TRO (TDS) RG 3, MUMBAI V. SHAH GROUP BUILDERS & INFRA LTD, NAVI MUMBAI

ITA 4046/MUM/2013

• Counselvise Citation: 404619914 RSA 2013
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 04-03-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 20-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S PADMAJA DR
• Assessee Lawyers: ATUL G AR
• Keywords: Maximum Marginal Rate; Capital expenditure
• Section: 37(1); 201(1)

Judgement Text

, , , , E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . , ! '# ! '# ! '# ! '#, ,, , $ $ $ $ BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI AMIT SHUK LA, JM . / ITA NOS.4046 & 4047/MUM/2013 ( & ' (' / ASSESSMENT YEARS : 201011, & 2011-12 ) TRO (TDS) R - 3, MUMBAI, 10 TH FL. R. NO.1010, SMT. K.G. MITTAL AYURVEDIC HOSPITAL BULDING, CHARNI RD. (W) MUMBAI-400002 .. )* / APPELLANT & V/S M/S. S HAH GROUP BUILDERS & INFRA. PROJECT LTD, 323-329, ARNEJA CORNER, PLOT NO.71, SECTOR-17, VASHI, NAVI MUMBAI-400709 .... +,)* / RESPONDENT ) . / PERMANENT ACCOUNT NUMBER AALCS4860L . / 0 / REVENUE BY : SHRI S. PADMAJA (DR) & '1! / 0 / ASSESSEE BY : SHRI ATUL G. (AR) & / ! / DATE OF HEARING 04.03.2015 ' 23( / ! / DATE OF ORDER 04.03.2015 ' ' ' ' / ORDER PER BENCH:- THE AFORESAID APPEALS HAVE BEEN FILED BY THE REVENU E AGAINST ORDER DATED 24.04.2012, FOR THE A.Y.2010-11 AND 201 1-12, PASSED BY LD.CIT(A) IN RELATION TO THE ORDER U/S.201(1)/201(1A) .THE COMMON M/S.SHAH GROUP BUILDERS & INFRA. 2 ISSUES RAISED BY THE REVENUE IN VARIOUS GROUNDS OF APPEAL ARE THAT, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLD ING THAT THE AMOUNT PAID BY THE ASSESSEE TO CITY INDUSTRIAL DEVELOPMENT CORPORATION OF MAHARASHTRA LTD. (CIDCO) AS PREMIUM FOR ACQUIRING L EASEHOLD RIGHT IN RESPECT OF THE LEASED PLOT IS NOT IN THE NATURE OF RE NT AS DEFINED U/S.194I OF THE ACT, AND ACCORDINGLY, THE ASSESSEE WA S NOT REQUIRED TO DEDUCT TAX AT SOURCE U/S.194I. 2. AT THE OUTSET, LEARNED COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y.2008- 09 & 2009-10, PASSED IN ITA NOS.4561 & 4562/MUM/2012 VIDE ORDER D ATED 21.08.2013, HAS DECIDE THE ISSUE IN FAVOUR OF THE ASS ESSEE. ON THE OTHER HAND, THE LEARNED CIT (DR) SUBMITTED THAT THE TRI BUNAL HAS MAINLY RELIED UPON ANOTHER ORDER OF THE TRIBUNAL IN TH E CASE OF M/S. WADHWA & ASSOCIATES REALTORS PVT. LTD. REPORTED IN 201 4 146 ITD 694, WHICH CANNOT BE HELD TO BE APPLICABLE ON THE FACTS OF THE CASE. THE RELEVANT CLAUSES OF THE LEASE DEED HAVE TO BE EXAMINE D FOR COMING TO ANY CONCLUSION AS TO WHETHER THE PAYMENT OF LEASE PREM IUM WILL AMOUNT TO RENT OR NOT. HERE IN THIS CASE, THE CLAUSE OF LEASE DEED HAS NOT PROPERLY EXAMINED, THEREFORE, MATTER SHOULD BE RE STORED BACK TO THE FILE OF THE AO. M/S.SHAH GROUP BUILDERS & INFRA. 3 3. AFTER CONSIDERING THE SUBMISSIONS OF THE PARTIES A ND ON PERUSAL OF THE IMPUGNED ORDERS AND ALSO THE ORDER OF THE TRIBUNA L IN ASSESSEES OWN CASE, WE FIND THAT THE TRIBUNAL ON SIMILAR FACTS A ND ON SIMILAR GROUNDS HAVE HELD THAT, THE LEASE PREMIUM PAID BY THE ASSESSEE TO CIDCO IS NOT IN THE NATURE OF RENT AS CONTEMPLATED U/S.1 94-I AND THEREFORE, ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOU RCE FROM THE SAID PAYMENT. THE LEARNED CIT(A) HAS DISCUSSED THE ENTIRE ISSUE IN DETAIL AND AFTER ANALYZING THE VARIOUS CONTENTIONS RAISED BY THE AO AND SUBMISSION OF THE ASSESSEE HAS GIVEN THE FINDING AS UNDER:- 5.49. I HAVE CAREFULLY GONE THROUGH THE VARIOUS CLAUSES OF LEASE AGREEMENT, SUBMISSION OF THE APPELLANT AND THAT OF THE AC AND OTHER RELEVANT DOCUMENTS. ON A CAREFUL PERUSAL IT CAN BE OBSERVED THAT THESE CLAUSES OF THE LEASE DEED ARE STANDARD REGULA TORY CLAUSES WHICH DO NOT AFFECT THE LEASE HOLD RIGHT OF THE APPELLANT IN ANY MANNER. FOR EXAMPLE CLAUSE (C) OF THE LESSEE'S COVENENTS' IS IN RESPECT OF THE RESTRICTIO N ON EXCAVATION THIS CLAUSE IS IN CONFORMITY WITH VARIOUS LAND LAWS APPLICABLE IN THE STATE. THIS CLAUSE IS TO ENSURE THE RIGHT OF THE LESSOR IN RESPECT OF ANY MINERALS ETC. FOUND FROM TH E LAND. IN SUCH CASES THE LESSEE DOES NOT HAVE A RIGHT OF EXCA VATION. THIS CLAUSE RETAINS THE RIGHT OF THE STATE TO ANY MINERA LS FOUND FROM THE LAND. HOWEVER, THE EXCAVATION OF LAND IS PERMITTED FOR THE PURPOSE OF CONSTRUCTING THE FOUND ATION OF THE BUILDING OR FOR EXECUTING ANY WORK PURSUANT TO TH E TERMS OF THE LEASE. M/S.SHAH GROUP BUILDERS & INFRA. 4 5.50 LIKEWISE ALL OTHER CLAUSES IN THE LEASE DEED A RE ONLY REGULATORY IN NATURE AND ARE MEANT FOR THE PURPOSE OF PROPER DEVELOPMENT OF THE AREA AND THEY IN NO WAY A FFECT THE LEASE HOLD RIGHT OF THE LESSEE. SUCH RESTRICTIO NS WOULD BE IMPOSED BY THE LOCAL AUTHORITY WHILE GRANTING PERMISSION FOR CONSTRUCTION OF BUILDING EVEN IN THE CASES OF FREEHOLD OWNERSHIP. I THEREFORE DO NOT AGREE WITH T HE CONTENTION OF THE AO THAT THE CLAUSES ARE RESTRICTI VE COVENANTS, AND HENCE THE PREMIUM PAID FOR LEASEHOLD RIGHTS, BECOMES ADVANCE RENT FOR THE USE OF THE LAND. 5.51 ACCORDINGLY, AND ON THE BASIS OF AFORESAID DIS CUSSION, I HOLD THAT THE AMOUNT PAID BY THE APPELLANT IS LEA SE PREMIUM FOR ACQUIRING LEASEHOLD RIGHTS IN RESPECT O F THE LEASED LAND, AND THE SAME IS NOT IN THE NATURE OF R ENT AS CONTEMPLATED U/S 194-1 OF THE ACT. ACCORDINGLY, THE APPELLANT WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE U/ S 194-I OF THE INCOME-TAX ACT, 1961.' 9. IN THE PRESENT CASE, THE WRITTEN SUBMISSIONS FUR NISHED BY THE APPELLANT AND THE ORDERS PASSED BY THE AO HAVE B EEN CONSIDERED BY ME. IT IS SEEN THAT THE FACTS IN THE CAS E OF THE APPELLANT ARE SIMILAR TO THE FACTS IN THE CASE OF NA VI MUMBAI SEZ PVT. LTD. AND OTHER CASES CITED IN PARA 7 ABOVE. HENCE, IT IS EVIDENT THAT THE LEASE PREMIUM OF RS.25,31,84,180/- I N RESPECT OF THE LEASED PLOTS, PAID BY THE APPELLANT IS NOT IN THE NATURE OF RENT AS CONTEMPLATED U/S 194-I OF THE ACT. IT IS THUS ALSO EVIDENT THAT THE APPELLANT WAS NOT R EQUIRED TO DEDUCT TAX AT SOURCE U/S 194-1 OF THE INCOME-TAX ACT, 1961. I HOLD ACCORDINGLY. THE DEMANDS OF RS.3,99,50,178/- F OR AY 2010-11 AND RS.94,92,121/- FOR A.Y. 2011-12 RAIS ED M/S.SHAH GROUP BUILDERS & INFRA. 5 BY THE AO U/S.201(1)/201(1A) OF THE ACT BY INVOKING THE PROVISIONS OF SECTION 194-I ARE DELETED. 4. IN THIS YEAR ALSO THE FACTS ARE THAT THE ASSESSEE HAS MADE PAYMENT OF RS.25,31,84,180/- TO THE CIDCO IN THE PREVI OUS YEARS RELEVANT TO A.YS. 2010-11 & 2011-12, AN ACCOUNT OF A LLOTMENT OF PLOTS FOR DEVELOPMENT AS PER THE SCHEME ALLOTTED BY THE CID CO. UNDER THE LEASE AGREEMENT, THE PREMIUM PAID WAS MORE IN THE NA TURE OF SALE CONSIDERATION, AS THE ASSESSEE WAS LIABLE TO PAY ONL Y THE LEASE RENTAL OF RS.100/- PER ANNUM FOR THE PERIOD OF 60 YEARS. T HESE LEASE PREMIUMS WERE PAID FOR THE ACQUISITION OF LAND RIGHTS IN THE PROPERTY AS PER THE DEVELOPMENT CONTROL REGULATION AND IT CANN OT BE EQUATED OR TREATED AS RENTAL PAYMENT. WHEN THE INTEREST OF THE L ESSOR IS PARTED THEN THE PRICE PAID IS TURNED AS PREMIUM AND HOWEVER , IF PERIODICAL PAYMENT IS CONTINUOUSLY MADE, THEN IT IS HELD IN THE NA TURE OF RENT. THIS ASPECT OF THE MATTER HAS BEEN DEALT BY THE TRIBUNAL MUMBAI BENCH IN SERIES OF CASES WHEREIN IT HAS BEEN HELD TH AT SUCH PREMIUM PAID ACQUISITION OF RIGHTS IN THE LAND IS NOT IN THE NA TURE OF RENT. IN THE ASSESSEES OWN CASE THE TRIBUNAL HAS AFTER RELYING UP ON VARIOUS DECISIONS, AS UNDER: 5 . WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON REC ORD. IT M/S.SHAH GROUP BUILDERS & INFRA. 6 IS OBSERVED THAT A SIMILAR ISSUE INVOLVED IN THE CA SE OF SHREE NAMAN HOTELS PVT. LTD. & SHREE NAMAN DEVELOPERS LTD. HAS BEEN DECIDED BY US IN FAVOUR OF THE ASSESSEE VIDE AN ORDER DATED 14-08-2013 PASSED IN I TA NO. 688 TO 691/MUM/2012 BY FOLLOWING THE ORDER OF T HE CO-ORDINATE BENCH OF THIS TRIBUNAL PASSED IN THE CA SE OF M/S WADHWA &. ASSOCIATES REALTORS PVT. LTD. VIDE OR DER DATED 3-7-2013 PASSED IN ITA NO. 695/MUM/2012. IN T HE CASE OF M/S WADHWA & ASSOCIATES REALTORS PVT. LTD. (SUPRA), A SIMILAR ISSUE WAS DECIDED BY THE TRIBUNA L IN FAVOUR OF THE ASSESSEE FOR THE FOLLOWING REASONS GI VEN IN PARA 9 TO 10 OF ITS ORDER DATED 3-7-2013 (SUPRA):- '9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE ORDER OF THE LOWER AUTHORITIES AND THE MATERIAL EVI DENCE BROUGHT ON RECORD IN THE FORM OF PAPER BOOK AND THE JUDICIAL DECISIONS RELIED UPON BY THE RIVAL PARTIES. THE ENTI RE GRIEVANCE REVOLVES AROUND THE PREMIUM PAID BY THE A SSESSEE TO M/S. MMRDA LTD. FOR THE LEASEHOLD RIGHTS ACQUIRED BY THE ASSESSEE THROUGH THE LEASE DEED DT. 22 ND 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 THE ASSESSEE THAT SUCH LEASE PREMIUM IS IN THE NATURE OF CAPITAL EXPENDITURE AND THEREFORE THERE IS NO QUESTION OF DE DUCTION OF TAX AT SOURCE. FURTHER, THE SAID LEASE PREMIUM DOES N OT COME WITHIN THE PURVIEW OF THE DEFINITION OF RENT AS PRO VIDED U/S. 194- 1 OF THE ACT. 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 M/S.SHAH GROUP BUILDERS & INFRA. 7 LEASE DEED TRANSPIRES THAT THE PREMIUM IS NOT PAID UNDER A LEASE BUT IS PAID AS A PRICE FOR OBTAINING THE LEAS E, HENCE IT PRECEDES THE GRANT OF LEASE. THEREFORE, BY ANY STRE TCH OF IMAGINATION, IT CANNOT BE EQUATED WITH THE RENT WHICH I S PAID PERIODICALLY. A PERUSAL OF THE RECORDS FURTHER SHOW TH AT THE PAYMENT TO MMRD IS ALSO FOR ADDITIONAL BUILT UP ARE AND ALSO FOR GRANTING FREE OF FSI AREA, SUCH PAYMENT CANNOT B E EQUATED TO RENT. IT IS ALSO SEEN THAT THE MMRD IN EXERCISE OF POWER U/S. 43 R.W. SEC. 37(1) OF THE MAHARASHTRA TOWN PLA NNING ACT 1966, MRTP ACT AND OTHER POWERS ENABLING THE SAM E HAS APPROVED THE PROPOSAL TO MODIFY REGULATION 4A(II) AN D THEREBY INCREASED THE FSI OF THE ENTIRE 'G' BLOCK OF BKC. T HE DEVELOPMENT CONTROL REGULATIONS FOR BKC SPECIFY THE PERMISSIBLE FSI. PURSUANT TO SUCH PROVISIONS, THE A SSESSEE BECAME ENTITLED FOR ADDITIONAL FSI AND HAS FURTHER AC QUIRED /PURCHASED THE ADDITIONAL BUILT UP AREA FOR CONSTRUCTION OF ADDITIONAL AREA ON THE AFORESAID PLOT. THUS THE ASSE SSEE HAS MADE PAYMENT TO MMRD UNDER DEVELOPMENT CONTROL FOR ACQUIRING LEASEHOLD LAND AND ADDITIONAL BUILT UP AR EA. THE DECISIONS OF THE TRIBUNAL IN THE CASE OF M/S. NATIO NAL STOCK EXCHANGE (SUPRA) AND MUKUND LTD (SUPRA) HAVE BEEN WELL DISCUSSED BY THE LD. CIT(A) IS HIS ORDER. THE D ECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF K HIMLINE PUMPS LTD. (SUPRA) SQUARELY AND DIRECTLY APPLY ON TH E FACTS OF THE CASE WHEREIN THE HON'BLE JURISDICTIONAL HIGH CO URT HAS HELD THAT PAYMENT FOR ACQUIRING LEASEHOLD LAND IS A CAPITAL EXPENDITURE. CONSIDERING THE ENTIRE FACTS IN TOTALITY IN THE LIGHT OF THE JUDICIAL DECISIONS VIS--VIS PROVISIONS OF S EC. 194-1, DEFINITION OF RENT AS PROVIDED UNDER THE SAID PROVIS ION, WE DO M/S.SHAH GROUP BUILDERS & INFRA. 8 NOT FIND ANY REASON TO TAMPER OR INTERFERE WITH THE F INDINGS OF THE LD. CIT(A) WHICH WE CONFIRM'. 6.AS THE ISSUE INVOLVED IN THE PRESENT CASE AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THE CASE OF WADHWA &, ASSOCIATES REALTORS PVT.LTD. (SUPRA) AS WELL AS SHR EE NAMAN HOTELS PVT. LTD. &, SHREE NAMAN DEVELOPERS LT D. (SUPRA) DECIDED BY THE TRIBUNAL, WE RESPECTFULLY FO LLOW THE DECISIONS RENDERED IN THE SAID CASES BY THE CO-ORDIN ATE BENCH OF THIS TRIBUNALAND UPHOLD THE IMPUGNED ORDER OF THE I D. CIT(A) HOLDING THAT THE LEASE PREMIUMS PAID BY THE A SSESSEE TO CIDCO NOT BEING IN THE NATURE OF RENT AS CONTEMPLATE D IN SECTION 194-1 OF THE ACT, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE FROM THE SAID PAYMENTS AND HENCE COULD NOT BE TREATED AS THE ASSESSEE IN DEFAULT U/S 201(1) 86 201( 1A) OF THE ACT. THE APPEALS FILED BY THE REVENUE ARE ACCORDINGL Y DISMISSED. 5. ACCORDINGLY FOLLOWING THE JUDICIAL PRECEDENCE, W E HOLD THAT THE LEASE PREMIUM PAID BY THE ASSESSEE TO CIDCO IS NOT I N THE NATURE OF RENT AS CONTEMPLATED IN SECTION 194-I AND THEREFORE, TH E ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE FROM THE SAID PAYMENTS AND HENCE COULD NOT BE TREATED AS THE ASSESSEE IN DEFAULT. ACCO RDINGLY, THE APPEAL FILED BY THE REVENUE FOR BOTH THE ASSESSMENT YEARS ARE DISMISSED. M/S.SHAH GROUP BUILDERS & INFRA. 9 6. IN THE RESULT, THE BOTH THE APPEALS OF THE REVEN UE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH DAY OF MARCH 2015. SD/- SD/- SD/ - . D. KRUNAKARA RAO ACCOUNTANT MEMBER SD/ - ! ! ! ! '# '# '# '# AMIT SHUKLA JUDICIAL MEMBER MUMBAI, 4& 4& 4& 4& DATED:04 .03.2015 PATEL ' / +!5 65(! / COPY OF THE ORDER FORWARDED TO : (1) & '1! / THE ASSESSEE; (2) . / THE REVENUE; (3) 7() / THE CIT(A); (4) 7 / THE CIT, MUMBAI CITY CONCERNED; (5) 5:; +!& , , / THE DR, ITAT, MUMBAI; (6) ;' < / GUARD FILE. ,5! +! / TRUE COPY '& / BY ORDER = / > . / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI