ITO (OSD) (TDS) 1(3), MUMBAI V. DHIRENDRA RAMJI VORA, NAVI MUMBAI

ITA 3179/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78716 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 27-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 08-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NIKESH JAIN
• Keywords: Capital asset
• Section: 2(14); 37(1); 201(1); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUM BAI . . , , BEFORE SHRI I. P. BANSAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 3179/MUM/2012 ( / ASSESSMENT YEAR: 2009-10) INCOME TAX OFFICER OSD (TDS) 1(3), ROOM NO.811, 8 TH FLOOR, MRS. K. G. MITTAL AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD (W), MUMBAI-400 002 / VS. DHIRENDRA RAMJI VORA RAMJI LAKHAMSHI & CO. 1-29, APMC, MARKET-II, PHASE-II, VASHI, NAVI MUMBAI ./ ./PAN/GIR NO. AAAPV 7369 R ( /APPELLANT ) : ( !' / RESPONDENT ) # $ / APPELLANT BY : SHRI P. K. SINGH !' # $ / RESPONDENT BY : SHRI NILESH PATEL & SHRI NIKESH JAIN % &'( # )* / DATE OF HEARING : 27.03.2014 +,- # )* / DATE OF PRONOUNCEMENT : 09.04.2014 . / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-14, MUMBAI (C IT(A) FOR SHORT) DATED 27.02.2012, ALLOWING THE ASSESSEES APPEAL CONTESTI NG ITS ASSESSMENT U/SS.201(1) AND 201(1A) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2009-10 VIDE ORDER DATED 31. 03.2011. 2 ITA NO. 3179/MUM/2012 (A.Y. 2009-10) ITO (OSD) (TDS) VS. DHIRENDRA RAMJI VORA 2.1 THE ISSUE ARISING IN THE INSTANT APPEAL IS WITH REGARD TO THE EXIGIBILITY TO DEDUCTION OF TAX AT SOURCE U/S.194-I OF THE ACT ON THE SUM OF RS.219.71 LACS, DESCRIBED AS LEASE PREMIUM, PAID BY THE ASSESSEE, A DEVELOPER, TO CITY INDUSTRIAL DEVELOPMENT CORPORATION (CIDCO) UNDER A LEASE AGREE MENT DATED 03.12.2008 (PB PGS. 42-59) AND, CONSEQUENTLY, THE VALIDITY OR OTHE RWISE IN LAW OF THE DELETION OF THE DEMAND RAISED ON THE ASSESSEE U/SS. 201(1) AND 201(1A) BY THE ASSESSING OFFICER (A.O.) IN APPEAL BY THE LD. CIT(A) VIDE THE IMPUGNED ORDER. 2.2 BEFORE US, THE MATTER WAS ARGUED AS COVERED BY THE VARIOUS ORDERS BY THE TRIBUNAL, THE ASSESSEES PAPER-BOOK-2 (APB-2) DATED 30.08.2013 CONTAINING A COMPILATION OF FIVE ORDERS, INCLUDING (AS PER THE I NDEX) ONE BY THE HONBLE HIGH COURT, I.E., IN THE CASE OF CIT VS. MUHAMMAD HUSSAIN [2001] 247 ITR 347 (J&K). THE LD. DEPARTMENTAL REPRESENTATIVE (DR), ON THE OT HER HAND, WOULD RELY ON THE ORDER OF THE A.O. 3. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERI AL ON RECORD, GIVING OUR CAREFUL CONSIDERATION TO THE MATTER. 3.1 THE REVENUES CASE IS THAT THE NOMENCLATURE EMP LOYED IS NOT DETERMINATIVE OF THE MATTER. THE LEASE PREMIUM, WHICH IS ADMITTED LY TOWARD GRANT OF LEASE-HOLD RIGHTS, I.E., FOR THE PERIOD OF LEASE, SIXTY YEARS IN THE INSTANT CASE, AFTER WHICH THE LAND SHALL BE RESUMED BY OR REVERT TO THE LESSOR IS ONLY TOWARD THE USE OF THE LAND. WHAT ELSE ARE THE LEASE HOLD RIGHTS FOR OR TOWARD ? THE WORD RENT, AS DEFINED U/S.194-I, IS SO IN A VERY BROAD MANNER, SO AS TO I NCLUDE WITHIN ITS AMBIT ANY SUM, BY WHATSOEVER NAME CALLED, PAID UNDER ANY AGREEMENT OR ARRANGEMENT, INCLUDING BY WAY OF A LEASE, FOR THE USE OF, AMONG OTHERS, LA ND. THE IMPUGNED PAYMENT OF RS.2,19,70,602/- BY THE ASSESSEE AS THE LESSEE, DES CRIBED AS LEASE PREMIUM, RESERVING AN ANNUAL RENT OF RS.1/- FOR A PLOT OF LA ND ADMEASURING 452.070 SQ. MTRS., IS THUS ONLY RENT WITHIN THE MEANING OF TERM U/S. 194-I. 3 ITA NO. 3179/MUM/2012 (A.Y. 2009-10) ITO (OSD) (TDS) VS. DHIRENDRA RAMJI VORA THE ASSESSEES CASE, ON THE OTHER HAND, IS THAT A L EASE HOLD IS A BUNDLE OF RIGHTS, INCLUDING FOR THE DEVELOPMENT OF LEASE-HOLD LAND BY CONSTRUCTING A BUILDING THEREON COMPLYING WITH THE APPLICABLE TOWN PLANNING PROVISIONS/NORMS. NO PART THEREOF, THEREFORE, QUALIFIES TO BE A RENT, WHICH IS, AS WELL AS ITS DIFFERENCE WITH PREMIUM, CLARIFIED PER SECTION 105 OF THE TRANSFE R OF PROPERTY ACT, 1882. BOTH THE PARTIES RELIED ON CASE LAW BY THE HIGHER C OURTS OF LAW, I.E., IN THE PROCEEDINGS AT THE ASSESSMENT AND THE FIRST APPELLA TE STAGE. 3.2 THE QUESTION BEFORE US IN THE MATTER IS IF THE ISSUE AT HAND CAN BE CONSIDERED AS COVERED BY THE VARIOUS DECISIONS ADDUCED BEFORE US. THE DECISION IN THE CASE OF MUHAMMAD HUSSAIN (SUPRA) IS WITH REGARD TO THE POWER OF THE APPELLA TE AUTHORITY TO CONDONE THE DELAY IF IT IS SATISFIED ABOUT THE S UFFICIENCY OF THE CAUSE SHOWN FOR THE DELAY. WE ARE COMPLETELY UNABLE TO CORRELATE TH E SAID DECISION WITH THE FACTS OF THE CASE OR ISSUE BEFORE US FOR ADJUDICATION. FURTH ER, THE DECISION AT PGS. 148-153 OF APB-2 IS BY THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF INDIAN NEWSPAPER SOCIETY VS. ITO (IN WP NO.1504 OF 2011 DATED 09.11.2011), AND NOT BY THE TRIBUNAL, AS SPECIFIED IN THE INDEX TO THE PAPER-BO OK. THE SAID DECISION CONCERNS THE JURISDICTION OF THE A.O. AT MUMBAI TO PASS AN ORDER U/SS. 201(1) AND 201(1A) IN THE CASE OF AN ASSESSEE BEING REGULARLY ASSESSED AS ALS O ASSESSABLE AT NEW DELHI. THE SAME, THUS, IS AGAIN ON AN ENTIRELY DIFFERENT MATTE R. THE REMAINING THREE ORDERS (I.E., AT PGS. 92-147 OF APB-2) ARE BY THE TRIBUNAL AND, MORE IMPORTANTLY, ON THE POINT, WITH THAT IN THE CASE OF NAVI MUMBAI SEZ PVT. LTD. (IN ITA NO.738 TO 741/MUM(B)/2012 DATED 16.08.2013/PGS.92-126 OF APB- 2), TO WHICH OUR ATTENTION WAS DRAWN DURING HEARING, BEING A VERY COMPREHENSIV E ORDER. THE PREMISE OF ALL THE SAID THREE ORDERS, WHICH STAND PERUSED BY US, I S THAT LEASE PREMIUM IS SEPARATE AND DISTINCT FROM THE LEASE RENT, AND THE FORMER CA NNOT BE CONSTRUED AS A RENT U/S.194-I. REFERENCE HAS BEEN MADE AND SUPPORT FOR THE PURPOSE DRAWN FROM THE 4 ITA NO. 3179/MUM/2012 (A.Y. 2009-10) ITO (OSD) (TDS) VS. DHIRENDRA RAMJI VORA DECISIONS, PRINCIPALLY BY THE APEX COURT, AS UNDER, BESIDES BY THE HONBLE HIGH COURTS, AS IN THE CASE OF CIT VS. KHIMLINE PUMPS LTD . [2002] 258 ITR 459 (BOM); BHARAT STEEL TUBES LTD. VS. CIT [2001] 252 ITR 622 (DELHI); CIT VS. PROJECT AUTOMOBILES [1987] 167 ITR 781 (MP); AND CIT VS. PROJECT AUTOMOBILES [1984] 150 ITR 266 (BOM): 1) A.R. KRISHNAMURTHY VS. CIT [1989] 176 ITR 417 (SC); 2) R.K. PALSHIKAR (HUF) VS. CIT [1988] 172 ITR 311 (SC); 3) CIT VS. PANBARI TEA CO. LTD. [1965] 57 ITR 422 (SC); 4) MAHARAJA CHINTAMANI SARAN NATH SAH DEO VS. CIT [1961] 41 ITR 506 (SC); 5) MEMBER FOR THE BOARD OF AGRICULTURAL INCOME TAX VS. SINDHURANI CHAUDHURANI & ORS. [1957] 32 ITR 169 (SC); AND 6) RAJA BAHADUR KAMAKSHYA NARAIN SING OF RAMGARH VS. C IT [1943] 11 ITR 513 (PC). THE DECISIONS ADVANCED BY THE REVENUE, AS IN THE CA SE OF CIT VS. REEBOK INDIA CO. [2007] 291 ITR 455 (DEL); UNITED AIRLINES VS. CIT [2006] 287 ITR 281 (DEL); KRISHNA OBEROI VS. UNION OF INDIA [2002] 257 ITR 105 (AP); CIT VS. H.M.T. LTD. [1993] 203 ITR 820 (KAR); AND BRAITHWAITE & CO. (INDIA) LTD. VS. CIT [1978] 111 ITR 542 (CAL.), STAND DISTINGUISHED BY IT (TRIB UNAL) ON FACTS. 3.3 THE POSITION OF LAW IS NOT AMBIVALENT, AS MAY A PPEAR TO BE THE CASE, WITH BOTH SIDES ADVERTING TO DECISIONS IN THEIR FAVOUR. RENT, THOUGH A TERM OF WIDE IMPORT, SO THAT ANY PAYMENT, HOWSOEVER DESCRIBED, U NDER ANY ARRANGEMENT FOR SEEKING OR SECURING ENJOYMENT OR POSSESSION OF INTER ALIA IMMOVABLE PROPERTY FOR ANY LAWFUL PURPOSE, WOULD FALL TO BE CONSIDERED AS RENT. THE TERM BEING SPECIFICALLY DEFINED UNDER A PROVISION OF THE ACT, RECOURSE TO I TS GENERAL MEANING OR TO SECTION 105 OF THE TRANSFER OF PROPERTY ACT, IS NOT APPOSIT E, AND TOWARD WHICH WE RELY ON 5 ITA NO. 3179/MUM/2012 (A.Y. 2009-10) ITO (OSD) (TDS) VS. DHIRENDRA RAMJI VORA THE DECISIONS BY THE APEX COURT INTER ALIA IN THE CASE CIT VS. RAJA BENOY KUMAR SAHAS ROY [1957] 32 ITR 466 (SC) AND CIT VS. BENGAL RIVER SERVICE CO. LTD. [1921] 82 ITR 42 (SC). THE LIMIT TO THE SCOPE OF TH E SAID WORD, HOWEVER, IS IMPLICIT THEREIN, AND WOULD NOT INCLUDE TRANSFER OF A CAPITAL ASSET, I.E., WHERE SO, IN TERMS OF THE DEFINING PROVISION OF SECTION 2(14). I F AND TO THE EXTENT A PAYMENT, DESCRIBED AS LEASE PREMIUM, DENOTES OR REPRESENTS A CAPITAL ASSET IN THE FORM OF LEASE-HOLD RIGHTS, ITS TRANSFER CANNOT BE CONSIDER ED AS EITHER TOWARD RENT OR ADVANCE RENT, AS THE CASE MAY BE, APART FROM THE FA CT THAT RENT USUALLY CONNOTES A PERIODIC PAYMENT. THIS POSITION IN LAW IS IN FACT U NDISPUTED IN-AS-MUCH AS RENT, BY ITS VERY NATURE AND CHARACTER, EXCLUDES TRANSFER OF AN IMMOVABLE PROPERTY OR INTEREST THEREIN, WHICH ARE IN THE CAPITAL FIELD, S O AS TO BE CONSIDERED AS A CAPITAL ASSET U/S. 2(14) OF THE ACT. IT IS TOWARD THIS OR T O BRING HOME THIS ESSENTIAL DIFFERENCE THAT REFERENCE STANDS MADE TO SECTION 10 5 OF THE TRANSFER OF PROPERTY ACT, AND NO OTHER; RENT BEING SPECIFICALLY DEFINED UNDER THE ACT. IN FACT, THE PROVISION OF SECTION 194-IA, BROUGHT ON THE STATUTE BY FINANCE ACT, 2013 W.E.F. 01.04.2013, ENDORSES THE SAID POSITION IN LAW. CARE MUST, HOWEVER, BE TAKEN, EVEN AS EXPLAINED BY THE HONBLE APEX COURT IN PANBARI TEA CO. LTD. (SUPRA), THAT ONE IS NOT CAMOUFLAGED FOR THE OTHER BY USING CLEVER PHRAS EOLOGY, AND WHAT IS TO BE LOOKED AT IS THE SUBSTANCE OF THE TRANSACTION, FOR IT MAY WELL BE THAT THE SO CALLED PREMIUM IS IN FACT ADVANCE RENT OR WHAT IS TERMED A S RENT IS ONLY A DEFERRED PRICE. IT IS IN THIS CONTEXT THAT THE HONBLE COURTS HAVE WIT H REGARD TO THE FACTS OF THE CASE BEFORE THEM CONSIDERED THE WHOLE OR PART OF THE PAY MENT AS RENT. IN FACT, THE TERM BEING BROADLY DEFINED, WOULD ALSO INCLUDE PAYMENTS WHICH ARE NOT WHOLLY ON REVENUE ACCOUNT, DEDUCIBLE U/S.30 OR SECTION 37(1) OF THE ACT, I.E., WHERE IN RELATION TO THE ASSESSEES BUSINESS. 6 ITA NO. 3179/MUM/2012 (A.Y. 2009-10) ITO (OSD) (TDS) VS. DHIRENDRA RAMJI VORA 3.4 THE QUESTION, ACCORDINGLY, BOILS DOWN TO AN ASS ESSMENT IN THE FACTS AND CIRCUMSTANCES OF THE CASE IF THE WHOLE OR ANY PART OF THE PAYMENT COULD BE, THOUGH DESCRIBED AS A LEASE PREMIUM AND, THUS, OSTENSIBLY THE PRICE FOR THE TRANSFER OF THE LEASE HOLD RIGHTS, DENOTES A PAYMENT IN THE NATURE OF RENT, I.E., TOWARD THE USE OF LAND. IN THE CASES BEFORE THE TRIBUNAL BEING RELIED UPON BY THE ASSESSEE, THE LEASE PREMIUM WAS FOUND TO BE FOR THE TRANSFER OF INTERES T IN LAND, CREATING RIGHTS IN REM . IN SOME CASES IT WAS TOWARD ADDITIONAL BUILT-UP ARE A OR FOR GRANT OF ADDITIONAL FSI RELATABLE TO THE LEASEHOLD LAND AS WELL, WITH THE L EASE PREMIUM CHARGED ON THE BASIS OF THE EXTANT PRICE AS ADOPTED FOR THE PURPOSE OF L EVY OF STAMP DUTY. IN THE FACTS OF THE INSTANT CASE, THE ANNUAL RENT IS RESERVED AT RS .1/- (REFER PARA 7 OF THE LEASE AGREEMENT). THE SAME ESTABLISHES BEYOND DOUBT THAT THE ENTIRE LEASE PREMIUM PAID IS A PRICE FOR THE TRANSFER OF LEASE HOLD RIGHTS OR SALAMI . NO DOUBT IN THE CASE OF H.M.T. LTD. (SUPRA), THE VERY SAME FACT, I.E., OF THE ANNUAL RE NT BEING AT RS.1/-, WAS CONSTRUED TO MEAN THAT THE AMOUNT PAID BY WAY OF LE ASE PREMIUM WAS ONLY RENT OR ADVANCE RENT. HOWEVER, THE SAME IS FIRSTLY AN INFER ENCE OF FACT, BASED ON PRIMARY FACT/S. TWO, WITH RESPECT, WE DIFFER IN-AS-MUCH AS THE RESERVING A TOKEN RENT, TO OUR MIND, ONLY IMPLIES THAT IN EFFECT AND SUBSTANCE THE PROPERTY STANDS BENEFICIALLY PASSED ON TO THE TRANSFEREE FOR A PRICE; THE LESSOR -TRANSFEROR RETAINING ONLY A TITULAR INTEREST. THE ANNUAL RENT RESERVED IN THE CASE OF JT. CIT VS. MUKUND LTD. [2007] 106 ITD 231 (SB) WAS ALSO, IT MAY BE NOTED, AT RS.1/-, COUPLED WITH A 99 YEAR LEASE FOR SETTING UP OF A PLANT ON THE DEMISED LAND, AND WHIC H WAS CONSTRUED BY THE SPECIAL BENCH TO IMPLY OF THE LEASE PREMIUM AS BEING THE PRICE FOR THE LEASE HOLD RIGHTS THEREIN. FURTHER, WE OBSERVE THAT THE ASSESSMENT ORDER STATE S THE ANNUAL RENT AT RS.60,000/-. THOUGH WE DO NOT FIND ANY EVIDENCE TO SUPPORT THE SAME ON RECORD, EVEN SO, THE SAME WOULD NOT, TO OUR MIND, OPERATE T O DISTURB THE FINDING OF THE SAME AS REPRESENTING ONLY A NOMINAL RENT IN VIEW OF THE SUBSTANTIAL RIGHTS/INTEREST 7 ITA NO. 3179/MUM/2012 (A.Y. 2009-10) ITO (OSD) (TDS) VS. DHIRENDRA RAMJI VORA HAVING BEEN TRANSFERRED. IN FACT, THE ARRANGEMENT I S SUBJECT TO THE ASSESSEE-LICENSEE CONSTRUCTING A BUILDING COMPLYING WITH THE RELEVANT AND APPLICABLE GUIDELINES WITHIN THE PRESCRIBED TIME PERIOD (OF FOUR YEARS), ALSO PROVIDING INFRASTRUCTURE FACILITIES AS WELL AS PARKING FACILITIES QUA THE PROPOSED RESIDENTIAL COMPLEX. FURTHER, THE PREMIUM AMOUNT, AS IT APPEARS, HAS BEE N WORKED OUT WITH REFERENCE TO THE READY RECKONER RATES FOR STAMP DUTY PURPOSES, B ESIDES BEING ALSO ACCOUNTED FOR AS SALES BY THE LESSOR (CIDCO). ACCORDINGLY, THOUGH DESCRIBED AS A LICENSEE IN THE ARRANGEMENT, THE ASSESSEE TO OUR MIND IS A LESSEE, AND THE ARRANGEMENT, NOTWITHSTANDING THE RESTRICTIVE CONVENANTS, CONFERS SUBSTANTIAL RIGHTS IN THE LAND, ENABLING THE ASSESSEE TO, AS A DEVELOPER, TRANSFER THE RESIDENTIAL UNITS TO BE CONSTRUCTED THEREON TO OTHERS. 4. IN VIEW OF THE FORE-GOING, IN OUR CLEAR VIEW, TH E IMPUGNED PAYMENT REPRESENTS THE TRANSFER PRICE OF THE LAND ON LEASE HOLD BASIS, SO THAT NO PART THEREOF QUALIFIES TO BE A RENT WITHIN THE MEANING OF THE TERM U/S.194-I OF THE ACT SO AS TO BE EXIGIBLE FOR DEDUCTION OF TAX AT SOURCE THERE-UN DER. WE, ACCORDINGLY, CONFIRM THE IMPUGNED ORDER. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . /-)0 ' # / # ) 12 ORDER PRONOUNCED IN THE OPEN COURT ON APRIL 09, 201 4 SD/- SD/- (I. P. BANSAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER % ( MUMBAI; 3& DATED : 09.04.2014 '.&../ ROSHANI , SR. PS 8 ITA NO. 3179/MUM/2012 (A.Y. 2009-10) ITO (OSD) (TDS) VS. DHIRENDRA RAMJI VORA !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. % 4) ( ) / THE CIT(A) 4. % 4) / CIT CONCERNED 5. 7'89 !)&:; , * :;- , % ( / DR, ITAT, MUMBAI 6. 9<= >( / GUARD FILE !' ) / BY ORDER, */)+ , (DY./ASSTT. REGISTRAR) , % ( /ITAT, MUMBAI