Nagarjuna Oil Corporation Ltd., CHENNAI V. ACIT, CHENNAI

ITA 2268/CHNY/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2622 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 08-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 10-09-2014
• Court: TRIBUNAL
• Department Lawyers: SASIKUMARJCIT
• Assessee Lawyers: R VIJAYARAGHAVAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , ! ' #! ' $ . %& ' () BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NOS.2267, 2268 & 2269 /MDS./2014 ( / ASSESSMENT YEARS :2009-10,2010-11 & 2012-13) M/S.NAGARJUNA OIL CORPORATION LTD., BLOCK B,NEW 53 (OD NO.31) DR.RADHAKRISHNAN SALAI, MYLAPORE CHENNAI 600 004. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, TDS CIRCLE-II, CHENNAI 600 034. PAN AAACN 9369 E ( *+ / APPELLANT ) ( ,-*+ / RESPONDENT ) / APPELLANT BY : MR.R.VIJAYARAGHAVAN,ADVOCATE / RESPONDENT BY : MR.SASIKUMAR,JCIT, D.R / DATE OF HEARING : 09.02.2016 ! /DATE OF PRONOUNCEMENT : 11 .03.2016 . / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE THREE APPEALS FILED BY THE ASSESSEE ARE DIR ECTED AGAINST THE COMMON ORDER OF THE LEARNED COMMISSIONER OF INC OME TAX(A)- ITA NOS.2267 TO 2269/MDS/2014 2 VII, CHENNAI DATED 13.06.2014 PERTAINING TO THE AS SESSMENT YEARS 2009-10,2010-11 & 2012-13 SINCE CERTAIN ISSUES ARE COMMON NATURE, THESE THREE APPEALS ARE CLUBBED TOGETHER, H EARD TOGETHER AND DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF C ONVENIENCE. 2. THERE WAS A DELAY OF 2 DAYS IN FILING THIS APPE AL. CONSEQUENT TO THIS, THE ASSESSEE FILED A CONDONATION PETITION FOR CONDOANTION OF DELAY. WE HAVE GONE THROUGH THE CONDONATION PETITI ON AND THE REASONS SHOWN ARE JUSTIFIED AND HENCE, DELAY IN FIL ING THE APPEAL BELATEDLY FOR TWO DAYS BEFORE THE TRIBUNAL IS CONDO NED AND APPEAL ADMITTED. 3. THE COMMON GROUND IN BOTH THE APPEALS IS WITH R EGARD TO CONFIRM THE LEVY OF INTEREST U/S.201(1A) OF ` 77,24,710/- (A.Y 2009- 10), ` 54,09,396/-(A.Y 2010-11) & ` 67,24,120/- (A.Y 2012-13) AS THE ASSESSEE HAS NOT DEDUCTED OF TAX AT SOURCE U/S.194- I ON THE PAYMENT MADE TO SIPCOT. ITA NOS.2267 TO 2269/MDS/2014 3 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A PRIVATE LIMITED COMPANY, ENGAGED IN THE PROCESS OF SETTING UP A CRUDE OIL REFINERY IN THE CUDDALORE DISTRICT OF TAMILNADU. TH E ASSESSEE APPLIED TO SIPCOT FOR ALLOTMENT OF LAND FOR COMMISSIONING A ND RUNNING THE PLANT IN THIS REGARD. ACCORDINGLY 1065.96 ACRES OF LAND SITUATED IN KAYALPATTU,TIRUCHOPURAM AND 581.38 ACRES OF LAND SI TUATED IN ANDARMULLIPALAM WERE ALLOTTED TO THE ASSESSEE ON L EASE FOR 99 YEARS AGAINST THE PAYMENTS AS DETAILED BELOW:- DATE AMOUNT DETAILS FIRST TRANCHE 15.05.2008 23.09.2009 TOTAL 20,65,43,000 19,31,92,000 39,97,35,027 FOR ALLOTMENT OF 1065.96 ACRES OF LAND SECOND TRANCHE 07.06.2011 39,24,31,500 FOR ALLOTMENT OF 581.38 ACRES OF LAND WHILE PAYING THE ABOVE MENTIONED AMOUNTS TO SIPCOT, THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE. THIS NON-D EDUCTION OF TDS WAS REVEALED DURING THE COURSE OF TDS SURVEY PROCEE DINGS ITA NOS.2267 TO 2269/MDS/2014 4 CONDUCTED AGAINST THE ASSESSEE ON 04.12.2012. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE AS SESSEE HAD VIOLATED THE PROVISIONS OF THE SECTION 194I OF THE ACT BY FAILING TO DEDUCT TAX ON THE AFFORESAID SUMS IN AGGREGATE IN T HE ABOVE TABLE PERTAINING TO THE A.YS 2009-10,2010-11 & 2012-13 AN D PASSED THE IMPUGNED ORDERS U/S.201(1A) OF THE ACT IN RESPECT O F THE INTEREST PART ONLY AS THE RECIPIENT (SIPCOT) OF THE SAID SUMS HAD DULY CONSIDERED THE PAYMENTS AS ITS INCOME UNDER THE HEAD AREA DEV ELOPMENT ACTIVITY FOR THE PURPOSE OF PAYING INCOME-TAX. AG AINST THIS ORDER, THE ASSESSEE WAS IN APPEAL BEFORE THE CIT(A). ON APPEA L, THE CIT(A) CONFIRMED THE ORDER OF THE AO. AGAINST THE ORDER OF THE LD.CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IT IS BROUGHT TO OUR NOTICE THAT SIMILAR IS SUE CAME FOR CONSIDERATION BEFORE THIS TRIBUNAL, IN THE CASE OF M/S.TRIL INFOPARK LTD., IN ITA NO.699/MDS./2014 VIDE ORDER DATED 19.0 6.2015. THE TRIBUNAL, AFTER CONSIDERING THE VARIOUS JUDGEMENTS INCLUDING THE EARLIER JUDGMENT OF CO-ORDINATE BENCH OF CHENNAI IN THE CASE OF ITA NOS.2267 TO 2269/MDS/2014 5 FOXCONN INDIA DEVELOPERS (P.) LTD., VS. ITO REPORTE D IN (2012) 53 SOT 0213, OBSERVED AS FOLLOWS:- 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EI THER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE HAVE A LSO GONE THROUGH THE ORDERS OF THE GOVERNMENT OF TAMIL NADU. THE GOVERN MENT ORDER DATED 11.03.2010 IN G.O (MS) NO.28 ISSUED BY INDUSTRIES ( I.T) DEPARTMENT SHOWS THAT THE UPFRONT LAND LEASE RENT WAS ESCALATED BY 1 2% AND TAMIL NADU INDUSTRIAL DEVELOPMENT CORPORATION RECEIVED A SUM O F ` 1412.80 CRORES FROM THE ASSESSEE. HOWEVER, TAMIL NADU INDUSTRIAL DEVELOPMENT CORPORATION PAID ONLY A SUM OF ` 1320.95 CRORES TO THE GOVERNMENT TOWARDS THE COST OF THE LAND AND RETAINED THE BALANCE AMOUN T OF ` 91.85 CRORES AND UTILIZED THE SAME FOR DISCHARGING ITS OWN LIABILITY TO GOVERNMENT AND BANK OVERDRAFT DUES. THE GOVERNMENT FURTHER FOUND THAT TAMIL NADU INDUSTRIAL DEVELOPMENT CORPORATION HAS TO RETAIN ONLY ` 5.50 CRORES OUT OF ` 1412.80 CRORES RECEIVED FROM THE ASSESSEE AND SHOULD HAVE P AID THE BALANCE OF ` 1407/- CRORES TO THE GOVERNMENT. ON THE REQUEST OF THE CHAIRMAN & MANAGING DIRECTOR OF TAMIL NADU INDUSTRIAL DEVELOPM ENT CORPORATION, THE ABOVE SAID BALANCE AMOUNT OF ` 88.22 CRORES WAS TREATED AS TERM LOAN FOR A PERIOD OF THREE YEARS AND REPAYABLE WITH INTEREST @ 10.5% PER ANNUM. THE QUESTION NOW ARISES FOR CONSIDERATION BEFORE THE TR IBUNAL IS WHETHER THE PAYMENT OF ` 1412.80 CRORES MADE BY THE ASSESSEE TO TAMIL NADU INDUSTRIAL DEVELOPMENT CORPORATION IS A CAPITAL PAY MENT FOR ACQUIRING THE ITA NOS.2267 TO 2269/MDS/2014 6 LAND TO THE EXTENT OF 25.27 ACRES OF LAND OR IT IS A LEASE RENT? THE ASSESSEE CLAIMS THAT EVEN THOUGH THE LEASE PERIOD WAS 99 YEA RS, THE PAYMENT MADE BY THE ASSESSEE IS ONLY FOR ACQUIRING THE PROPERTY. ACCORDINGLY, THE ASSESSEE CLAIMS THAT IT WAS A PURCHASE OF PROPERTY, HENCE, WHAT WAS PAID BY THE ASSESSEE IS A CAPITAL AMOUNT FOR ACQUIRING T HE LAND. THE CONTENTION OF THE REVENUE IS THAT THE AMOUNT PAID BY THE ASSES SEE IS ONLY A LEASE RENT FOR USING THE LAND, THEREFORE, TAX HAS TO BE DEDUCT ED UNDER SECTION 194-I OF THE ACT. TO APPRECIATE THE CONTENTIONS MADE BY THE PARTIES BEFORE THE TRIBUNAL, IT IS NECESSARY TO GO THROUGH THE COPIES OF THE LEASE AGREEMENT ENTERED INTO BETWEEN THE PARTIES. DURING THE COURS E OF HEARING, IT WAS POINTED OUT TO THE LD.COUNSEL FOR THE ASSESSEE THAT THE COPIES OF THE LEASE AGREEMENT SAID TO BE ENTERED INTO BETWEEN THE ASSES SEE AND TAMIL NADU INDUSTRIAL DEVELOPMENT CORPORATION IS NOT AVAILABLE ON RECORD OF THIS TRIBUNAL. THE LD.COUNSEL SUBMITTED THAT A COPY OF THE LEASE DEED WAS ALREADY FILED BEFORE THE TRIBUNAL. AFTER PERUSING THE FILE ONCE AGAIN DURING THE COURSE OF HEARING, IT WAS BROUGHT TO THE NOTICE OF THE LD.COUNSEL FOR THE ASSESSEE THAT THE LEASE AGREEMENT IS NOT AVAILABLE ON RECORD. THOUGH THE LD.COUNSEL SUBMITTED THAT HE WILL FILE ONE MORE COP Y OF THE LEASE DEED BEFORE THE TRIBUNAL, IN FACT, NO SUCH COPY WAS FILE D TILL NOW. THEREFORE, THIS TRIBUNAL IS UNABLE TO APPRECIATE THE EXACT NATURE O F TRANSACTION BETWEEN THE ASSESSEE AND TAMIL NADU INDUSTRIAL DEVELOPMENT CORP ORATION. THEREFORE, ITA NOS.2267 TO 2269/MDS/2014 7 WE HAVE TO PROCEED ONLY ON THE BASIS OF THE FACTS W HICH WERE BROUGHT ON RECORD BY THE ASSESSING OFFICER. 11. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENTS RE LIED UPON BY THE LD.COUNSEL FOR THE ASSESSEE DURING THE COURSE OF HE ARING. IN RANE BRAKE LININGS LTD. (SUPRA), THE MADRAS HIGH COURT FOUND T HAT LEASE FOR 99 YEARS IS AS MUCH AS ALIENATION AS A SALE. THE MADRAS HIGH C OURT PLACED RELIANCE ON THE JUDGMENT OF APEX COURT IN PALSHIKAR (HUF) V. CI T REPORTED IN 172 ITR 311 AND JUDGMENT OF MADRAS HIGH COURT IN ARCHAKASUN DARA RAJU DIKSHATULU V. ARCHAKASESHADRIDIKSHATULU (1928) 54 M LJ 76. THE ASSESSMENT YEAR UNDER CONSIDERATION BEFORE THE MADR AS HIGH COURT IN RANE BRAKE LININGS LTD. WAS 1994-95. WE FIND THAT THAT TRANSFER IS DEFINED IN SECTION 2(47) OF THE ACT. IN FACT, SECT ION 2(47) IS AN INCLUSIVE DEFINITION AND SUBSTITUTED BY TAXATION LAWS (AMENDM ENT) ACT, 1984 WITH EFFECT FROM 1.04.1985. WE ALSO FIND THAT PARLIAMEN T HAS INTRODUCED SECTION 194-I OF THE ACT BY FINANCE ACT, 1994 WITH EFFECT F ROM 1.06.1994. EXPLANATION TO SECTION 194-I WAS SUBSTITUTED BY TAX ATION LAWS (AMENDMENT) ACT, 2006 WITH EFFECT FROM 13.07.2006. FOR THE FIRST TIME IN THE INCOME-TAX ACT, THE PARLIAMENT DEFINED RENT B Y SAYING THAT ANY PAYMENT BY WHATEVER NAME CALLED, UNDER ANY LEASE, S UB-LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR THE USE OF E ITHER SEPARATELY OR TOGETHER ANY LAND. THEREFORE, WITH EFFECT FROM 13. 07.2006, ANY AMOUNT PAID BY THE ASSESSEE, BY WHATEVER NAME CALLED, UNDER ANY LEASE, SUB-LEASE, ITA NOS.2267 TO 2269/MDS/2014 8 TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR T HE USE OF THE LAND HAS TO BE TREATED AS RENT. THE MADRAS HIGH COURT IN RA NE BRAKE LININGS LTD. (SUPRA) HAD NO OCCASION TO CONSIDER THE EXPLANATION (I) TO SECTION 194-I WHICH WAS INTRODUCED WITH EFFECT FROM 13.07.2006. IN FACT, THIS BENCH OF THE TRIBUNAL IN FOXCONN INDIA DEVELOPER (P) LTD. (SUPRA ) CONSIDERED THIS IDENTICAL ISSUE AND FOUND THAT THE ASSESSEE IS LIAB LE TO DEDUCT TAX ON THE LEASE RENT IN VIEW OF EXPLANATION (I) TO SECTION 19 4-I OF THE ACT. HOWEVER, AFTER REFERRING TO JUDGMENT OF APEX COURT IN HINDUS TAN COCA COLA BEVERAGES P. LTD. (SULPRA), THIS TRIBUNAL FOUND THA T SINCE THE PAYEE HAS PAID TAXES, THERE CANNOT BE ANY DOUBT THAT TDS COUL D NOT BE RECOVERED FROM THE ASSESSEE. HOWEVER, THE ASSESSEE IS LIABLE TO PAY INTEREST UNDER SECTION 201(1A) OF THE ACT TILL THE PAYMENT WAS MAD E BY THE RECIPIENT. 12. SINCE COPY OF THE LEASE AGREEMENT BETWEEN THE A SSESSEE AND TAMIL NADU INDUSTRIAL DEVELOPMENT CORPORATION IS NO T AVAILABLE BEFORE US, WE ARE UNABLE TO EXPRESS OUR OPINION ON THE NATURE OF TRANSACTION WHETHER, IT WAS AN ADVANCE PAYMENT OF RENT OR COST OF ACQUIS ITION OF THE LAND COULD BE DECIDED AFTER GOING THROUGH THE SO-CALLED LEASE DEE D EXECUTED BY THE ASSESSEE AND TIDCO. MOREOVER, THE MATTER NEEDS TO BE RE-EXAMINED IN THE LIGHT OF THE PROVISIONS OF SECTION 2(47) READ W ITH EXPLANATION (I) TO SECTION 194-I OF THE ACT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE NATURE OF THE TRANSACTION COULD BE ASCERTAINED ONLY AFTER GOING THROUGH THE LEASE AGREEMENT SAID TO BE EXECUTED BY THE ASSESSEE AND TAMIL NADU ITA NOS.2267 TO 2269/MDS/2014 9 INDUSTRIAL DEVELOPMENT CORPORATION. ACCORDINGLY, T HE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE. THE ENTIRE ISSUE IS REM ITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL REC ONSIDER THE ISSUE AFRESH IN THE LIGHT OF THE LEASE DEED AND THEREAFTER DECID E THE ISSUE AFRESH IN ACCORDANCE WITH LAW. THE ASSESSING OFFICER SHALL A LSO VERIFY WHETHER THE RECIPIENT TAMIL NADU INDUSTRIAL DEVELOPMENT CORPORA TION HAS PAID TAXES OR NOT ON THE AMOUNT RECEIVED BY THEM. IF THE RECIPIE NT HAS PAID THE TAXES, THEN IT MAY NOT BE NECESSARY TO RECOVER THE TDS AMO UNT FROM THE ASSESSEE AND THE REVENUE CAN ONLY RECOVER INTEREST UNDER SEC TION 201(1A) OF THE ACT TILL THE PAYMENT WAS MADE BY THE RECIPIENT AS HELD BY APEX COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES P. LTD. (SULP RA). 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES AS INDICATED ABOVE. HOWEVER, LD.A.R SUBMITTED THAT SINCE THE LEASE DEED EXECUTED BETWEEN THE PARTIES WAS PRODUCED BEFORE THE LOWER A UTHORITIES, THERE WAS NO NECESSITY TO REMIT THE ISSUE BACK TO THE FIL E OF THE AO FOR FRESH CONSIDERATION AND ISSUE IS TO BE DECIDED IN FAVOUR OF THE ASSESSEE IN VIEW OF THE JUDGMENT OF HONBLE SUPREME COURT IN TH E CASE OF A.R.KRISHNAMURTHY & ANOTHER VS. CIT REPORTED IN (19 89) 176 ITR 0417(SC), THE JUDGEMENT OF JURISDICTIONAL HIGH COU RT IN THE CASE OF ITA NOS.2267 TO 2269/MDS/2014 10 CIT VS. RANE BRAKE LININGS LTD., REPORTED IN (2014 ) 365 ITR 0401(MAD.) AND ALSO THE ORDER OF THE TRIBUNAL IN TH E CASE OF ITO VS. DHIRENDRA RAMJI VORA IN ITA NO.3179/MUM./2012 VIDR ORDER DATED 09.04.2014 WHEREIN HELD THAT ONE TIME LUMP SUM PAID BY THE ASSESSEE FOR THE PURPOSE OF ACQUIRING LAND FOR A PE RIOD OF 99 YEARS, RENDERS ENDURING ADVANTAGES TO ASSESSEE, AND EXPEND ITURE IN THIS REGARD WILL BE CAPITAL IN NATURE. PERMANENT LEASE IS AS MUCH ALIENATION AS A SALE. IN OUR OPINION, THE JURISDIC TIONAL HIGH COURT JUDGMENT (365 ITR 0401) WAS VERY MUCH CONSIDERED BY THE TRIBUNAL IN THE CASE OF M/S.TRIL INFOPARK LTD. AFTER THAT, IT WAS OBSERVED THAT IF THE RECIPIENT HAS PAID THE TAXES, THEN IT MAY N OT BE NECESSARY TO RECOVER THE TDS AMOUNT FROM THE ASSESSEE AND THE RE VENUE CAN ONLY RECOVER THE INTEREST U/S.201(1A) OF THE ACT TI LL THE PAYMENT WAS MADE BY THE RECIPIENT. 6. FURTHER, IT WAS OBSERVED THAT WITH EFFECT FROM 13.07.2007, ANY AMOUNT PAID BY THE ASSESSEE, BY WHATEVER NAME CALLE D, UNDER ANY LEASE, SUB-LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR THE USE OF THE LAND HAS TO BE TREATED AS RENT. S INCE THE MADRAS HIGH ITA NOS.2267 TO 2269/MDS/2014 11 COURT IN RANE BRAKE LININGS LTD (SUPRA) HAD NO OCCA SION TO CONSIDER THE EXPLANATION (I) TO SECTION 194-I WHICH WAS INTR ODUCED WITH EFFECT FROM 13.07.2006, THAT JUDGMENT CANNOT BE APPLIED TO THE FACTS OF THE CASE AS HELD BY THE TRIBUNAL IN THE CASE OF M/S.TRI L INFOPARK LTD.,. IN OUR OPINION, THE ORDER OF THE TRIBUNAL IN THE CASE OF FOXCONN INDIA DEVELOPERS (P) LTD. VS. ITO (SUPRA) IS SQUARELY APP LICABLE AND THE ASSESSEE IS LIABLE TO DEDUCT TDS. SINCE THE RECIPI ENT HAS PAID THE TAXES, THE ASSESSEE IS LIABLE FOR PAYMENT OF INTERE ST U/S.201(1A) OF THE ACT. ACCORDINGLY, WE ARE INCLINED TO DISMISS TH E APPEALS OF THE ASSESSEE. 7. IN THE RESULT, ALL THE THREE APPEALS FILED BY TH E ASSESSEE FOR ASSESSMENT YEARS 2009-10, 2010-11 & 2012-13 STAND D ISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 11 TH OF MARCH,2016 AT CHENNAI. SD/- SD/- ' # $ . % & ' ( DUVVURU RL REDDY ) ) ( ( ( ) * + ) ) ' CHANDRA POOJARI ', JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 11 TH MARCH,2016 . K S SUNDARAM. ITA NOS.2267 TO 2269/MDS/2014 12 -.,, /0,10 /COPY TO: , 1. /APPELLANT 2. /RESPONDENT 3. , 2,'' /CIT(A) 4. , 2 /CIT 5. 034, 5 /DR 6. 4,6 /GF