ITO (TDS) RG 2(2), MUMBAI V. KAMDHENU BUILDERS & DEVELOPERS, NAVI MUMBAI

ITA 2397/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3854 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-01-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 28-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R RAMACHANDRAN
• Assessee Lawyers: SUBODH RATNAPARKHI
• Keywords: Capital receipt; Capital expenditure
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI , , BEFORE SHRI B R BASKARAN , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER ITA NO. : 2397 /MUM/20 13 (ASSESSMENT YEAR: 20 1 0 - 11 ) ITA NO. : 2399 /MUM/20 13 (ASSESSMENT YEAR: 20 11 - 12 ) IN C OME TAX OFFICER TAX (TDS) - 2 (2 ) , ROOM NO. 7 07 , 7 TH FLOOR, SMT. K G MITTAL AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD, MUMBAI - 400 705 VS M/S KAMDHENU BUILDERS & DEVELOPERS BUILDERS, SHOP NO. 8, OPP SADGURU TERRACE, SION KOLIWADA, MUMBAI - 400 0 22 PAN: AAHEK 9461 E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R RAMACHANDRAN RESPONDENT BY : SHRI SUBODH RATNAPARKHI /DATE OF HEARING : 02 - 0 8 - 201 6 / DATE OF PRONOUNCEMENT : 02 - 0 8 - 2016 ORDER , : PER AMIT SHUKLA , J M: THE AFORESAID APPEAL HA VE BEEN FILED BY THE REVENUE AGAINST COMMON ORDER DATE D 13 . 01 .201 3 , PASSED BY LD. CIT(A PPEALS ) - 14 , MUMBAI FOR THE ASSESSMENT YEAR 2010 - 11 AND 2011 - 12 IN RELATION TO THE ORDER UNDER SECTION 201(1) / 201(1A). IN BO TH THE APPEALS, THE COMMON ISSUE INVOLVED IS THAT, ASSESSEE HAS BEEN TREATED TO BE ASSESSEE - IN - DEFAULT FOR 2 M/S KAMDHENU BUILDERS & DEVELOPERS ITA NO. : 2397 /MUM/20 13 ITA NO. : 2399 /MUM/20 13 NON - DEDUCTING OF TAX - AT - SOURCE ON THE AMOUNT PAID TO CITY INDUSTRIAL DEVELOPMENT CORPORATION (CIDCO) TOWARDS A PREMIUM FOR HOUSE HOLD RIGHTS IN RESPE CT OF LEASEHOLD PLOT WHICH HAS BEEN TREATED BY THE AO AS RENT WITHIN THE AMBIT AND DEFINITION OF SECTION 194I. 2. THE ASSESSEE WHICH IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND REAL ESTATE DEVELOPMENT WAS ALLOTTED A PLOT IN NAVI MUMBAI BY CIDCO FOR D EVELOPMENT OF COMMERCIAL COMPLEX. FOR THE ALLOTMENT OF SUCH A PLOT, TOTAL LEASE PREMIUM FOR THE ACQUISITION OF THE SAID PLOT WAS AT RS.24,12,30,536/ - . THE DETAILS OF WHICH ARE AS UNDER: - ASST. YR. AMOUNT (RS.) 2010 - 11 12,80,15,268 2011 - 12 11,32,15,268 T OTAL RS. 24,12,30,536 THE AO HELD THAT, SUCH A PAYMENT OF LEASE PREMIUM FALLS UNDER THE NATURE OF RENT , AS DEFINED UNDER SECTION 194I AND, THEREFORE, ASSESSEE SHOULD HAVE DEDUCTED TDS ON SUCH PAYMENTS. THUS, F AILURE TO DEDUCT TDS IS DEFAULT UNDER SECTI ON 201(1) AND ACCORDINGLY, THE ASSESSEE WOULD BE TREATED AS ASSESSEE - IN - DEFAULT UNDER SECTION 201(1) AND ALSO LIABLE FOR INTEREST UNDER SECTION 201(1A). THE AOS CONTENTION CAN BE SUMMARIZED IN THE FOLLOWING MANNER: - A ) THE DEFINITION OF RENT UNDER THE ACT I S OF WIDEST AMPLITUDE AND SCOPE AND ENCOMPASSES WITHIN ITS FOLD, PAYMENT BY WAY OF LEASE PREMIUM. THE AMENDED DEFINITION OF RENT W.E.F. 13/07/2006 HAS FURTHER WINDED ITS SCOPE, MADE IT MORE COMPREHENSIVE FOR A PERIOD OF 60 YEARS. 3 M/S KAMDHENU BUILDERS & DEVELOPERS ITA NO. : 2397 /MUM/20 13 ITA NO. : 2399 /MUM/20 13 B ) THE PAYMENT OF LEASE PRE MISES BY THE APPELLANT TO CIDCO IS NOTHING BUT ADVANCE RENT PAID BY THE APPELLANT FOR A PERIOD OF 60 YEARS. C ) THE NOMENCLATURES GIVEN BY THE PARTIES CONCERNED FOR MAKING PAYMENT TO THE PAYEE ARE OF NO SIGNIFICANCE AS THE SAME IS COVERED BY THE DEFINITION OF RENT IN THE ACT. IT IS THE SUBSTANCE OF THE TRANSACTION WHICH GAINS PRECEDENCE AND SUPREMACY OVER THE NOMENCLATURE. D ) THE PAYMENT COULD BE UNDER ANY LEASE, SUBLEASE, TENANCY OR OTHER AGREEMENT OR ARRANGEMENT. THIS, IN ITSELF SIGNIFIES THAT THE LEGISLATU RE HAS COVERED ALL SORTS OF AGREEMENTS OR ARRANGEMENTS TO COVER THE TRANSACTION WITHIN THE MEANING OF SECTION 194I BY DEFINING SUCH PAYMENTS AS RENT. E ) THE DEFINITION OF RENT FOR THE PURPOSE OF SECTION 194I HAS INCLUDED WITHIN ITS AMBIT ANY PAYMENT MA DE UNDER ANY LEASE. THUS, THE DEFINITION OF RENT IS WIDER IN ITS TEXT AND CONTEXT THAN THE MEANING COMMONLY ASSIGNED TO THE RENT IN THE CONTEXT OF A LEASE. THE USE OF THE EXPRESSION ANY BEFORE PAYMENT FURTHER ENLARGES THE AMBIT AND SCOPE OF THE D EFINITION OF RENT U/S 194I. F ) THE AO HAS CONCLUDED THAT ALL KINDS OF PAYMENTS IN RESPECT OF A LEASE ARE COVERED UNDER THE TERM RENT DEFINED IN SECTION 194I OF THE ACT. IT IS THE SUBSTANCE OF THE TRANSACTION WHICH GAINS PRECEDENCE AND SUPREMACY OVER FORM OR NOMENCLATURE. G ) ALSO, IT IS IMMATERIAL WHETHER THE CIDCO HAS SHOWN THIS PAYMENT AS A REVENUE RECEIPT OR AS A CAPITAL IN ITS BOOKS OF 4 M/S KAMDHENU BUILDERS & DEVELOPERS ITA NO. : 2397 /MUM/20 13 ITA NO. : 2399 /MUM/20 13 ACCOUNT. THE TDS PROVISIONS ARE ATTRACTED WHENEVER A PAYMENT OR CREDIT IS MADE ON ACCOUNT OF CERTAIN TYPES OF PAYMENTS S PECIFIED IN CHAPTER XVII - B OF THE ACT. AS AN EXAMPLE THE AO HAS CITED SECTION 194LA WHERE EVEN PAYMENTS IN THE NATURE OF CAPITAL RECEIPTS ARE SUBJECT TO TDS. H ) THERE ARE VARIOUS RESTRICTIVE CLAUSES IN THE LEASE AGREEMENT WHICH INDICATE THAT THE LEASE TRANSA CTION IS MERELY FOR THE USE OF THE LAND. HENCE IT CANNOT BE SAID THAT THERE WAS ANY INTENTION ON THE PART OF THE CIDCO TO GRANT OR ALLOW ACQUISITION OF LAND RIGHTS. BESIDES THIS, HE ALSO RELIED UPON VARIOUS DECISIONS. 3. ON THE OTHER HAND, THE ASSES S EE S CONTENTION HAD BEEN THAT, THE LEASE PREMIUM IS NOT IN THE NATURE OF RENT, BECAUSE IT HAS BEEN PAID AS A PREMIUM FOR ALLOTMENT OF A PLOT FOR A PERIOD OF 60 YEARS AT RS.100/ - PER MONTH. SUCH A LEASE PREMIUM IS THE COST OF THE PLOT OF L AND . I N SUPPORT, CLA USE 21 OF ALLOTMENT LETTER WAS REFERRED AND RELIED UPON . THE LD. CIT(A) IN THE IMPUGNED ORDER AFTER DETAIL DISCUSSION HAS HELD THAT THE PREMIUM PAID IN RESPECT OF THESE PLOTS WILL NOT FALL IN THE NATURE OF RENT AS CONTEMPLATED UNDER SECTION 194I, THERE FORE, ASSESSEE IS NOT REQUIRED TO DEDUCT TAX AT SOURCE. 4. BEFORE US, IT HAS BEEN ADMITT ED BY BOTH THE PARTIES, THAT THI S ISSUE IS SQUARELY COVERED BY CATENA OF TRIBUNAL DECISIONS IN VARIOUS CASES FOR SIMILAR PAYMENT OF LEASE PREMIUM TO SIDCO , SOME OF WH ICH ARE AS UNDER: 5 M/S KAMDHENU BUILDERS & DEVELOPERS ITA NO. : 2397 /MUM/20 13 ITA NO. : 2399 /MUM/20 13 SR.N. CASE LAW CITATION/ITA NO. 1 ITO(TDS) V. WADHWA & ASSOCIATES REALTORS (P) LTD. 146 ITD 694(MUM) 2 ITO(TDS) V. NAVI MUMBAI SEZ(P) LTD. 147 ITD 261(MUM) 3 CIT V. KHIMLINE PUMPS LTD.[2012] 258 ITR 459 (BOM) 4 ITO(TDS) V. KANTADEVI CHAUDHARY, A BENCH ORDER DATED 02.07.2015 ITA 624/M/2014 5 ITO(TDS) V. KEYSTONE LIFESPACES PVT LTD - A BENCH ORDER DATED 16.03.2016 ITAS 2088 & 2089 /MUM/2014 5. AFTER CONSIDERING THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER AS WELL AS VARIOUS DE CISIONS OF THE TRIBUNAL, WE AGREE THAT, NOW THIS ISSUE STANDS COVERED BY VARIOUS DECISIONS OF THE TRIBUNAL, WHEREIN CONSISTENTLY IT HAS BEEN HELD THAT THE CONSIDERATION PAID FOR ACQUIRING THE LEASEHOLD RIGHT IS A CAPITAL EXPENDITURE AND DOES NOT FALL WITHI N THE AMBIT OF RENT UNDER SECTION 194I. ACCORDINGLY, WE ALSO HOLD THAT LEASE PREMIUM PAID BY THE ASSESSEE FOR ACQUIRING DEVELOPMENT OF LEASEHOLD RIGHTS FOR THE PERIOD OF 60 YEARS CANNOT BE RECKONED AS RENT UNDER SECTION 194I AND SUCH A SINGLE PAYMENT F OR ACQUISITION OF RIGHTS OF LEASE TO ENJOY THE LEASEHOLD RIGHTS ON A PLOT OF THE LAND IS A CAPITAL EXPENDITURE, WHICH IS NOT LIABLE FOR DEDUCTION OF TAX - AT - SOURCE. ACCORDINGLY, THE GROUND RAISED BY THE DEPARTMENT IN BOTH THE IMPUGNED ASSESSMENT YEARS DOES NOT STAND AND AS SUCH WE DISMISS THE SAME. 6. IN THE RESULT, BOTH APPEALS FILED BY THE DEPARTMENT ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND AUGUST, 2016 . SD/ - SD/ - ( ) ( ) ( B R BASKARAN ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 2 ND AUGUST , 2016 6 M/S KAMDHENU BUILDERS & DEVELOPERS ITA NO. : 2397 /MUM/20 13 ITA NO. : 2399 /MUM/20 13 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3 ) THE C IT 25 , MUMBAI . 4 ) THE C IT CITY - 25 , MUMBAI 5 ) , , / THE D.R. A BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS