ITO (TDS) 1(2)(2), MUMBAI V. ENAM FINANCIAL CONSULTANTS P. LTD, MUMBAI

ITA 3639/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8278 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2017
• Appeal Filed By: Department
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 12-06-2015
• Court: TRIBUNAL
• Department Lawyers: MRS BEENA SANTOSH
• Assessee Lawyers: MANISH D DESAI
• Keywords: Maximum Marginal Rate; Capital receipt; Capital expenditure
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G , MUMBAI BEFORE SHRI CN PRASAD , JUDICIAL MEMBER AND SHRI ASHWANI TANEJA , ACCOUNTANT MEMBER ITA NO. 3 639 /MUM/201 5 : (A.Y : 20 0 9 - 1 0 ) ITO (TDS) 1(2)(2) R.NO.812 K.G. MITTAL HOSPITAL BLDG., CHARNI ROAD MUMBAI 400 002 ( / APPELLANT) VS. M/S ENAM FINANCIAL CONSULTANTS PVT. LTD. 44, 2 ND FLOOR, KHATAU BUILDING, SAHID BHAGAT SINGH ROAD, FORT, BANK STREET MUMBAI 400 0 2 3 PAN : AAACE1052H ( / RESPONDENT) / A PPELLANT BY : MRS BEENA SANTOSH RE SPONDENT BY : SHRI MANISH D DESAI / DATE OF HEARING : 1 6 / 02 /201 7 DATE OF PRONOUNCEMENT : 22 / 02/2017 / O R D E R PER C.N.PRASAD (J.M.) : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT (APPEALS) - 40 , MUMBAI DATED 2 6 . 0 3 .201 5 FOR THE ASSESSMENT YEAR 20 0 9 - 1 0 . 2 M/S ENAM FINANCIAL CONSULTANT PVT. LTD. ITA NO . 3639 /MUM/201 5 , A.Y. 2009 - 10 2. THE REVENUE IS CHALLENGING THE ORDER OF THE LD. CIT (APPEALS) IN HOLDI NG THAT THE AMOUNT PAID BY THE A SSESSEE TO THE LESSOR, I.E. M/S MUMBAI METROPOLITAN REGIONAL DEVELOPMENT AUTHORITY (MMRDA) WAS NOT IN THE NATURE OF RENT AS DEFINED IN E XPLANATION (I) TO SECTION 194 - I OF THE ACT FOR THE PURPOSE OF TAX DEDUCTION AT SOURCE. 3. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ISSUE IN APPEAL IS SQUARELY COVERED BY VARIOUS DECISIONS OF TH E T RIBUNAL OF THE MUMBAI BENCH ES , WHERE THE HONBLE T RIBUNAL CONSISTENTLY HOLDING THAT LEASE PREMIUM PAID BY THE ASSESSEE TO MMR DA IS NOT IN THE NATURE OF RENT U/S 194I OF THE ACT . THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITS THAT THE LD. CIT (APPEALS) FOLLOWING THE DECISIONS OF THE C O - ORDINATE BENCH IN THE CASE OF WADHWA & ASSOCIATES REALTORS PVT. LTD AND SHREE NAMAN DEVELOPE RS LTD. HELD THAT LEASE PREMIUM PAID BY THE ASSESSEE TO MMRDA DURING THE YEAR UNDER CONSIDERATION WAS NOT IN THE NATURE OF RENT AS CONTEMPLATED UNDER THE PROVISIONS OF S ECTION 194I OF THE ACT. 4. ON THE OTHER HAND, THE LD.DR FAIRLY SUBMITS THAT THE ISSU E IS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN THE ABOVE CASES. 5 . WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE DECISIONS RELIED ON. THE ASSESSEE ENTERED INTO A LEASE AGREEMENT WITH MMRDA BY PARTICIP ATING IN PUBLIC TENDER ANNOUNCED BY MMRDA FOR ACQUIRING A PLOT IN BKC REGION AND PAID PREMIUM AS A PRICE FOR OBTAINING THE 3 M/S ENAM FINANCIAL CONSULTANT PVT. LTD. ITA NO . 3639 /MUM/201 5 , A.Y. 2009 - 10 LEASE FOR A PERIOD OF 8 YEARS. AFTER ACQUIRING THE RIGHT TO HOLD THE PROPERTY FOR A PERIOD OF 8 YEARS, ASSESSEE STARTED CONSTRUCTION OF BUILDING. IN THE COURSE OF CONSTRUCTION OF BUILDING, THERE ARE CERTAIN AREAS OF CONSTRUCTION LIKE STAIRCASE, LIFT S , LIFT ROOM, LOBBIES ETC. WHICH CONSUMES SPACES AND AS PER THE RULES, ASSESSEE CAN PAY SOME CHARGES/PREMIUM TO THE CONCERNED AUTHORITY I. E. MMRDA AND CAN CONSTRUCT ABOVE AREAS FREE OF FSI , THAT MEANS FOR THE PURPOSE OF CALCULATION OF FSI THE ABOVE AREAS SHALL BE EXCLUDED. THE ASSESSEE DURING THE ASSESSMENT YEAR 2009 - 10, PAID RS.4,23,81,332/ - TO MMRDA AS PREMIUM FOR ACQUIRING STAIRCASE, LIF TS, LIFT ROOM, LOBBIES ETC. FOR COUNTING FEE OF FSI. THIS PREMIUM PAID BY THE ASSESSEE WAS TREATED AS RENT UNDER THE PROVISIONS OF SECTION 194I BY THE A SSESSING O FFICER AND S INCE NO TAX WAS DEDUCTED BY THE A SSESSEE ON SUCH PREMIUM PAID TO MMRDA, THE A SSES SING O FFICER INVOKED THE PROVISIONS OF SECTION 194I AND TREATED THE ASSESSEE TREATING THE ASSESSEE AS DEFAULTER U/S 201(1) AND 201(1A) OF THE ACT. 6. T HE QUESTION BEFORE US TO BE DECIDED IS WHETHER THE PREMIUM PAID BY THE ASSESSEE TO MMRDA FOR ACQUIRING THE STA IR CASE, LIFTS, LIFT ROOM, LOBBIES ETC. FOR FREE OF FSI IS IN THE NATURE OF RENT FOR THE PURPOSE OF THE PROVISIONS OF 194I OF THE ACT OR NOT. WE FIND THAT THE C O - ORDINATE BENCH IN THE CASE OF ITO VS. WADHWA & ASSOCIATES REALTORS PVT. LT D [36 TAXMAN.COM 526] CONSIDERED SIMILAR ISSUE AND HELD THAT PREMIUM PAID BY THE ASSESSEE TO MMRDA FOR THE CONSTRUCTION OF BUILDING AND FOR ADDITIONAL BUILT UP AREA FOR GRANT OF FREE OF FSI CANNOT BE EQUATED TO RENT. SIMILAR VIEW HAS BEEN TAKEN BY THE TRIB UNAL IN THE CASE OF ITO VS. SHREE NAMAN DEVELOPERS LTD. IN ITA NOS. 686 AND 687 /M/ 2012 4 M/S ENAM FINANCIAL CONSULTANT PVT. LTD. ITA NO . 3639 /MUM/201 5 , A.Y. 2009 - 10 DATED 06/08/2013 AND ACIT VS K RAHEJA CORPORATE SERVICES PVT. LTD. IN ITA NO.5807/M /2012 DATED 04.02.2015. THE LD . CIT (APPEALS) FOLLOWING THE SAID ORDERS HELD AS UNDER : 5.1 I HAVE CONSIDERED THE CITED DECISIONS. THE FACTS OF SHREE NAMAN DEVELOPERS LTD. ARE EXACTLY IDENTICAL TO THE FACTS IN THE CASE OF THE ASSESSEE. IN THAT CASE, THE ASSESSEE WAS ALLOTTED CERTAIN PLOTS OF LAND IN BANDRA KURLA COMPLEX ON LEASE SUBJECT TO PAYMENT OF LEASE PREMIUM TO MMRDA. IN ADDITION, THE ASSESSEE MADE FURTHER PAYMENT OF PREMIUM TO MMRDA TOWARDS ADDITIONAL BASEMENT AREA AND AREAS TOWARDS LIFTS, STAIRCASE AND LIFT LOBBIES, ETC. DURI NG THE YEAR UNDER CONSIDERATION. DEMAND U/S.201(1) / 201(1A) WAS RAISED HOLDING THAT THE ASSESSEE WAS LIABLE TO DEDUCT TDS AS PER THE PROVISIONS OF SECTION 1941. THE CIT(A) EXAMINED THE ISSUE IN DETAIL IN THAT CASE AND NOTED THAT THE LEASE PREMIUM CHARGED BY THE MMRDA TO THE A SSESSEES WAS EQUAL TO THE PREVAILING MARKET RATE FOR ACQUISITION OF COMMERCIAL PREMISES AS PER THE VALUATION MADE FOR STAMP DUTY PURPOSE. HE ALSO NOTED THAT THE RATES SO PRESCRIBED BY THE STAMP DUTY AUTHORITIES WERE FOR THE ACQUISITION OF PROPERTY AND NOT FOR THE USE OF LET OUT PROPERTY BY THE TENANT. HE FURTHER NOTED THAT EVEN THE ADDITIONAL PREMIUM WAS CHARGED BY THE MMRDA TO THE ASSESSEE FOR THE ADDITIONAL FSI AS PER THE READY RECKONER RATE PRESCRIBED BY THE STAMP DUTY AUTHORITIES. T HE LD.CIT(A) HELD THAT THE WHOLE TRANSACTION INVOLVING GRANT OF LEASEHOLD RIGHTS BY THE MMRDA TO THE ASSESSES THUS WAS NOTHING BUT THE TRANSACTION OF TRANSFER OF PR OPERTY AND THE LEASE PREMIUM AGREED TO BE PAID WAS THE CONSIDERATION FOR THE ACQUISITION OF SUCH LEASEHOLD RIGHTS IN THE PROPERTY. IN THIS REGARD, A REFERENCE WAS MADE BY THE LD.CIT(A) TO THE DECISION IN THE CASE OF RAJA BAHADUR KAMAKSHYA NARAIN SINGH OF RAMGARH V. COMMISSIONER OF INCOME TAX, (1943) 11 ITR 513 (PC) WHEREIN IT WAS HELD THAT THE PA YMENT OF SALAMI UNDER THE LEASE AGREEMENT WAS A CAPITAL RECEIPT BEING A SINGLE PAYMENT MADE FOR THE ACQUISITION OF THE RIGHT BY THE LESSEE TO ENJOY THE BENEFITS GRANTED TO THEM UNDER THE LEASE. HE ALSO RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF MEMBER FOR THE BOARD OF AGRICULTURAL INCOME TAX VS. SINDHURANI CHAUDHRANJ & ORS. 5 M/S ENAM FINANCIAL CONSULTANT PVT. LTD. ITA NO . 3639 /MUM/201 5 , A.Y. 2009 - 10 32 ITR 169 (SC) WHEREIN I T WAS HELD THAT SALAMI AS A LUMPSUM NON RECURRING PAYMENT MADE BY A PROSPECTIVE TENANT TO THE LANDLORD WHICH IS N OT IN THE NATURE OF RENT WITHIN THE DEFINITION OF 'AGRICULTURAL INCOME' GIVEN IN THE INCOME TAX ACT. IT WAS HELD THAT SUCH 10 ITA 686 & 687/M/12 CO 08 & 09/M/13 ITA 688 TO 691/M /12 CO 12 TO 15/M/13 PAYMENT HAS ALL THE CHARACTERISTICS OF A CAPITAL PAYMENT AND IT IS NOT REVENUE IN NATURE. THE LD.CIT(A) FURTHER RELIED ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V. KHIMLINE PUMPS LTD. (2002) 258 ITR 459 WHEREIN IT WAS HELD THAT AMOUNT OF RS.45 LACS PAID BY THE ASSESSE E TO M/ S. APVE LTD. FOR ACQUISITION OF LEASEHOLD LAND WAS A CAPITAL EXPENDITURE. THE LD.CIT(A) ALSO REFERRED TO THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF MUKUND LTD. 106 ITR 231 WHEREIN IT WAS HELD THAT THE PREMIUM PAID FOR ACQUIRING LEASEHOLD RIGHT IN LAND WAS A CAPITAL EXPENDITURE. THE LD.CIT(A) THEN DISCUSSED THE CASE LAWS RELIED UPON BY THE AO IN HIS ORDERS AND RECORDED A FINDING AFTER SUCH DISCUSSION THAT IN NONE OF THE SAID CASE LAWS, IT WAS HELD THAT THE LEASE PREMIUM PAID IN THE SIMILAR CIRCUMSTANCES WAS IN THE NATURE OF ADVANCE RENT AND TAX WAS DEDUCTIBLE AT SOURCE U/S. 194 - I OF THE ACT. HE HELD THAT THE CASE LAWS RELIED UPON BY THE AO, THEREFORE, WERE DI STINGUISHABLE ON FACTS AND IN LAW AND THE SAME WERE NOT APPLICABLE TO THE FACTS OF THE ASSESSEE' S CASE. THE ID. CIT(A) FINALLY REFERRED TO THE DECISION OF THE TRIBUNAL IN THE CASE OF NATIONAL STOCK EXCHANG E OF INDIA LIMITED (ITA NO.1955/MUM/ 99 AND OTHERS) AND NOTED THAT IN THE SIMILAR FACTS AND CIRCUMSTANCES INVOLVED IN THAT CASE, IT WAS HELD BY THE TRIBUNAL THAT A CONSIDERATION PAID FOR ACQUIRING LEASEHOLD RIGHTS IN LAND WAS A CAPITAL EXPENDITURE AND NOT RENT. ACCORDINGLY, THE LD.CIT(A) HELD THAT THE PAYM ENT MADE BY THE ASSESSEES TO MMRDA ON ACCOUNT OF LEASE PREMIUM FOR ACQUIRING LEASEHOLD RIGHTS AND ADDITIONAL FSI IN RESPECT OF THE LEASE PROPERTY WAS NOT IN THE NATURE OF RENT AS CONTEMPLATED IN SECTION 194 - I OF THE ACT AND THE ASSESSEES WERE NOT REQUIRED TO DEDUCT TAX AT SOURCE FROM THE SAID PAYMENT. ACCORDINGLY, THE DEMAND RAISED BY THE AO TREATING THE ASSESSEES IN DEFAULT U/S.201(L) & 201(1A) WAS CANCELLED BY THE LD.CIT(A). 6 M/S ENAM FINANCIAL CONSULTANT PVT. LTD. ITA NO . 3639 /MUM/201 5 , A.Y. 2009 - 10 5.2 AGAINST THE ABOVE ORDER OF THE CIT(A), THE REVENUE PREFERRED APPEAL BEFORE T HE TRIBUNAL AND THE ITAT 'E' BENCH, M UMBAI VIDE ORDER DATED 14 - 08 - 2013 HELD AS UNDER: 'AS THE ISSUE INVOLVED IN THE PRESENT CASES AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THE CASE OF WADHWA & ASSOCIATES REALTORS PVT.LTD. (SUPRA) D ECIDED BY THE TRIBUNAL, WE RESPECTFULLY FOLLOW THE SAID DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL AND UPHOLD THE IMPUGNED ORDERS OF THE LD. GIT(A) HOLDING THAT THE LEASE PREMIUM PAID BY THE ASSESSEES TO MMRDA NOT BEING IN THE NATURE OF RENT AS CON TEMPLATED IN SECTION 194 - I OF THE ACT, THEY WERE NOT LIABLE TO DEDUCT TAX AT SOURCE FROM THE SAID PAYMENT AND HENCE COULD NOT BE TREATED AS THE ASSESSEES IN DEFAULT U1S.201(1) & 201(14) OF THE ACT. THE APPEALS FI L ED BY THE REVENUE ARE ACCORDINGLY DISMISSED .' 5.3 SINCE THE FACTS IN THE PRESENT CASE ARE ABSOLUTELY IDENTICAL TO THE FACTS IN THE CASE OF SHREE NAMAN DEVELOPERS LTD., RESPECTFULLY FOLLOWING THE DECISION OF JURISDICTIONAL ITAT, WITH WHICH I AGREE, IT IS HEREBY HELD THAT THE LEASE PREMIUM PAID BY THE ASSESSEE TO MMRDA DURING THE YEAR UNDER CONSIDERATION, WAS NOT IN THE NATURE OF RENT AS CONTEMPLATED U/S. 1941 AND, THEREFORE, THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE FROM THE SAID PAYMENT. ACCORDINGLY, THE DEMAND RAISED BY THE ASSESSING OFFICER, TREATING THE ASSESSEE IN DEFAULT U/S.201(1) I 201(IA) IS INCORRECT AND IS DIRECTED TO BE DELETED. GR OUNDS OF APPEAL ARE ALLOWED TO THE ABOVE EXTENT. 7 . AS SEEN FROM THE ABOVE, THE LD. CIT (APPEALS) HELD THAT THE PRESENT CASE IS IDENTICAL TO THE FACTS IN THE CASE OF SHEE NAMAN DEVELOPERS LTD. AND THEREFORE FOLLOWING THE DECISION OF THE C O - ORDINATE BENC H, HE HELD THAT LEASE PREMIUM PAID BY THE ASSESSEE TO MMRDA IS NOT IN THE NATURE OF RENT UNDER PROVISIONS OF 194I 7 M/S ENAM FINANCIAL CONSULTANT PVT. LTD. ITA NO . 3639 /MUM/201 5 , A.Y. 2009 - 10 OF THE ACT. THE LD. DR COULD NOT BRING ANY DISTINGUISHING FEATURES ON FACTS. IN THE CIRCUMSTANCES FOLLOWING THE ABOVE C O - ORDINATE BENCH DECI SIONS ON SIM ILAR ISSUE, WE UPHOLD THE ORDER OF THE LD. CIT (APPEALS) AND REJECT THE GROUNDS OF REVENUE. 8 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THE 22 ND DAY OF FEBRUARY 2017 . SD/ - SD/ - ASHWANI TANEJA C.N.PRASAD / / ACCOUNTANT MEMBER JUDICIAL MEMBER / MUMBAI; / DATED 22 / 02 / 2017 LR, SPS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, (ASSTT. REGISTRAR) , / ITAT, MUM 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. // TRUE COPY / /