMINED THE LIABILITY AT 78.94 LAKHS.FOLLOWING OUR ORDER OF THE LAST ASSESSMENT YEAR WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT, APPEALS FILED BY AO .S FOR BOTH THE AY.S STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH, 2016. 2016 SD/- SD/- ( / AMIT SHUKLA ) ( / RAJENDRA ) / JUDICIAL MEMBER !# / ACCOUNTANT MEMBER /MUMBAI, /DATE: 16.03. 2016 . . . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI