ASST CIT CEN CIR 13, MUMBAI V. PARINEE DEVELOPERS P.LTD, MUMBAI

ITA 3753/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3531 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 26-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR DARSHI SUMAN RATNAM
• Keywords: Maximum Marginal Rate; Capital expenditure
• Section: 37(1); 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI B.R.BASKARAN (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 3753/MUM/2014 ASSESSMENT YEAR: 2010-11 THE A CIT CENTRAL CIRCLE - 1 3, ROOM NO. 1103, 11 TH FLOOR, OLD CGO ANNEXE BUILDING, M.K.ROAD, MUMBAI- 400020. VS. M/S. PARINEE DEVELOPERS PVT. LTD . , CRESENZO BLDG., C-38 & 39, G BLOCK, BEHIND MCA GROUND, BANDRA- KURLA COMPLEX, BANDRA(E), MUMBAI- 400051. PAN- AADCP8343H (APPELLANT) (RESPONDENT) & CO NO. 116/MUM/2015 (ITA NO. 3753/MUM/2014) ASSESSMENT YEAR: 2010-11 M/S. PARINEE DEVELOPERS PVT. LTD., CRESENZO BLDG., C-38 & 39, G BLOCK, BEHIND MCA GROUND, BANDRA- KURLA COMPLEX, BANDRA(E), MUMBAI- 400051. PAN- AADCP8343H VS. THE ACIT CENTRAL CIRCLE - 13, ROOM NO. 1103, 11 TH FLOOR, OLD CGO ANNEXE BUILDING, M.K.ROAD, MUMBAI- 400020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. DR. DARSHI SUMAN RATNAM RESPONDENT BY : SHRI. M.P. LOHIA & NIKHIL TIWARI DATE OF HEARING: 0 6 /06 /2016 DATE OF PRONOUNCEMENT: 17/08/20 16 O R D E R PER RAM LAL NEGI, JM THE PRESENT APPEAL AND CROSS OBJECTION HAVE BEEN PREFERRED BY THE REVENUE AND THE ASSESSEE RESPECTIVELY AGAINST ORDER DATED 14/03/2014 PASSED 2 ITA NO. 3753/MUM/2014 & CO NO. 116/MUM/2015 ASSESSMENT YEAR: 2010-11 BY THE LD. CIT(A)-37, MUMBAI FOR THE ASST. YEAR 201 0-11. SINCE THE APPEAL AND CROSS OBJECTION PERTAIN TO THE SAME ASSESSEE FOR TH E SAME ASSESSMENT YEAR, BOTH WERE CLUBBED AND HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 3753/MUM/2014 A.Y. 2010-11 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE ENGAG ED IN THE BUSINESS OF REAL ESTATE AND CONSTRUCTIONS, FILED ITS RETURN OF INCOM E FOR THE RELEVANT ASSESSMENT YEAR DECLARING THE TOTAL INCOME OF RS. 1,20,62,49,3 30/-. THE RETURN WAS PROCESSED AND THE AO PASSED ASSESSMENT ORDER U/S 14 3(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DETERMINING THE TOTA L INCOME OF RS. 1,77,04,05,282/- AFTER INTER ALIA MAKING DISALLOWANCE OF RS. 51,32,63,248/- TOWARDS LEASE RENT PAYMENT MADE TO MMRDA. THE ASSES SEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE CIT(A). THE LD. CIT(A) ALLOWED THIS GROUND OF APPEAL OF THE ASSESSEE AND DELETED THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT. AGAINST THE SAID ORDER THE REVENUE IS IN APPEA L BEFORE THE TRIBUNAL. 2. THE REVENUE HAS CHALLENGED THE IMPUGNED ORDER DA TED 14/03/2014 PASSED BY THE LD. CIT(A) ON THE FOLLOWING EFFECTIVE GROUNDS:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE SUM OF RS. 51,32,63,248/- PAID BY THE ASSESSEE TO MMRDA FOR AC QUIRING LEASE HOLD RIGHTS AND ADDITIONAL FSI FOR THE LEASED PLOT WAS NOT IN THE NATURE OF RENT AS DEFINED IN SECTION 194I OF THE IT ACT, AND IS NOT LIABLE FOR TDS. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THAT, THE AMEN DED DEFINITION OF RENT 3 ITA NO. 3753/MUM/2014 & CO NO. 116/MUM/2015 ASSESSMENT YEAR: 2010-11 IN EXPLANATION TO SECTION 1941 W.E.F. 13/07/2006 IS COMPREHENSIVE AND INCLUDES ANY PAYMENT BY WHATEVER NAME CALLED UNDER ANY LEASE, SUB- LEASE, TENANCY OR ANY OTHER ARRANGEMENT. 3. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSES SEE SUBMITTED THAT THE ISSUES INVOLVED IN THE PRESENT APPEAL HAVE BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE ITAT MUMBAI IN ASSESSEE S OWN CASES ITA NO 1734/MUM/2012 FOR THE A.Y. 2008-09 AND ITA NO 4457/ MUM/2012 FOR THE A.Y. 2010-11 AND C.O. NO 42/MUM/2012 AND CO NO 167/ MUM/2012 RESPECTIVELY, ARISING OUT OF THE SAID APPEALS. SINC E, THE IDENTICAL ISSUES HAVE BEEN DECIDED IN FAVOUR OF THE ASSESSEE, THE PRESENT APPEAL IS SQUARELY COVERED BY THE DECISION OF THE ITAT MUMBAI. 4. ON THE OTHER HAND THE LD. DEPARTMENTAL REPRE SENTATIVE DID NOT DISPUTE THAT THE FACTS AND CIRCUMSTANCES OF THE PRESENT CAS E IS SIMILAR TO THE FACTS OF THE CASES REFERRED, HOWEVER, RELYING UPON THE FINDI NGS OF THE AO SUBMITTED THAT SINCE EACH AND EVERY CASE IS REQUIRED TO BE DECIDED ON ITS OWN MERIT, THE AO HAS RIGHTLY MADE THE DISALLOWANCE IN QUESTION AND T HE LD. CIT HAS WRONGLY ALLOWED THE APPEAL OF THE ASSESSEE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE DOCUMENTS CAREFULLY IN THE LIGHT OF THE RESPECTIVE CONTENTIONS OF THE P ARTIES. WE HAVE NOTICED THAT THE COORDINATE BENCH OF THE TRIBUNAL HAS DECIDED TH E IDENTICAL ISSUES IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASES REFERRED AB OVE, BY FOLLOWING THE DECISION DATED 3.6.2013 RENDERED BY THE MUMBAI TRIB UNAL IN ITA NO.695/MUM/2012 AND CO NO 6/MUM/2013 IN THE CASE OF WADHAWA & ASSOCIATES RETAILORS PVT. LTD.. THE RELEVANT PORTIO N OF THE ORDER READS AS UNDER:- 3. TO UNDERSTAND THE ISSUE REFERENCE CAN BE MADE TO THE FACTS RELATING TO ASSESSMENT YEAR 2008-09 AND THE FACTS F OR A.Y 2010-11 4 ITA NO. 3753/MUM/2014 & CO NO. 116/MUM/2015 ASSESSMENT YEAR: 2010-11 ARE ALSO THE SAME EXCEPT DIFFERENCE IN FIGURES. THE ASSESSEE MADE A PAYMENT OF RS. 260,19,80,000/- TO MUMBAI METROPOLIT AN REGIONAL DEVELOPMENT AUTHORITY (MMRDA) FOR ADDITIONAL BUILT UP AREA. ACCORDING TO AO SUCH PAYMENT MADE BY THE ASSESSEE I S IN THE NATURE OF RENT FOR THE USE OF LAND, THEREFORE, THE ASSESSEE WAS REQUIRED TO TAX UNDER SECTION 194I OF THE ACT. ACCO RDINGLY, VIDE ORDER DATED 29/3/2011 PASSED UNDER SECTION 201(1) AND 201 (1A) THE ASSESSEE HAS BEEN FASTENED WITH THE TAX LIABILITY A S UNDER: TAX UNDER SECTION 201 - RS.58,95,94,618/- INTEREST U/S. 201(1A) - RS. 23,58,37,848/- LD. CIT(A) HAS DELETED SUCH ADDITION MADE BY THE AO . THE DEPARTMENT IS AGGRIEVED AND HENCE HAS FILED AFOREME NTIONED APPEAL. 3.1 FIGURES FOR ASSESSMENT YEAR 2010-11 ARE AS UNDE R: 1. PAYMENT MADE FOR ADDITIONAL BUILT UP AREA TO MMRDA - RS.39,18,30,000 2. TAX U/S. 201(1) - RS. 4,03,58,490 3. INTEREST UNDER SECTION 201(IA) - RS. 1,04,,93,207 4. TOTAL TAX LIABILITY - RS. 5,08,51,697 4. AFTER HEARING BOTH PARTIES WE FOUND THAT THE ISS UE IS COVERED BY THE AFOREMENTIONED DECISION OF ITAT. FOR THE SAKE O F COMPLETENESS THE RELEVANT PORTION OF ORDER PASSED IN THE CASE OF ITO VS. M/S.WADHAWA & ASSOCIATES REALTORS PVT. LTD.(SUPRA) IS AS UNDER: 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE ORDER OF THE LOWER AUTHORITIES AND THE MATERIAL EVIDENCE BRO UGHT ON RECORD IN THE FORM OF PAPER BOOK AND THE JUDICIAL DECISIONS R ELIED UPON BY THE RIVAL PARTIES. THE ENTIRE GRIEVANCE REVOLVES AROUND THE PREMIUM PAID 5 ITA NO. 3753/MUM/2014 & CO NO. 116/MUM/2015 ASSESSMENT YEAR: 2010-11 BY THE ASSESSEE TO M/S. MMRDA LTD. FOR THE LEASEHOL D RIGHTS ACQUIRED BY THE ASSESSEE THROUGH THE LEASE DEED DT. NOVEMBER, 2004. IT IS THE SAY OF THE REVENUE THAT THIS LEASE PREMIUM WAS LIABLE FOR DEDUCTION OF TAX AT SOURCE FAILING WHICH THE AS SESSEE IS TO BE TREATED AS ASSESSEE IN DEFAULT. IT IS THE SAY OF TH E ASSESSEE THAT SUCH LEASE PREMIUM IS IN THE NATURE OF CAPITAL EXPE NDITURE AND THEREFORE THERE IS NO QUESTION OF DEDUCTION OF TAX AT SOURCE. FURTHER, THE SAID LEASE PREMIUM DOES NOT COME WITHIN THE PUR VIEW OF THE DEFINITION OF RENT AS PROVIDED U/S. 194-1 OF THE AC T. 10. WE HAVE CAREFULLY PERUSED THE LEASE DEED AS EXH IBITED FROM PAGE-1 TO 42 OF THE PAPER BOOK. A CAREFUL READING O F THE SAID LEASE DEED TRANSPIRES THAT THE PREMIUM IS NOT PAID UNDER A LEASE BUT IS PAID AS A PRICE FOR OBTAINING THE LEASE, HENCE IT P RECEDES THE GRANT OF LEASE. THEREFORE, BY ANY STRETCH OF IMAGINATION, IT CANNOT BE EQUATED WITH THE RENT WHICH IS PAID PERIODICALLY. A PERUSAL OF THE RECORDS FURTHER SHOW THAT THE PAYMENT TO MMRD IS ALSO FOR A DDITIONAL BUILT UP ARE AND ALSO FOR GRANTING FREE OF FSI AREA, SUCH PAYMENT CANNOT BE EQUATED TO RENT. IT IS ALSO SEEN THAT THE MMRD I N EXERCISE OF POWER U/S. 43 R.W. SEC. 37(1) OF THE MAHARASHTRA TO WN PLANNING ACT 1966, MRTP ACT AND OTHER POWERS ENABLING THE SAME H AS APPROVED THE PROPOSAL TO MODIFY REGULATION 4A(II) AND THEREB Y INCREASED THE FSI OF THE ENTIRE G BLOCK OF BKC. THE DEVELOPMENT CONTROL REGULATIONS FOR BKC SPECIFY THE PERMISSIBLE FSI. PU RSUANT TO SUCH PROVISIONS, THE ASSESSEE BECAME ENTITLED FOR ADDITI ONAL FSI AND HAS FURTHER ACQUIRED/PURCHASED THE ADDITIONAL BUILT UP AREA FOR CONSTRUCTION OF ADDITIONAL AREA ON THE AFORESAID PL OT. THUS THE ASSESSEE HAS MADE PAYMENT TO MMRD UNDER DEVELOPMENT CONTROL FOR ACQUIRING LEASEHOLD LAND AND ADDITIONAL BUILT U P AREA. THE DECISIONS OF THE TRIBUNAL IN THE CASE OF M/S. NATIO NAL STOCK 6 ITA NO. 3753/MUM/2014 & CO NO. 116/MUM/2015 ASSESSMENT YEAR: 2010-11 EXCHANGE (SUPRA) AND MUKUND LTD (SUPRA) HAVE BEEN W ELL DISCUSSED BY THE LD. CIT(A) IS HIS ORDER. THE DECISION OF THE HONBLE 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 HONBLE JURISDICTIONAL HIGH COURT 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--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 INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) WHICH WE CONFIRM. 6. SINCE, THE FACTS AND CIRCUMSTANCES OF THE PR ESENT CASE ARE IDENTICAL TO THE CASES REFERRED ABOVE IN ASSESSEES OWN CASES AND TH E IDENTICAL ISSUES INVOLVED IN THE PRESENT APPEAL HAVE ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE, WE RESPECTFULLY FOLLOW THE VIEW TAKEN BY THE COORDINAT E BENCH AND ALLOW THE APPEAL OF THE ASSESSEE. CO 116/MUM/2015 A.Y. 2010-11. THE ASSESSEE HAS FILED THE PRESENT CROSS OBJECTION ON THE FOLLOWING GROUNDS:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED A.O. HAS:- LEASE RENT PAID TO MMRDA OF RS. 51,32,63,248/- 1. ERRED IN OBJECTING THE ORDER OF CIT(A) ON THE GR OUND SUM PAID OF RS. 51,32,63,248/- TO MMRDA FOR ACQUIRING LEASE HOL D RIGHTS AND ADDITIONAL FSI FOR THE LEASED PLOT WAS IN THE NATUR E OF RENT AS DEFINED IN SECTION 1941 OF THE ACT AND LIABLE FOR T DS. 7 ITA NO. 3753/MUM/2014 & CO NO. 116/MUM/2015 ASSESSMENT YEAR: 2010-11 2. WITHOUT PREJUDICE TO ABOVE ERRED IN NOT APPRECIATING THE FACT THAT STATE GOVERNMENT AND LOCAL AUTHORITY HAVE AN O VERRIDING TITLE ON PAYMENT MADE TO MMRDA AND HENCE SAME DOES NOT REQUI RE DEDUCTION OF TAX AT SOURCE UNDER SECTION 196 OF THE ACT. 2. SINCE, WE HAVE UPHELD THE IMPUGNED ORDER PASSE D BY THE LD. CIT(A), WE DO NOT FIND ANY MERIT IN THE CROSS OBJECTIONS FILED BY THE ASSESSEE. HENCE, WE DISMISS THE SAME AS INFRUTUOUS . IN THE RESULT, THE APPEAL FILED BY THE DEP ARTMENT AND CROSS OBJECTION FILED BY THE ASSESSEE FOR THE A.Y. 2010-11 ARE DISM ISSED. ORDER PRONOUNCED IN THE OPEN COU RT ON 17 TH AUGUST, 2016 SD/- SD/- ( B.R.BASKARAN ) (RAM LAL NEGI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED: 17/08/2016 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. !' , $ !'% , / DR, ITAT, MUMBAI 6. &' ( / GUARD FILE. / BY ORDER, ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI PRAMILA