ITO (TDS) 1(1)(3), MUMBAI V. BKS GALAXY REALTORS P.LTD, NAVI MUMBAI

ITA 2341/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1523 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2010-2011
• Appeal Filed On: 23-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Maximum Marginal Rate; Capital expenditure
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH , MUMBAI BEFORE SRI B. R. BASKARAN, AM AND SRI AMIT SHUKLA , J M ITA NO . 2341 /MUM/2015 (A.Y: 20 10 - 11 ) THE INCOME TAX OFFICER(TDS), WARD - 1 (1) (3),ROOM NO.806, K.G.MITTAL HOSPITAL BUILDING, CHARNI ROAD, MUMBA I - 2 VS. M/S. BKS GALAXY REALTORS PVT. LTD., 409, SECTOR 17, PLOT NO.74, NAVI MUMBAI PAN: ACCB 8390 D APPELLANT .. RESPONDENT APPELLANT BY .. SHRI VAIBHAV JAIN, DR RESPONDENT BY .. SHRI PRAKASH PANDIT, AR DATE OF HEARING .. 15 - 12 - 2016 DATE OF PRONOUNCEMENT .. 20 - 12 - 2016 O R D E R PER AMIT SHUKLA , JM : THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE IMPUGNED ORDER DATED 25 - 02 - 2015 PASSED BY THE LEARNED CIT (A) - 59, MUMBAI IN RELATION TO THE ORDER PASSED U/S 201 (1)/201(1A) O F THE INCOME TAX ACT, 19 61 FOR THE ASSESSMENT YEAR 20 10 - 11 . THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: - (I) ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE AMOUNT PAID BY THE LESSEE ( M/S. B KS GALAXY REALTORS PVT. LTD.) TO THE LESSOR (CIDCO) WAS NOT IN THE NATURE OF RENT, AS DEFINED IN THE EXPLANATION (I) TO SECTION 194 I OF THE ACT FOR THE PURPOSE OF DEDUCTION OF TAX AT SOURCE. (II) ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ACCEPTING THE CLAIM OF THE ASSESSEE THAT NO TAX WAX DEDUCT IBLE UNDER SECTION 194 I FROM T HE PAYMENT MADE BY THE ASSESSEE TO CIDCO FOR ACQUISITION OF THE PLOT OF LAND ON LEASE FROM CIDCO. (III) ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT CONFIRMING THE ORDER OF THE ASSESSING OFFICER TREATING THE ITA NO. 2341 /MUM/20 1 5 AS SESSMENT YEAR: 20 10 - 11 2 ASSESSEE AS AN ASSESSEE IN DEFAULT U/S. 201(1) IN RESPECT OF THE AMOUNT OF TAX WHICH HAS NOT BEEN DEDU CTED UNDER SECTION 19 4 I FROM T HE PAYMENT MADE TO CIDCO AND LEVYING INTEREST UNDER SECTION 201(1A). (IV) ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN IGNORING THE DEFINITION OF RENT, AS CONTAINED IN SECTION 194 I AND IN RESORTING TO INTERPRETATIVE REASONING WHEREAS AS PER THE SETTLED PRINCIPLE OF JURISPRUDENCE, THIS EXERCISE IS REQUIRED ONLY WHEN THE LAW IS UNCLEAR. (V) ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN GOING INTO THE QUEST ION OF TAXABILITY OF THE PAYMENT MADE BY THE ASSESSEE TO CIDCO DESPITE THE DECISION OF THE APEX COURT IN THE CASE OF THE AGGARWAL CHAMBERS OF COMMERCE V. GANPAT RAI HIRALAL, 33 ITR 245, WHERE IT HAS BEEN HELD THAT THE PERSONS WHO ARE RESPONSIBLE FOR DEDUCT ION OF TAX AT SOURCE ARE NOT CONCERNED WITH THE ULTIMATE RESULT OF ASSESSMENT. 2. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE OF PAYMENT OF LEASE PREMIUM TO CIDCO, WHETHER FALLS WITHIN THE AMBIT OF RENT U/S 194 - I OR NOT H AS BEEN THE SUBJECT MATTER OF DISPUTE IN VARIOUS APPEALS BEFORE THIS TRIBUNAL. CONSISTENTLY, THIS TRIBUNAL HAS BEEN HOLDING THAT SUCH A LUMP SUM PAYMENT OF LEASE PREMIUM DOES NOT FALL WITHIN THE AMBIT OF RENT, THEREFORE, THE ASSESSEE IS NOT LIABLE TO DED UCT TDS U/S 194 - I AND THE ASSESSEE CANNOT BE HELD TO BE THE ASSESSEE IN DEFAULT IN TERMS OF SECTION 201(1). IN SUPPORT, HE FILED COMPILATION OF VARIOUS TRIBUNAL DECISIONS BEFORE US. HE ALSO POINTE D OUT THAT , THERE IS A JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE C ASE OF CIT VS INDIAN NEWS PAPER SOCIETY ORDER DATED 18 - 12 - 2 015 IN ITA NO.918 & 920 OF 2015, WHEREIN PAYMENT OF LEASE PREMIUM PAID TO MMRDA WAS HELD TO BE CAPITAL EXPENDITURE. 3. ON THE OTHER HAND, THE LEARNED DR STRONGLY RELIED UPON THE ORD ER OF THE ASSESSING OFFICER. ITA NO. 2341 /MUM/20 1 5 AS SESSMENT YEAR: 20 10 - 11 3 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ON PERUSAL OF THE IMPUGNED ORDER, WE FIND THAT THE ASSESSEE HAS MADE PAYMENT OF RS.16,05,06,501 / - TO CIDCO AS LEASE PREMIUM. THE ASSESSING OFFICER HELD THAT THE SAME IS TO BE TRE ATED AS RENT AND, THEREFORE, THE ASSESSEE SHOULD HAVE DEDUCTED TDS U/S 194 - I. BEFORE THE LEARNED CIT (A), IT WAS CONTENDED THAT THIS ISSUE I S COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF ITO VS. NAVI MUMBAI SEZ PVT. LTD. PASSED IN ITA NOS. 738 TO 741/MUM/2012 D ATED 16 - 08 - 2013. WHEN CONFRONTED TO THE ASSESSING OFFICE , BY THE LEARNED CIT (A), IN HIS REMAND REPORT , THE ASSESSING OFFICER STATED THAT THE SAID DECISION HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND THE REVENUE HAS FILED APPEAL BEFORE THE H ONBLE BOMBAY HIGH COURT. THE LEARNED CIT (A) AFTER NOTING DOWN THE FOLLOWING FACTS HELD THAT THE PREMIUM PAID TO CIDCO IS CAPITAL IN NATURE AND THE SAME CANNOT BE CONSIDERED AS RENT FOR THE PURPOSE OF DEDUCTION OF TDS U/S 194 - I. THE RELEVANT OBSERVATION O F THE CIT (A) READS AS UNDER: - 3.3 AT THE TIME OF APPELLATE PROCEEDINGS, THE SUBMISSION FILED BY THE APPELLANT WAS REMANDED TO THE A O BY THE CIT(A) - 12, MUMBAI VIDE LETTER N O.CIT(A) - 12/MISC. COMMENTS OF A O/2014 - 15 DATED 15/05/20 14 TO THE AO FOR REPORT. THE A O WAS ALSO ASKED TO PLACE NEW ARGUMENTS/POINTS/EVIDENCES WHICH ARE NOT REFERRED TO IN THE ORDER APPEALED AGAINST, SO AS TO STRENGTHEN THE CASE OF THE REVENUE. THE REMAND REPORT WAS RECEIVED FROM T HE A O THROUGH THE ADDL. CIT (TDS ), RANGE - 1, MUMBAI VIDE HI S LETTER NO.ADDL. CIT (TDS)/RANGE - 1(1) /COMMENTS OF AO/2014 - 15 DATED 12/08/2015. THE AOS REPORTED STATED INTERALIA AS UNDER: - THE REPORT/COMMENTS CALLED FOR ON THE ABOVE MENTIONED SUBJECT IS AS UNDER: - THE DECISION OF THE HONBLE ITAT IN THE CASE OF WAD HWA & ASSOCIATES AND SHREE NAMAN DEVELOPERS LTD., IS NOT ACCEPTED BY THE DEPARTMENT. THE DEPARTMENT HAS PREFERRED FURTHER APPEAL WITH HONBLE BOMBAY HIGH COURT WHICH IS PENDING. 3.4 I HAVE PERUSED THE FACTS OF THE CASE, SUBMISSION OF THE APPELLANT AND THE ORDER U/S. 201(1)/201(1A) AND THE REMAND REPORT SUBMITTED BY THE AO. THUS, FROM RR IT IS APPARENT THAT THE AO HAS NOT BROUGHT ANY DISTINGUISHING FACTS BUT HAS SIMPLY ITA NO. 2341 /MUM/20 1 5 AS SESSMENT YEAR: 20 10 - 11 4 STATED THAT THE DECISION OF ITAT IS NOT ACCEPTED BY THE DEPARTMENT. ON PERUSAL OF SUBMISS IONS FILED BY THE APPELLANT, IT IS OBSERVED THAT THE PAYMENT IS FOR ACQUISITION OF LEASEHOLD LAND. THE PAYMENT MADE IS NOT MADE FOR LEASE RENT AND THEREFORE, NO TDS WAS DEDUCTED BY THE APPELLANT AS IT WAS CONSIDERED AS A PAYMENT FOR ACQUISITION OF LAND RIG HTS. THE AMOUNT CHARGED IS EQUAL TO THE RATE PREVALENT AS PER STAMP DUTY RECKONER. THEREFORE, THE PREMIUM PAID TO CIDCO IS CAPITAL IN NATURE AND THE SAME CANNOT BE CONSIDERED AS RENT LIABLE FOR TDS U/S. 194 - I OF THE ACT. THEREAFTER, HE REFERRED TO CATENA OF OTHER DECISIONS TO STRENGTHEN HIS FINDING. WE FIND THAT THIS ISSUE IS COVERED BY THE VARIOUS TRIBUNAL DECISIONS , LIKE IN THE O RDER OF THE TRIBUNAL DATED 19 - 05 - 2015 PASSED IN ITA NO.5678/MUM/2012 IN THE CASE OF ITO VS SHELTON INFRASTRUCTURE PVT. LTD. FO R ASSESSMENT YEAR 2010 - 11. FOLLOWING DECISIONS WERE RELIED UPON: - 1. THE INDIAN NEWS PAPERS SOCIETY (ITA NO.5207/DEL/2012) DATED 20 JUNE 2013 (DEL); 2. M/S. WADHWA & ASSOCIATES REALTORS PVT. LTD. (ITA NO.695/M/2012) DATED 3 JULY 2013 (MUM); 3. SHREE NAM AN DEVELOPERS LTD. (ITA NO.686 & 687/M/2012) DATED 14 AUGUST 2013 (MUM); 4. M/S. SHAH GROUP BUILDERS LTD. (ITA NO.4523/M/2012) DATED 14 AUGUST 2013 (MUM); 5. M/S. TCG URBAN INFRASTRUCTURE HOLDING PVT. LTD. (ITA NO.4563/M/2012) DATED 14 AUGUST 2013 (MUM); 6. M/S. NAVI MUMBAI SEZ PVT. LTD. (ITA NO.738/M/2012) DATED 16 AUGUST 2013 (MUM); 7. M/S. TRENT LIMITED (ITA NO.4629/M/2012) DATED 21 AUGUST 2013 (MUM); 8. NAMAN BKC CHS LTD. (ITA NO.708/M/2012) DATED 12 SEPTEMBER 2013 (MUM); 9. PARINEE DEVELOPERS PVT . LTD. (ITA NO.1734/M/2012) DATED 26 SEPTEMBER 2013 (MUM); 10. DHIRENDRA RAMJI VORA (ITA NO.3179/M/2012) DATED 9 APRIL 2014. ITA NO. 2341 /MUM/20 1 5 AS SESSMENT YEAR: 20 10 - 11 5 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS INDIAN NEWS PAPER SOCIETY (CITED SUPRA) WHEREIN IT HAS BEEN HELD THAT LEASE PR EMIUM PAID TO MMRDA IS CAPITAL EXPENDITURE. ONCE THAT IS SO, THEN THERE IS NO REQUIREMENT TO DEDUCT TDS. THUS, FOLLOWING THE VIEW TAKEN BY THIS TRIBUNAL THAT SUCH PAYMENT OF LEASE PREMIUM DOES NOT FALL WITHIN THE MEANING OF RENT AS CONTEMPLATED U/S 194 - I , WE HOLD THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TDS ON SUCH PAYMENT. THE MAIN REASON BEING THAT THE LEASE PREMIUM WAS PAID TO ACQUIRE PLOT OF LAND WITH SUBSTANTIAL RIGHTS SO AS TO BECOME THE OWNER OF THE PLOT. ONCE, THE PAYMENT IS FOR ACQUISITION OF LA ND RIGHTS AND THEN, THE SAME IS TO BE RECKONED AS CAPITAL EXPENDITURE. THUS, WE UPHOLD THE ORDER OF THE LEARNED CIT (A) AND DISMISS THE GROUNDS RAISED BY THE REVENUE. 5 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 - 12 - 2016 . SD/ - ( B. R. BASKARAN ) ACCONTANT MEMBER MUMBAI, DATED: 20 - 12 - 2016 LAKSHMIKANTA DEKA/SR.PS SD/ - ( AMIT SHUKLA ) JUDICIAL MEMBER ITA NO. 2341 /MUM/20 1 5 AS SESSMENT YEAR: 20 10 - 11 6 BY ORDER, ASSISTANT REGISTRAR ITAT, MUMBAI SR. NO. PARTICULARS DATE INITIALS MEMBER C ONCERNED 1 DICTATION GIVEN ON 16 .12.16 LK DEKA JM 2 DRAFT PLACED BEFORE AUTHOR 19 .12.16 3 DRAFT PROPOSED/PLACED BEFORE T HE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY S ECOND MEM BER 5 APPROVED DRAFT COMES TO THE SR.PS 20.11.16 6 KEPT FOR PRONOUNCEMENT ON - 7 FILE SENT TO THE BENCH CLERK 21.11.16 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT (A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//