ACIT(TDS) Circle - 1, Kolkata, Kolkata V. M/s. Earnest Towers Pvt. Ltd., Kolkata

ITA 242/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1741 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 18-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Maximum Marginal Rate; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA C BENCH, KOLKATA [BEFORE SRI J. SUDHAKAR REDDY, HONBLE A CCOUNTANT M EMBER & SRI ABY T. VARKEY , HONBLE JUDICIAL MEMBER ] I .T.A. NO. 242 /KOL /201 6 ASSESSMENT YEAR: 20 1 0 - 1 1 & I.T.A. NO. 243 /KOL/201 6 ASSESSMENT YEAR: 20 11 - 12 ACIT (TDS) CIRCLE - 1 KOLKATA.. . .. APPELLANT 10B, MIDDLETON ROAD KOLKATA 700 071 M/S. EARNEST TOWERS PVT. LTD.. .... .. . .. .. . . RESPONDENT 9B WOOD STREET 4 TH FLOOR KOLKATA 700 016 [PAN : AABCE 8612 N ] APPEARANCES BY: NONE , APPEAR ED ON BEHALF OF THE ASSESSEE. SHRI G. MALLIKARJUNA , CIT , DR, APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : DECEMBER 7 TH , 2017 DATE OF PRONOUNCING THE ORDER : JANUARY 19 TH , 201 8 O R D E R PER J. SUDHAKAR REDDY : - BOTH THESE APPEALS ARE FILED BY THE REVENUE AND ARE DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 24 , KOLKATA , (HEREINAFTER THE LD. CIT (A)), PASSED U/S 250 OF THE INCOME TAX ACT, 1961 (THE ACT), DT. 24 / 11 /201 5 , FOR THE ASSESSMENT YEAR 20 1 0 - 1 1 & 2011 - 12, ON THE FOLLOWING GROUNDS: - FOR THE ASSESSMENT YEAR 2010 - 11 1. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE LD. CIT( A) HAS ERRED IN HOLDING THAT PREMIUM FOR ACQUIRING LEASEHOLD RIGHTS FOR THE LEASED PLOT WAS NOT RENT, WHEREAS THE REAL NATURE OF THE PAYMENT OF THE IMPUGNED AMOUNT BY WAY OF 'LEASE PREMIUM' FALLS WITHIN THE PURVIEW OF SUB - CLAUSE (I) OF EXPLANATION TO SEC. 194 I OF THE I .T. ACT, 1961. 2. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE LD. C I T(A) HAS ERRED BOTH ON FACTS AND IN LAW TO APPRECIATE THAT THE ISSUE IN QUESTION WAS NOT 2 I.T.A. NO. 242/KOL/2016 ASSESSMENT YEAR: 2010 - 11 & I.T.A. NO. 243/KOL/2016 ASSESSMENT YEAR: 2011 - 12 M/S. EARNEST TOWERS PVT. LTD CAPITAL VS. REVENUE EXPENDITURE, BUT WHETHER THE PAYMENT WAS MADE FOR USE OF THE LAND OR NOT AS REQUIRED U / S. 194 OF THE ACT. 3 . THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW TO APPRECIATE THAT RESTRICTIVE CLAUSES IN THE DEED COVERING THE TRANSACTION, GOVERNING USE OF THE LAND, AL TERATION ETC. 4. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) FAILED TO APPRECIATE THE APPLICABILITY OF THE RATIO OF JUDICIAL PRONOUNCEMENT IN THE CASE OF CIT VS. PANBARI TEA CO. LTD. [57 ITR 422 (SC)(1965)] ON THE ISSUE. 5. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE DEPARTMENT CRAVES TO ADD, ALTER, MODIFY THE ABOVE GROUNDS OF APPEAL, DURING THE COURSE OF APPELLATE PROCEEDINGS. AS THE GROUNDS OF APPEAL FOR THE ASSESSMENT YEAR 2011 - 12, ARE IDENTICAL AS THAT FOR THE ASSESSMENT Y EAR 2010 - 11 , THEY ARE NOT REPRODUCED FOR THE SAKE OF BREVITY. 2. T HE LD. COUNSEL FOR THE ASSESSEE, FILED A PETITION FOR ADJOU RNMENT. AS THIS IS NOT A FIT CASE FOR GRANT OF ADJOURNMENT, WE REJECT THE SAME AND DISPOSE OF THIS CASE EX - PARTE ON MERITS, QUA THE ASSESSEE, AFTER HEARING THE LD. D/R. 3. FACTS IN BRIEF: - THE ASSESSE IS A JOINT VENTURE COMPANY PROMOTED BY TCG URBAN INFRASTRUCTURE HOLDINGS LTD (51%), HIRANANDANI PROPERTIES PVT LTD (24%) AND INTELLIGENT PARKS PVT LTD (25%). BY VIRTUE OF A LEASE DEED D ATED 23.06.2008 AND BY VIRTUE OF THE SUPPLEMENT ARY LEASE DEED DATED 01.02.2012, BETWEEN THE ASSESSE AND THE MUMBAI METROPOLITAN REGION DEVELOPMENT AUTHORITY (MMRDA) , THE ASSESSE HAS TAKEN ON LEASE FOR INFRASTRUCTURAL DEVELOPMENT A PLOT OF LAND BEARING PLOT NO. C - 54 &55 IN 'G' BLOCK OF BANDRA - KURLA COMPLEX SITUATED AND LYING IN VILLAGE KOLEKALYAN, TAL. ANDHERI ADMEASURING 8076.38 SQ. METRES , HAVING TOTALLED MAXIMUM PERM ISSIBLE B UILT UP AREA OF 40608 SQ. MTRS., I NCLUDING THE ADDITIONAL BUILT UP AREA , ON THE PAYMENT OF A PREMI UM OF RS.1182,51, 22,200/ - ACCORDING TO THE AGREEMENTS THE AMOUNT OF PREMIUM WAS TO BE PAID AT ONE TIME OR THE ASSESSE MAY PAY IN ANNUAL INSTALMENT S WITH SIMPLE INTEREST @10% P.A. ON EVERY PAYMENT OF INSTALMENT AND ALSO ANY DELAYED PAYMENT OF INSTALMENT WILL ATTRACT PENAL 3 I.T.A. NO. 242/KOL/2016 ASSESSMENT YEAR: 2010 - 11 & I.T.A. NO. 243/KOL/2016 ASSESSMENT YEAR: 2011 - 12 M/S. EARNEST TOWERS PVT. LTD INTEREST AT THE PREVAILING PRIME LENDING RATE DECIDED BY THE RESERVE BANK OF INDIA ON THE TOTAL AMOUNT DUE. 5. FROM THE DETAILS FI LED BY THE ASSESSE IT WAS FOUND THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSE COMPANY HAS PAID LEASE PREMIUM AS WELL AS INTEREST ON DELAYED PAYMENT (INTEREST ACCRUED) O N LEASE PREMIUM PAYABLE TO MMRDA , WITHOUT DEDUCTING THE TDS U/S 1941 AND U/S194A OF THE I. T . ACT, AS UNDER: 4. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE PREMIUM PAID IS IN THE NATURE OF RENT AND CONSEQUENTLY THE ASSESSEE, SHOULD HAVE DEDUCTED TDS U/S 194I AND TDS ON INTEREST PAID U/S 194A OF THE ACT. ON APPEAL THE LD. FIRST APPE LLATE AUTHORITY FOLLOWED HIS EARLIER ORDER FOR THE ASSESSMENT YEAR 2008 - 09 AND HELD THAT SECTION 194I IS NOT ATTRACTED ON INSTALMENT PAYABLE BY THE ASSESSEE TO MMRDA . 5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 6. HEARD SHRI G. MALLIKARJUNA, THE LD. CIT, D/R. THE LD. D/R, VEHEMENTLY CONTENDED THAT WHAT IS TERMED AS LEASE PREMIUM, IS NOTHING BUT ADVANCE RENT PAID. HE POINTED OUT THAT LEASE PREMIUM IS NOT A NON - REFUNDABLE DEPOSIT AND FOR THE CONSIDERATION FOR USE OF LOAN AND HENCE PARTAKES THE CHARA CTER OF RENT. HE PRAYED THAT THE ORDER OF THE ASSESSING OFFICER BE UPHELD. 7. WE FIND THAT THE TRIBUNAL HAS, IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008 - 09, ON AN IDENTICAL ISSUE HELD AS FOLLOWS: - 15. ON CAREFUL CONSIDERATION OF THE RIVAL SUBM ISSIONS, WE OBSERVE THAT AS PER SECTION 194 - 1 OF THE ACT, ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU 4 I.T.A. NO. 242/KOL/2016 ASSESSMENT YEAR: 2010 - 11 & I.T.A. NO. 243/KOL/2016 ASSESSMENT YEAR: 2011 - 12 M/S. EARNEST TOWERS PVT. LTD UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING ANY INCOME BY WAY OF RENT, SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR A T THE TIME OF PAYMENT THEREOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, SHALL DEDUCT INCOME - TAX THEREON AT THE RATE PRESCRIBED THEREIN. SINCE IN THE PRESENT CASE, WE HAVE HELD THAT THE LEASE PREMIUM PAID BY TH E ASSESSEE WAS CAPITAL IN NATURE AND WAS NOT RENT, THEREFORE, WE ARE UNABLE TO APPROVE THE FINDINGS OF TDS OFFICER/ASSESSING OFFICER THAT THE ASSESSEE WAS LIABLE TO DEDUCT TDS ON PAYMENT OF LEASE PREMIUM TO MMRDA. AT THIS POINT, WE PLACE RELIANCE ON THE JU DGMENT OF HON'BLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF KRISHAK BHARATI COOPERATIVE LTD. VS DCIT (2013) 350 ITR 24 (DEL) WHEREIN THEIR LORDSHIPS HELD THAT FOR PREMIUM ON ACQUISITION OF LEASE HOLD RIGHTS IN THE LAND, LEASE FOR 90 YEARS WITH SUBS TANTIAL INTEREST IN THE LAND, THEN LEASE PREMIUM CONSTITUTED CAPITAL EXPENDITURE. 16. IN VIEW OF DISCUSSIONS MADE HEREINABOVE, WE ARE NOT IN AGREEMENT WITH THE FINDINGS OF THE ASSESSING OFFICER AND WE DECLINE TO HOLD THAT THE COMMISSIONER OF INCOME TAX(A) HAS ERRED IN NOT TREATING THE ASSESSEE AS ASSESSEE IN DEFAULT WITHIN THE MEANING OF SECTION 201(1)OF THE INCOME TAX ACT FOR NON - DEDUCTION OF TDS ON PAYMENT OF LEASE PREMIUM TO MMRDA. AT THE COST OF REPETITION, IT IS WORTHWHILE TO MENTION THAT FOR INVOKING THE PROVISIONS OF SECTION 201(1)OF THE ACT, THIS IS A PRECONDITION THAT THE PERSON SHOULD BE REQUIRED TO DEDUCT ANY SUM IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT AND HE DOES NOT DEDUCT, OR DOES NOT PAY OR AFTER DEDUCTION FAILS TO PAY THE WHOLE OR IN PA RT OF THE TAX AS REQUIRED UNDER THE PROVISIONS OF THE ACT, THEN ONLY SUCH PERSON SHALL BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF PAYMENT OF SUCH TAX. IN THE CASE IN HAND, THE ASSESSEE WAS NOT LIABLE TO DEDUCT ANY TAX ON PAYMENT OF LEASE PREMIUM TO MMRDA BECAUSE IT WAS CAPITAL EXPENDITURE TO ACQUIRE LAND ON LEASE WITH SUBSTANTIAL RIGHT TO CONSTRUCT A COMMERCIAL BUILDING COMPLEX. 8. AFTER DISCUSSING ALL THE CASE - LAW, THE TRIBUNAL ULTIMATELY UPHELD THE ORDER OF THE LD. CIT(A) AND DISMISSED THE GRO UND OF THE REVENUE. 8.1. APPLYING THE PROPOSITIONS OF LAW LAID DOWN IN THIS CASE - LAW TO THE FACTS OF THE CASE ON HAND, WE DISMISS THIS GROUND OF THE REVENUE. 9. IN THE RESULT , BOTH THE APPEALS OF THE REVENUE ARE DISMISSED . KOLKATA, THE 19 TH DAY OF JANUARY , 201 8 . SD/ - SD/ - [ABY T. VARKEY] [ J. SUDHAKAR REDDY ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 19 . 01 .201 8 {SC SPS} 5 I.T.A. NO. 242/KOL/2016 ASSESSMENT YEAR: 2010 - 11 & I.T.A. NO. 243/KOL/2016 ASSESSMENT YEAR: 2011 - 12 M/S. EARNEST TOWERS PVT. LTD COPY OF THE ORDER FORWARDED TO: 1. M/S. EARNEST TOWERS PVT. LTD 9B WOOD STREET 4 TH FLOOR KOLKATA 700 016 2. ACIT (TDS) CIRCLE - 1 KOLKATA 10B, MIDDLETON ROAD KOLKATA 700 071 3. CIT(A) - 4. CIT - , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE/ D.D.O. ITAT, KOLKATA BENCHES