ITO (TDS) - 3(2), MUMBAI V. SHREE RAJAL ENTERPRISES, NAVI MUMBAI

ITA 2577/MUM/2013

• Counselvise Citation: 257719914 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 09-07-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 04-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH L PATHADE
• Assessee Lawyers: HITESH SHAH
• Keywords: Capital asset; Capital expenditure
• Section: 201(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE HONBLE S/SHRI H.L. KARWA, PRESIDENT AND B. R.BASKARAN (AM) . . , . . , ./I.T.A. NO. 2577/MUM/2013 ( / ASSESSMENT YEAR :2009-2010) INCOME TAX OFFICER (TDS) 3(2) ROOM NO.910,9 TH FLOOR, SMT.K.G.MITTAL AYURVEDIC HOSPITAL BLDG. CHARNI ROAD (W), MUMBAI-400002. / VS. SHREE RAJAL ENTERPRISES SHOP NO.9, SECTOR-2, CIDCO MATERIAL MARKET, KOPARKHAIRANE, NAVI MUMBAI-400705 ( / APPELLANT) .. ( !' / RESPONDENT) ./ #$ ./PAN/GIR NO. : ABBFS0600A % / APPELLANT BY : SHRI PRAKASH L PATHADE !' & % /RESPONDENT BY : SHRI HITESH SHAH ' & ( ) / DATE OF HEARING : 9.7.2014 *+ & ( ) /DATE OF PRONOUNCEMENT : 9.7.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 15.1.2013 PASSED BY LD. CIT(A)-14, MUMBAI AND IT RE LATES TO THE ASSESSMENT YEAR 2009-10. 2. THOUGH THE REVENUE HAS RAISED AS MANY AS 15 GR OUNDS, THE LD. DR SUBMITTED THAT ONLY ISSUE THAT ARISES FOR CONSIDERA TION OF THE BENCH IS WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DEMAND S RAISED U/S 201(1) / 201(1A) OF THE INCOME TAX ACT, 1961 (THE ACT) BY HOLDING THAT THE ASSESSEE IS NOT I.T.A. NO. 2577/MUM/2013 2 REQUIRED TO DEDUCT TAX AT SOURCE U/S 194-I OF THE ACT ON THE LEASE PREMIUM AMOUNT OF RS.3,01,32,951/- PAID BY IT TO M/S CIDC O. 3. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD . THE FACTS THAT NEEDS TO BE CONSIDERED FOR DISPOSING OF THE ISSUE BEFORE US ARE THAT THE ASSESSEE, DURING THE YEAR UNDER CONSIDERATION ACQUIRED LEASE HOLD RIGHTS OF LAND SITUATED AT PLOT NO.33, SECTOR-3, KOPARKHAIRANE, NAVI MUMBAI FO R A PERIOD OF 60 YEARS BY PAYING LEASE PREMIUM OF RS.3,01,32,951/- TO CIDCO. THE AO TOOK THE VIEW THAT THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE O N THE SAID PAYMENT U/S 194-I OF THE ACT. SINCE THE ASSESSEE HAD NOT DEDUCTED TA X AT SOURCE AS STATED ABOVE, THE AO RAISED DEMAND U/S 201(1) BY TREATING THE ASS ESSEE AS ASSESSEE IN DEFAULT AND ALSO CHARGED INTEREST U/S 201(1A) OF THE ACT. THE ASSESSEE CHALLENGED THE SAID ORDER BY FILING APPEAL BEFORE THE LD. CIT(A). THE FIRST APPELLATE AUTHORITY HELD THAT THE LEASE PREMIUM AM OUNT PAID BY ASSESSEE TO M/S CIDCO IS NOT IN THE NATURE OF RENT AS CONTEMPL ATED U/S 194-I OF THE ACT AND ACCORDINGLY HE DELETED THE DEMAND RAISED BY THE AO U/S 201(1)/201(1A) OF THE ACT. AGGRIEVED BY THE ORDER PASSED BY LD CIT(A), TH E REVENUE HAS FILED THIS APPEAL BEFORE US. 4. BEFORE US, THE ASSESSEE PLACED RELIANCE ON VARIO US DECISIONS, MORE PARTICULARLY ON THE DECISION IN THE CASE OF ITO (TD S), (OSD), RANGE-2 V/S NAVI MUMBAI SEZ (P.) LTD (2013) 38 TAXMANN.COM 218 (MUMB AI-TRIB), WHEREIN, THE CO-ORDINATE BENCH OF THE MUMBAI TRIBUNAL HELD THAT THE LEASE PREMIUM PAID BY THE ASSESSEE THEREIN TO CIDCO FOR ACQUIRING THE LE ASEHOLD RIGHTS FOR A PERIOD OF 60 YEARS CANNOT FALL WITHIN THE MEANING OF RENT AS CONTEMPLATED U/S 194-I OF THE I.T.A. NO. 2577/MUM/2013 3 ACT. ACCORDINGLY, THE CO-ORDINATE BENCH OF THE TRI BUNAL HAD HELD THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE WHIL E MAKING THE SAID PAYMENT. THE LD. DR ALSO AGREED THAT THE FACTS PREVAILING IN THE INSTANT CASE ARE IDENTICAL WITH THE FACTS PREVAILING IN THE CASE OF ITO V/S NAVI MUMBAI SEZ (P.)LTD (SUPRA). 5. WE HAVE GONE THROUGH THE DECISION RENDERED B Y THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF NAVI MUMBAI SEZ (P.) LTD (SUPRA) AND FOR THE SAKE OF CONVENIENCE, WE EXTRACT THE OPERATIVE PORTION OF THE DECISION GIVEN BY THE CO- ORDINATE BENCH OF THE TRIBUNAL AS UNDER (PARAS 19 AND 21.2) : 19. IN THE CASE BEFORE US, THE ASSESSEE HAS ENTERE D IN TO LEASE AGREEMENTS WITH CIDCO FOR ACQUISITION OF LEASEHOLD RIGHTS IN THE LAND TO DEVELOP AND OPERATE THE SPECIAL ECONOMIC ZONE AT NA VI MUMBAI. ASSESSEE HAS PAID PREMIUM FOR DEMISED LEASE LAND . THE QUESTION BEFORE US IS AS TO WHETHER THE SAID LEASE PREMIUM P AID BY THE ASSESSEE TO CIDCO TO ACQUIRE LEASEHOLD RIGHTS FOR 60 YEARS UNDE R THE LEASE DEED(S) IS LIABLE FOR DEDUCTION OF TAX AT SOURCE BEING RENT WI THIN THE MEANING OF SECTION 194-I OF THE ACT OR NOT. AO HAS STATED T HAT THE SAID PAYMENT MADE BY ASSESSEE UNDER LEASE AGREEMENTS QUALIFIES FOR RENT FOR THE PURPOSE OF SECTION 194-I OF THE ACT AS IT PARTAKES ALL THE CHARACTERISTICS OF RENT AND WHEREAS THE ASSESSEE HAS CONTENDED THAT THE ASSESSEE HAS OBTAINED LEASEHOLD RIGHTS IN THE SAID LEASEHOLD LAN DS ON PAYMENT OF LEASE PREMIUM AND THE SAID LEASE PREMIUM IS NOT PAID U NDER A LEASE. HENCE, IT IS A CAPITAL EXPENDITURE AND NOT AN ADVANCE RENT . WE OBSERVE THAT THE MAIN THRUST OF THE AO TO HOLD THE PREMIUM PAID BY ASSESSEE TO HOLD IT AS RENT IS ON THE DEFINITION OF RENT UNDER SECTIO N 194-I OF THE ACT THAT IT CREATES A LEGAL FICTION AND THE LEASE DEED(S) EN TERED INTO CONTAIN VARIOUS RESTRICTIVE COVENANTS. THAT THE SAID PAYME NTS IN SUBSTANCE ARE FOR CONSIDERATION FOR USE OF LAND UNDER THE LEASE D EED(S), HENCE PROVISIONS OF SECTION 194-I OF THE ACT IS ATTRACTED . 21.2 WE OBSERVE THAT IN THE CASE BEFORE US, THERE IS A TRANSFER OF SUBSTANTIVE INTEREST OF LESSOR FOR THE LEASEHOLD LA ND IN FAVOUR OF THE ASSESSEE. THAT THERE IS A CONFERMENT OF RIGHT O N THE LESSEE BY ACQUIRING LEASEHOLD LAND AND THE PREMIUM HAS BEEN PAID IN LIE U THEREOF AND NOT FOR THE PURPOSE OF USE OF LAND. THE CASE CITED BY THE LD. CIT(A) OF RAJA BAHADUR KAMAKHYA NARAIN SINGH OF RAMGARH (SUPRA) AN D THE CASE OF THE HONBLE APEX COURT IN THE CASE OF PANBARI TEA CO. LTD. OF INDIA (SUPRA) I.T.A. NO. 2577/MUM/2013 4 SQUARELY APPLY TO THE FACTS OF THE CASE BEFORE US T HAT THE LEASE PREMIUM PAID BY THE ASSESSEE TO CIDCO FOR ACQUIRING LEAS EHOLD LAND IS CAPITAL EXPENDITURE TO ACQUIRE CAPITAL ASSET AND NOT FOR TH E USE OF LAND. THEREFORE, WE AGREE WITH LD. AR THAT THE LEASE PREM IUM PAID BY THE ASSESSEE FOR ACQUIRING LEASEHOLD LAND WITH A RIGHT TO DEVELOP AND MARKET, NMSEZ, CANNOT BE SAID TO BE AN ADVANCE PAYMENT OF RENT. ACCORDINGLY, PREMIUM PAID BY THE ASSESSEE FOR ACQUIRING LEASEHOL D LAND UNDER THE LEASE DEED(S) ENTERED INTO, ALTHOUGH WITH RESTRICT IVE COVENANTS IS A CAPITAL EXPENDITURE, AND IT DOES NOT FALL WITHIN THE AMBIT OF RENT UNDER SECTION 194-I OF THE ACT. 5. WE ALSO NOTICE THAT ANOTHER CO-ORDINATE BENCH O F THE MUMBAI TRIBUNAL HAS TAKEN IDENTICAL VIEW IN THE CASE OF ITO (TDS) V/S WADHWA & ASSOCIATES REALTORS (P) LTD (2013) 36 TAXMANN.COM 526 (MUMBAI- TRIB) AND THE SAID DECISION ALSO REFERRED BY THE TRIBUNAL IN THE CASE OF ITO V/S NAVI MUMBAI SEZ (P.)LTD (SUPRA). HENCE CONSISTENCE WITH THE VIEW TA KEN BY THE CO-ORDINATE BENCHES OF THE TRIBUNAL WE HOLD THAT THE PROVISIONS OF SECTION 194-I OF THE ACT ARE NOT ATTRACTED TO THE LEASE PREMIUM AMOUNT PAID BY THE ASSESSEE TO CIDCO FOR ACQUIRING THE LEASEHOLD RIGHTS. ACCORDINGLY, W E CONFIRM THE ORDER OF LD. CIT(A) ON THIS ISSUE. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 9TH JULY, 2014 . *+ ' , -. / 0 9TH JULY, 2014 + & 2 3 SD SD ( . . / H.L. KARWA) ( . . , / B.R. BASKARAN ) / PRESIDENT / ACCOUNTANT MEMBER - ' MUMBAI: 9TH JULY,2014. . . ./ SRL , SR. PS I.T.A. NO. 2577/MUM/2013 5 ! ' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. 3. ' 5( ( ) / THE CIT(A)- CONCERNED 4. ' 5( / CIT CONCERNED 5. 67 2 !(8 , ) 8 , - ' / DR, ITAT, MUMBAI CONCERNED 6. 2 9 : / GUARD FILE. ; ' / BY ORDER, TRUE COPY < # (ASSTT. REGISTRAR) ) 8 , - ' /ITAT, MUMBAI