ITO (TDS) 2(3), MUMBAI V. MILLENNIUM ASSOCIATES, NAVI MUMBAI

ITA 4347/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1314 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 20-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Maximum Marginal Rate; Non-deduction of tax; Capital expenditure
• Section: 37(1); 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B, MU MBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.4347/MUM/2014 (ASSESSMENT YEAR- 2011-12) ITO (TDS)-2(3), ROOM NO. 798, 7 TH FLOOR, SMT. K.G. MITTAL AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD, MUMBAI- 400002. VS. M/S MILLENNIUM ASSOCIATES, PLOT NO. 11, AVANISH SECTOR-10, AIROLI, NAVI MUMBAI-401708. PAN: AAPFM3953K (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SUMAN KUMAR (DR) ASSESSEE BY : SHRI NILESH JOSHI (AR) DATE OF HEARING : 13.04.2017 DATE OF PRONOUNCEMENT : 13.04.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY REVENUE U/S 253 OF THE INCOME-TAX AC T (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-14, MUMBAI DATED 04 .04.2014 FOR AY-2011-12. THOUGH THE REVENUE HAS RAISED AS MANY AS FIVE GROUN DS OF APPEAL. HOWEVER, AS PER OUR CONSIDERED VIEW THE ONLY SUBSTANTIAL ISSUE IS WHETHER THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE FROM THE PAYMENT O F LEASE PREMIUM PAID TO CITY INDUSTRIAL CORPORATION (CIDCO) DURING THE YEAR UN DER CONSIDERATION. 2. BRIEF FACTS OF THE CASE ARE THAT A SURVEY U/S 133 W AS CARRIED OUT IN CASE OF CITY AND INDUSTRIAL DEVELOPMENT CORPORATION OF MAHARASHTRA L TD. (CIDCO) ON 04.02.2011. IN COURSE OF SURVEY, IT WAS NOTICED THAT ASSESSEE W AS ALLOTTED PLOT NO. 9 & 10 AT KHARGHAR, NAVI MUMBAI ON LEASE PREMIUM OF RS.19,46, 02,098/- FOR FINANCIAL YEAR 2009-10 AND RS. 3,45,02,097/- FOR FINANCIAL YEAR 20 010-11 TO CIDCO. ACCORDING TO AO THE ASSESSEE WAS REQUIRED TO DEDUCT TAX ON PA YMENT OF SUCH LEASE RENT PREMIUM AS PER THE PROVISIONS OF SECTION 194I. THE ASSESSEE WAS GIVEN SHOW- ITA NO.4347/M/20 14- M/S MILLENNIUM ASSOCIATES 2 CAUSE NOTICE DATED 08.09.2011 & 16.11.2011 ASKING T HE ASSESSEE AS TO WHY THESE PAYMENTS SHOULD NOT BE TREATED AS LEASE RENT PAID TO CIDCO. THE ASSESSEE FILED ITS REPLY AND CONTENDED THAT THE LEASE PREMIUM IS T HE CAPITAL COST OF PLOT. THE AGREEMENT ON LEASE IS IN FACT A SALE AND THE ASSESS EE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE ON SUCH PREMIUM. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY AO AND AO PASSED A ORDER U/S 201(1) OF THE ACT AS UNDER: 21. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES O F THE CASE, THE ASSESSEE IS HELD DEEMED TO BE IN DEFAULT FOR FAILURE TO DEDUCT TAX AT SOURCE FROM THE PAYMENTS OF RS. 19,46,02,098. THE RATES OF TDS, AS PRESCRIBED FOR SECTION 194I WERE CHANGED W. E.F. 01-10-2009. THE RATES APPLICABLE WOULD BE AS UNDER: A) FOR THE PAYMENTS MADE FROM 01-04-2009 TO 30-09- 2009, THE APPLICABLE RATE WAS 20.6 %, INCLUDING E. CESS @ 3%; (PERIOD I). B) FOR THE PAYMENTS MADE FROM 01-10-2009 TO 31-03-2 010, THE APPLICABLE RATE WAS 10.3%, INCLUDING E. CESS @ 3%; (PERIOD IL) 22. IN THE PRESENT CASE, IN THE F.Y. 2009-10, THE A SSESSEE HAD MADE A PAYMENT OF RS. 83,00,000 DURING 'PERIOD I' AND A PAYMENT OF RS. 18,63,02,098 / - WAS MADE IN 'PERIOD 11'. HENCE, APPLYING THE APPLICABLE RATE, THE AMOUNT OF TDS DEF AULT U/S. 201(1) OF THE I.T. ACT, ON AGGREGATE AMOUNT OF RS. 19,46,02,098/-, WORKS OUT TO RS. 2,08 ,98,916/-. AS REGARD F.Y. 2010-11, THE ASSESSEE HAD MADE A PAYMENT OF RS. 3,45,02,097. HEN CE, THE TDS DEFAULT, @ 10.3%, WORKS OUT TO RS. 35,53,716. THE TOTAL AGGREGATE DEFAULT COMES TO RS. 2,44,52,632. 23. NOW, COMING TO THE INTEREST U/S 201(1A), THE SA ME IS CALCULATED-FOR THE PERIOD STARTING FROM THE DATE ON WHICH THE TAX WAS DEDUCTIBLE TILL THE D ATE OF ORDER. THE FOLLOWING TABLE SHOWS THE INTEREST WORKING U/S 201(IA) FOR BOTH THE ASSESSMEN T YEARS: S.NO. TDS DEFAULT AMOUNT (RS.) MONTH WHICH PAID PERIOD TILL 30.11.2011, IN MONTHS INTEREST @ 1% P.M. (COL. 2 X CO., 4 X 1% (IN RS.) 1 2 3 4 5 1 17,09,800 AUGUST2009 28 4,78,744 2 1,09,59,200 NOVEMBER2009 25 27,39,800 3 19,57,216 DECEMBER2009 24 4,69,732 4 28,84,000 JANUARY2009 23 6,63,320 6 28,32,500 FEBRUARY2009 22 6,23,150 7 5,56,200 MARCH2009 21 1,16,802 8 35,53,716 APRIL2009 20 7,10,743 TOTAL INTEREST 51,79,141 24. THE ASSESSMENT YEAR WISE DEMAND/INTEREST IS SUM MARIZED HEREUNDER: S.NO. A.Y. TAX (RS.) INTEREST(RS.) TOTAL (RS.) 1 2010-11 2,08,98,916 44,68,398 2,53,67,314 2 2011-12 35,53,716 7,10,743 42,64,459 25. THE ASSESSEE IS DIRECTED TO MAKE PAYMENT OF RS. 2,96,31,773/-. DEMAND NOTICE U/S 156 AND CHALLAN (NO. 281) ARE ACCORDINGLY ENCLOSED. ITA NO.4347/M/20 14- M/S MILLENNIUM ASSOCIATES 3 26. PENALTY PROCEEDINGS U/S.271-C OF THE I.T. ACT A RE SEPARATELY INITIATED, IN RESPECT OF EACH ASSESSMENT YEAR, FOR NON-DEDUCTION OF TAX AT SOURCE OF RS. 2,44,52,632 AT THE TIME OF MAKING PAYMENT OF RS. 22.91,04,195/-. ON APPEAL BEFORE THE LD. CIT(A), THE ORDER OF AO PA SSED U/S 201(1)/201(1A) WAS DELETED. THUS, AGGRIEVED BY THE ORDER OF LD. CI T(A), THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE ( DR) FOR REVENUE AND LD. AUTHORIZED REPRESENTATIVE (AR) OF ASSESSEE AND PERU SED THE MATERIAL AVAILABLE ON RECORD. AT THE OUTSET, LD. LD. AR OF THE ASSESSEE S UBMITTED THAT GROUNDS OF APPEAL RAISED BY REVENUE IN THE APPEAL IS SQUARELY COVERED IN FAVOUR OF ASSESSEE IN THE CASE OF ITO VS. MILLENNIUM ASSOCIATES IN ITA NO. 31 72 & 3173/MUM/2014 AND IN ASSESSEES OWN GROUP CONCERNED CASE IN ITO VS. M /S SHAH GROUP BUILDERS LTD. (ITA NO. 4523/M/12). THE LD. DR FOR THE REVENUE NOT DISPUTED THE FACTUAL POSITION SUBMITTED BY LD. AR OF THE ASSESSEE. 4. WE HAVE CONSIDERED THE CONTENTION OF THE PARTIES AN D HAS SEEN THAT THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ITO VS. MILLENNIUM ASSOCI ATES (SUPRA) AND IN ITO VS. M/S SHAH GROUP BUILDERS LTD. (SUPRA) HELD THAT PAYM ENT OF LEASE PREMIUM PAID TO CIDCO NOT IN THE NATURE OF RENT AS CONTEMPLATED IN SECTION 194I OF THE ACT AND ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE. TH US, ASSESSEE COULD NOT TREATED AS ASSESSEE IN DEFAULT U/S 201(1) & 201(1A) OF THE ACT. THE CO-ORDINATE BENCH IN M/S SHAH GROUP BUILDERS LTD. PASSED THE FOLLOWING O RDER: 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT A SIMILAR ISSUE 5 ITA 4523/M/12 INVOLVED IN THE CASE OF SHREE NAMAN HOTELS PVT. LTD . HAS BEEN DECIDED BY US IN FAVOUR OF THE ASSESSEE VIDE AN ORDER OF EVEN DATE PASSED I N ITA NO. 688 TO 691/MUM/2012 BY FOLLOWING THE ORDER OF THE CO-ORDINATE BENCH OF THI S TRIBUNAL PASSED IN THE CASE OF M/S WADHWA & ASSOCIATES REALTORS PVT. LTD. VIDE ORDER D ATED 3-7-2013 PASSED IN ITA NO. 695/MUM/2012. IN THE CASE OF M/S WADHWA & ASSOCIATE S REALTORS PVT. LTD. (SUPRA), A SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE FOR THE FOLLOWING REASONS GIVEN 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 EVIDENCE BROUGHT ON RE CORD IN THE FORM OF PAPER BOOK AND THE JUDICIAL DECISIONS RELIED UPON BY THE RIVAL PARTIES. THE ENTIRE GRIEVANCE REVOLVES AROUND THE PREMIUM PAID BY THE ASSESSEE TO M/S. MMRDA LTD. FOR THE LEASEHOLD RIGHTS ACQUIRED BY THE ASSESSEE THROUGH T HE LEASE DEED DT. 22ND NOVEMBER, 2004. IT IS THE SAY OF THE REVENUE THAT T HIS 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 ITA NO.4347/M/20 14- M/S MILLENNIUM ASSOCIATES 4 NATURE OF CAPITAL EXPENDITURE AND THEREFORE THERE I S NO QUESTION OF DEDUCTION OF TAX AT SOURCE. FURTHER, THE SAID LEASE PREMIUM DOES NOT COME WITHIN THE PURVIEW OF THE DEFINITION OF RENT AS PROVIDED 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 OF 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 PRECEDES THE GRANT OF LEASE. THEREFORE, BY ANY STRETCH OF IMAGINATION, IT CANNOT BE EQUATED WITH THE RENT WHICH IS PAID PERIO DICALLY. A PERUSAL OF THE RECORDS FURTHER SHOW THAT THE PAYMENT TO MMRD IS AL SO FOR ADDITIONAL BUILT UP ARE AND ALSO FOR GRANTING FREE OF FSI AREA, SUCH PA YMENT CANNOT BE 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 PLANNING ACT 1966, MRTP ACT AND OT HER POWERS ENABLING THE SAME HAS APPROVED THE PROPOSAL TO MODIFY REGULATION 4A(II) AND THEREBY INCREASED THE FSI OF THE ENTIRE 'G' BLOCK OF BKC. T HE DEVELOPMENT CONTROL REGULATIONS FOR BKC SPECIFY THE PERMISSIBLE FSI. PU RSUANT TO SUCH PROVISIONS, THE ASSESSEE BECAME ENTITLED FOR ADDITIONAL FSI AND HAS FURTHER ACQUIRED/PURCHASED THE ADDITIONAL BUILT UP AREA FOR CONSTRUCTION OF ADDITIONAL AREA ON THE AFORESAID PLOT. THUS THE ASSESSEE HAS MADE P AYMENT TO MMRD UNDER DEVELOPMENT CONTROL FOR ACQUIRING LEASEHOLD LAND AN D ADDITIONAL BUILT UP AREA. THE DECISIONS OF THE TRIBUNAL IN THE CASE OF M/S. N ATIONAL STOCK EXCHANGE (SUPRA) AND MUKUND LTD (SUPRA) HAVE BEEN WELL DISCU SSED BY THE LD. CIT(A) IS HIS ORDER. THE DECISION OF THE HON'BLE 6 ITA 4523/M /12 JURISDICTIONAL HIGH COURT IN THE CASE OF KHIMLINE PUMPS LTD. (SUPRA) SQ UARELY AND DIRECTLY APPLY ON THE FACTS OF THE CASE WHEREIN THE HON'BLE JURISDICT IONAL HIGH COURT HAS HELD THAT PAYMENT FOR ACQUIRING LEASEHOLD LAND IS A CAPITAL E XPENDITURE. 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 PROVIDED UNDER TH E SAID PROVISION, WE DO NOT FIND ANY REASON TO TAMPER OR INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) WHICH WE CONFIRM'. 6. AS THE ISSUE INVOLVED IN THE PRESENT CASE AS WEL L AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THE CASE OF WADHWA & ASSOCIA TES REALTORS PVT. LTD. (SUPRA) AS WELL AS SHREE NAMAN HOTELS PVT. LTD. (SUPRA) DECIDE D BY THE TRIBUNAL, WE RESPECTFULLY FOLLOW THE DECISIONS RENDERED IN THE SAID CASES BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL AND UPHOLD THE IMPUGNED ORDER OF THE LD. C IT(A) HOLDING THAT THE LEASE PREMIUM PAID BY THE ASSESSEE TO CIDCO NOT BEING IN THE NATURE OF RENT AS CONTEMPLATED IN SECTION 194-I OF THE ACT, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE FROM THE SAID PAYMENT AND HENCE COULD NOT BE TREATED AS THE ASSESSEE IN DEFAULT U/S 201(1) & 201(1 A) OF THE ACT . THE APPEAL FILED BY THE REVENUE IS ACCORDINGLY DISMISSED. 5. THUS, RESPECTFULLY FOLLOWING THE DECISION OF CO-ORD INATE BENCH, WE DO NOT FIND ANY MERIT IN THE APPEAL FILED BY REVENUE. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH DAY OF APRIL 2017. SD/- SD/- (G.S. PANNU) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 13/04/2017 ITA NO.4347/M/20 14- M/S MILLENNIUM ASSOCIATES 5 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/