TRO (TDS) RG 3, MUMBAI V. SHREE HAZARIMAL SOMANI MEMORIAL TRUST, MUMBAI

ITA 3124/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3634 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 05-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAILASH GAIKW
• Assessee Lawyers: DARSHAN B GA NDHI
• Keywords: Capital asset; Maximum Marginal Rate; Non-deduction of tax; Capital expenditure
• Section: 37(1); 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.3124/MUM/2014 ASSESSMENT YEAR: 2010-11 TAX RECOVERY OFFICER (TDS) RG.-3, R.NO. 1013, 10 TH FLOOR, SMT. K.G. MITTAL AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD, MUMBAI-400002. VS. M/S SHREE HAZARIMAL SOMANI MEMORIAL TRUST, 214, EMPIRE HOUSE, 3 RD FLOOR, DR. D.N. ROAD, FORT, MUMBAI-400001. PAN: AAATS1884L (APPELLANT) (RESPONDENT) REVENUE BY : SHRI KAILASH GAIKW AD (DR) ASSESSEE BY : SHRI DARSHAN B. GA NDHI (AR) DATE OF HEARING : 10.05.2015 DATE OF PRONOUNCEMENT : 13.05.2016 O R D E R PER PAWAN SINGH, JM: 1. THE PRESENT APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-13, MUMBAI DATED 06.02.2014 IN RESPECT OF AS SESSMENT YEAR (AY) 2010-11 RAISING THE FOLLOWING GROUNDS OF APPEA L:- (I) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN HOLDING THAT THE AMOUNT PAID BY THE LESSEE (SHREE HAZARIMAL SOMANI MEMORIAL TRUST) TO THE LESS OR (MMRDA) WAS NOT IN THE NATURE OF RENT, AS DEFINED IN THE EX PLANATION (I) TO SECTION 1941 OF THE ACT FOR THE PURPOSE OF DEDUCTIO N OF TAX AT SOURCE.' (II) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN ACCEPTING THE CLAIM OF THE A SSESSEE THAT NO TAX 2 ITA NO. 3124/M/2014 M/S SHREE HAZARIMAL SOMANI MEMO RIAL TRUST. WAS DEDUCTIBLE UNDER SECTION 1941 FROM THE PAYMENT MADE BY THE ASSESSEE TO MMRDA FOR ACQUISITION OF THE PLOT OF LA ND ON LEASE FROM MMRDA.' (III) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT CONFIRMING THE ORDER OF THE ASSESSING OFFICER TREATING THE ASSESSEE AS AN ASSESSEE IN DEF AULT U/S. 201(1) IN RESPECT OF THE AMOUNT OF TAX WHICH HAS NOT BEEN DED UCTED UNDER SECTION 1941 FROM THE PAYMENT MADE TO MMRDA AND LEV YING INTEREST UNDER SECTION 201(1A).' (IV) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN IGNORING THE DEFINITION OF R ENT, AS CONTAINED IN SECTION 1941 AND IN RESORTING TO INTERPRETATIVE REA SONING WHEREAS AS PER THE SETTLED PRINCIPLE OF JURISPRUDENCE, THIS EX ERCISE IS REQUIRED ONLY WHEN THE LAW IS UNCLEAR.' (V) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN GOING INTO THE QUESTION OF T AXABILITY OF THE PAYMENT MADE BY THE ASSESSEE TO MMRDA DESPITE THE D ECISION OF THE APEX COURT IN THE CASE OF THE AGGARWAL CHAMBERS OF COMMERCE V. GANPAT RAI HIRALAL, 33 ITR 245, WHERE IT HAS BEEN H ELD THAT THE PERSONS WHO ARE RESPONSIBLE FOR DEDUCTION OF TAX AT SOURCE ARE NOT CONCERNED WITH THE ULTIMATE RESULT OF ASSESSMENT.' 2. BRIEF FACTS OF THE CASE ARE THAT DURING THE FY- 200 9-10 THE ASSESSEE HAD MADE PAYMENT OF LEASE PREMIUM OF RS. 56,06,000/ - TO MMRDA. ON RECEIPT OF THE INFORMATION THAT ASSESSEE HAD MAD E PAYMENT OF RS. 56,06,000/- AND HAD NOT DEDUCTED THE TAX AT SOURCE U/S. 194I OF I.T. ACT, HENCE, NOTICE DATED 14.02.2011, 28.02.2011, 14 .03.2011 AND 27.02.2012 WAS ISSUED TO THE ASSESSEE TO SHOW CAUSE AS TO WHY THE ASSESSEE BE TREATED AS DEFAULTER WITHIN THE MEANING OF SECTION 201(1) OF THE ACT FOR NON-DEDUCTION OF TAX AT SOURCE ON TH E PAYMENT OF LEASE PREMIUM. THE ASSESSEE SUBMITTED ITS REPLY VIDE REPL Y DATED 21.03.2011, 30.03.2011, 20.10.2011 AND 12.03.2012 W HEREIN IT WAS CONTENDED THAT LEASE PREMIUM WAS PAID ON ACCOUNT OF OBTAINING ADDITIONAL FSI FOR CONSTRUCTION OF SCHOOL BUILDING RUN BY ASSESSEE TRUST. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED. THE AO CONCLUDED THAT ASSESSEE DEEMED IN DEFAULT U/S. 201(1) OF THE ACT, THE TAX WAS CALCULATED ALONG WITH INTEREST U/S. 201(1A) OF THE ACT I.E. RS. 3 ITA NO. 3124/M/2014 M/S SHREE HAZARIMAL SOMANI MEMO RIAL TRUST. 11,21,200 ON ACCOUNT OF TDS AND RS. 1,59,827/- ON A CCOUNT OF INTEREST, THUS A TOTAL SUM OF RS. 12,81,072/- IN AS SESSMENT ORDER DATED 15.03.2012. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRE D AN APPEAL BEFORE THE CIT(A) AND AFTER CONSIDERING THE CONTENTION OF THE ASSESSEE, THE CIT(A) ALLOWED THE APPEAL OF ASSESSEE. AGAINST WHIC H THE REVENUE FILED THE PRESENT APPEAL BEFORE US. 4. WE HAVE HEARD THE DEPARTMENTAL REPRESENTATIVE (DR) OF THE REVENUE AND AUTHORISED REPRESENTATIVE (AR) FOR ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS PER OUR OPINION, T HE SOLE GROUND FOR RE-CONSIDERATION IS THAT IF ANY PAYMENT MADE ON ACCOUNT OF AVAILING ADDITIONAL FSI CAN BE EQUATED WITH RENT. DR FOR REVENUE SUPPORTED THE ORDER OF AO AND ARGUED THAT CIT(A) MISINTERPRET ED THE PROVISIONS OF SECTION 194(I). DR FOR REVENUE FURTHER ARGUED TH AT ORDER OF CIT(A) BE REVERSED AND THAT ORD4ER OF AO BE RESTORED. ON T HE OTHER HAND, AR OF THE ASSESSEE ARGUED THAT THIS ISSUE IS SQUARELY COVERED ORDER OF CO-ORDINATE BENCH OF ITAT IN CASE OF ITO VS. WADHWA & ASSOCIATES REALTORS (P.) LTD. VIDE ITA NO. 695/M/2012 WHEREIN THE IDENTICAL ISSUE WAS CONSIDERED BY THE CO-ORDINATE BENCH OF TH IS TRIBUNAL. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. AR OF PAR TIES AND GONE THROUGH THE RECORD OF THE CASE. WE HAVE NOTICED THA T WHILE DECIDING THE APPEAL OF ASSESSEE, CIT(A) CONCLUDED AS UNDER: I HAVE GONE THROUGH THE SAME. IT IS ALSO NOTED FRO M THE DECISION GIVEN IN THE CASE OF NAMAN DEVELOPER THAT HONOURABL E ITAT, MUMBAI HAS UPHELD THE DECISION GIVEN BY CIT(A). IN VIEW OF THIS FACT, I AM IN AGREEMENT WITH THE APPELLANT THAT THE AMOUNT BEING LEASE PREMIUM WAS NOT LIABLE FOR DEDUCTION OF TAX B EING EXPENSE INCURRED TOWARDS ACQUIRING A CAPITAL ASSET BY THE A PPELLANT. THIS HAS ALREADY BEEN DECIDED BY HONOURABLE ITAT, MUMBAI IN THE CASE OF WADHAWA ASSOCIATES REALTORS (P) LTD IN 36 TAXMAN.CO M 526 (2013) AS WELL AS IN THE CASE OF SHRI NAMAN DEVELOPER LTD. IN ITA NUMBER 686 AND 687/MUM/2012, THE ONE CITED BY APPELLANT AL SO RESPECTFULLY FOLLOWING THE DECISIONS AVAILABLE IN THE CASE. I AM OF THE VIEW THAT LEVY OF TAX AND INTEREST IN ALL TOTALLING AMOUNTING TO RS. 12,81,072/- 4 ITA NO. 3124/M/2014 M/S SHREE HAZARIMAL SOMANI MEMO RIAL TRUST. BEING NOT SUSTAINABLE IN THE CASE OF APPELLANT HAS TO BE DELETED AND HENCE ARE DELETED. THE GROUND TAKEIN IN APPEAL IS A LLOWED. 6. WE HAVE FURTHER GONE THROUGH THE ORDER OF CO-ORDINA TE BENCH OF ITAT, MUMBAI IN CASE OF WADHWA & ASSOCIATES REALTOR S (P.) LTD. (SUPRA), WHEREIN WHILE DEALING WITH THE IDENTICAL I SSUE, IT WAS HELD: - 10. WE HAVE CAREFULLY PERUSED THE LEASE DEED AS EX HIBITED FROM PAGE- 1 TO 42 OF THE PAPER BOOK. A CAREFUL READING OF THE SAID LEASE DEED TRANSPIRES THAT THE PREMIUM IS NOT PAID UNDER A LEA SE BUT IS PAID AS A PRICE FOR OBTAINING THE LEASE, HENCE IT PRECEDES TH E GRANT OF LEASE. THEREFORE, BY ANY STRETCH OF IMAGINATION, IT CANNOT BE EQUATED WITH THE RENT WHICH IS PAID PERIODICALLY. A PERUSAL OF THE R ECORDS FURTHER SHOW THAT THE PAYMENT TO MMRD IS ALSO FOR ADDITIONAL BUI LT UP ARE AND ALSO FOR GRANTING FREE OF FSI AREA, SUCH PAYMENT CANNOT BE EQUATED TO RENT. IT IS ALSO SEEN THAT THE MMRD IN EXERCISE OF POWER U/S. 43 LW. SEC. 37(1) OF THE MAHARASHTRA TOWN PLANNING ACT 1966, MR TP ACT AND OTHER POWERS ENABLING THE SAME HAS APPROVED THE PRO POSAL TO MODIFY REGULATION 4A(II) AND THEREBY INCREASED THE FSI OF THE ENTIRE '0' BLOCK OF BKC. THE DEVELOPMENT CONTROL REGULATIONS FOR BKC SPECIFY THE PERMISSIBLE FSI. PURSUANT TO SUCH PROVISIONS, THE A SSESSEE BECAME ENTITLED FOR ADDITIONAL FSI AND HAS' FURTHER ACQUIR ED/PURCHASED THE ADDITIONAL BUILT UP AREA FOR CONSTRUCTION OF ADDITI ONAL AREA ON THE AFORESAID PLOT. THUS THE ASSESSEE-HAS MADE PAYMENT TO MMRD UNDER DEVELOPMENT CONTROL FOR ACQUIRING LEASEHOLD LAND AN D ADDITIONAL BUILT UP AREA. THE DECISIONS OF THE TRIBUNAL IN THE CASE OF NATIONAL SLACK EXCHANGE (SUPRA) AND MUKUND LTD. (SUPRA) HAVE BEEN WELL DISCUSSED BY THE LD. CIT(A) IS HIS ORDER. THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF KHIMLINE P UMPS LTD. (SUPRA) SQUARELY AND DIRECTLY APPLY ON THE FACTS OF THE CAS E WHEREIN THE HON'BLE JURISDICTIONAL HIGH COUL1 HAS HELD THAT PAY MENT FOR ACQUIRING LEASEHOLD LAND IS A CAPITAL EXPENDITURE. CONSIDERING THE ENTIRE FACTS IN TOTALITY IN THE LIGHT OF THE JUDICI AL DECISIONS VIS-A-VIS PROVISIONS OF SEC. 194-1, DEFINITION OF RENT AS PRO VIDED UNDER THE SAID PROVISION, WE DO NOT FIND ANY REASON TO TAMPER OR I NTERFERE WITH THE FINDINGS OF THE LD. CIT(A) WHICH WE CONFIRM. 7. WE HAVE SEEN THAT THE IDENTICAL ISSUE WAS CONSIDERE D BY THE CO- ORDINATE BENCH IN WADHWA & ASSOCIATES REALTORS (P.) LTD. WHEREIN IT WAS HELD THAT PREMIUM IS NOT PAID UNDER THE LEAS E BUT PAID AS A PRICE FOR OBTAINING THE LEASE, HENCE, IT PROCEEDS THE GRA NT OF LEASE, THEREFORE, BY ANY STRETCH OF IMAGINATION IT CANNOT BE EQUATED WITH RENT. IT WAS FURTHER CATEGORICALLY HELD THAT RENT IS PAID PERIOD ICALLY, HOWEVER, THE PREMIUM WAS PAID BY THE ASSESSEE FOR AVAILING ADDIT IONAL FSI. HENCE, 5 ITA NO. 3124/M/2014 M/S SHREE HAZARIMAL SOMANI MEMO RIAL TRUST. KEEPING IN VIEW THAT THE FACTS OF THE PRESENT CASE AND THE ORDER OF CO- ORDINATE BENCH, WE DO NOT FIND ANY ILLEGALITY OR IN FIRMITY IN THE ORDER OF CIT(A) AS THE SAME IS SQUARELY COVERED BY THE DE CISION OF WADHWA & ASSOCIATES REALTORS (P.) LTD. (SUPRA). 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 TH MAY, 2016. SD/- SD/- (SANJAY ARORA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 13/05/2016 S.K.PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / (ASSTT.REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. !'# / GUARD FILE. $ //TRUE COPY/