I.T.O. (T.D.S.) 3(2), MUMBAI V. SHAH GROUP BUILDERS LTD., NAVI MUMBAI

ITA 4523/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70778 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 04-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GIRIJA DAYAL
• Assessee Lawyers: A K GHOSH
• 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 P.M. JAGTAP, AM AND SHRI SANJAY GARG, J M !./ I.T.A. NO. 4523 /MUM/2012 ( &) % $*% &) % $*% &) % $*% &) % $*% / / / / ASSESSMENT YEAR : 2008-09) INCOME TAX OFFICER (TDS 3(2), R.NO. 910, 10 TH FLOOR, SMT K.G. MITTAL AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD (W), MUMBAI 400 002. ) ) ) ) / VS. M/S SHAH GROUP BUILDERS LTD., 323-329, ARNEJA CORNER, PLOT NO. 71 SECTOR 17, VASHI, NAVI MUMBAI 400 705 #+ !./ PAN : AAJCS8586M ( +, / // / APPELLANT ) .. ( -.+, / RESPONDENT ) +, / 0 ! / APPELLANT BY : SHRI GIRIJA DAYAL -.+, / 0 ! / RESPONDENT BY : SHRI A.K. GHOSH !)$ / / // / DATE OF HEARING : 07-08-2013 12* / / DATE OF PRONOUNCEMENT : 14-08-2013 '3 / O R D E R PER P.M. JAGTAP, A.M. : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER PASSED BY THE LD. CIT(A) -14, MUMBAI DATED 27-04-2012 FOR ASSESSM ENT YEAR 2008-09. 2. ALTHOUGH THE REVENUE HAS RAISED AS MANY AS 12 GR OUNDS IN THIS APPEAL, THE SOLITARY ISSUE ARISING OUT OF THE SAME IS WHETH ER THE ASSESSEE IS REQUIRED TO DEDUCT TAX AT SOURCE FROM THE PAYMENT OF LEASE P REMIUM MADE TO CIDCO ITA 4523/M/12 2 DURING THE YEAR UNDER CONSIDERATION U/S 194-1 OF TH E INCOME TAX ACT, 1961 (THE ACT). 3. THE RELEVANT FACTS OF THE CASE GIVING RISE TO TH IS APPEAL ARE THAT THE ASSESSEE WAS ALLOTTED CERTAIN PLOTS OF LAND IN KHAR GHAR, NAVI MUMBAI ON LEASE SUBJECT TO PAYMENT OF LEASE PREMIUM TO CIDCO. DURIN G THE YEAR UNDER CONSIDERATION, PART PAYMENT OF SUCH LEASE PREMIUM W AS MADE BY THE ASSESSEE TO CIDCO. ACCORDING TO THE A.O., THE ASSES SEE WAS REQUIRED TO DEDUCT TAX AT SOURCE FROM THE PAYMENT OF LEASE PREM IUM MADE TO CIDCO AS PER THE PROVISIONS OF SECTION 194-1 OF THE ACT AND SINCE NO SUCH TAX WAS DEDUCTED BY THE ASSESSEE FROM THE SAID PAYMENTS, HE ISSUED NOTICE TO THE ASSESSEE REQUIRING IT TO SHOW CAUSE AS TO WHY IT SH OULD NOT BE TREATED AS THE ASSESSEE IN DEFAULT FOR ITS FAILURE TO DEDUCT THE T AX AT SOURCE FROM THE PAYMENT OF LEASE PREMIUM MADE TO CIDCO. THE ASSESSE E FILED ITS REPLY TO SHOW CAUSE NOTICE ISSUED BY THE A.O. EXPLAINING ITS STAND ON THE ISSUE AND AFTER CONSIDERING AND DISCUSSING THE SAME IN DETAIL , THE A.O. HELD THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE FROM TH E PAYMENT MADE TO CIDCO ON ACCOUNT OF LEASE PREMIUM AND TREATED THE ASSESSE E IN DEFAULT FOR FAILURE TO DO SO FOR THE FOLLOWING REASONS GIVEN IN THE ORDER PASSED U/S 201(1) AND 201(1A) OF THE ACT: AT THE OUTSET, IT NEEDS TO BE MENTIONED THAT THE ASSESSEES REPRESENTATIVE HAS VEHEMENTLY CLAIMED THAT THE PAYM ENT REFERRED IN SHOW CAUSE DOES NOT BEAR THE CHARACTER OF RENT MENTIONED IN SECT. 1941 AND THEREFORE THERE IS NO REQUIREMENT OF DEDUCTION OF T AX FROM SUCH PAYMENT MADE TO CIDCO. THE LAND UNDER QUESTION HAS BEEN GIVEN BY THE LESSOR TO THE ASSESSEE ON LEASE AND FOR WHICH IT HAS PAID THE PRE MIUM OF RS. 70,85,01,870/-. THIS LUMP-SUM PAYMENT MADE BY THE L EASEE I.E. M/S. SHAH GROUP BUILDERS LTD. (ASSESSEE) HAS BEEN MADE TO AVO ID RECURRING PAYMENT BY INSTALMENTS BY THE THEM TO THE LESSOR. THE PAYMENT SO MADE BY THE ASSESSEE IS A RENT FOR ENJOYMENT AND OCCUPANCY OF THE IMPUGN ED LAND. THE ONE TIME PAYMENT DOES NOT CHANGE THE CHARACTER OF THIS PAYME NT AND THEREFORE IT SQUARELY FALLS WITHIN THE PARAMETER OF SECTION 1941 . THIS INFERENCE ALSO GATHERS SUPPORT FROM THE JUDICIAL PRONOUNCEMENTS OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V/S HMT LIMITED - 203 ITR 820 AND THAT OF HONBLE CALCUTTA HIGH COURT IN THE EASE OF BRAITHWAITE & CO . (1) LTD. V/S CIT 111 ITR 542. BOTH THE HIGH COURTS IN THESE CASES HAVE R ULED THAT LEASE PREMIUM PAID IN LUMP SUM IS NOTHING BUT THE RENT PAID IN AD VANCE TO OBVIATE PERIODICAL ITA 4523/M/12 3 PAYMENTS. GOING BY THE VERDICT OF THESE HONBLE HIG H COURTS, THE RULINGS ARE SQUARELY APPLICABLE TO THE FACTS OF THE INSTANT CAS E. THEREFORE, THE OBLIGATION WAS CAST UPON THE ASSESSEE TO DEDUCT TAX AT SOURCE FROM THE LEASE PREMIUM PAID TO CIDCO AS PER THE PROVISIONS U/S 194-I OF TH E INCOME TAX ACT, 1961. IT IS FURTHER NECESSARY TO MENTION THAT ADMITTEDLY VIDE LEASE AGREEMENT REFERRED TO ABOVE THE ASESSEE HAS ACQUIRED RIGHT OF OCCUPANCY AND RIGHT OF ENJOYMENT OF THE IMPUGNED PLOT, AND PAYMENT MADE FO R AVAILMENT OF SUCH, RIGHT IS RENT AND RENT ONLY AND NOTHING ELSE. BY CA LLING IT BY SOME OTHER NAME AND NOMENCLATURE DOES NOT CHANGE ITS REAL CHARACTER I.E. RENT. THEREFORE THE SUM SO PAID BY THE ASSESSEE IS RENT AND THEREFORE S QUARELY REQUIRES APPLICATION OF SECT. 1941. AT THIS JUNCTURE IT IS NECESSARY TO GO THROUGH THE EXPLANATION (I) TO SECT. 1941 WHICH PROVIDES DEFINI TION OF WORD RENT FOR THE PURPOSE OF SECT. 1941. FOR SAKE OF CONVENIENCE AND PROPER UNDERSTANDING THE RELEVANT PART OF EXPLANATION (I) TO SECT. 1941 IS R EPRODUCED HEREUNDER:- (I) RENT MEANS ANY PAYMENT, BY WHATEVER NAME CAL LED, UNDER ANY LEASE, SUB-LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR THE USE OF (EITHER SEPARATELY OR TOGETHER) ANY (A) LAND; OR (B) TO (H) ----- WHETHER OR NOT ANY OR ALL OF THE ABOVE ARE OWNED BY THE PAYEE THE ASSESSEE CONVENIENTLY IGNORED TO READ THE CRUX OF THE DEFINITION OF RENT PROVIDED IN EXPLANATION (I) TO SECTION 194-I O F THE INCOME TAX ACT, 1961. THE DEFINITION HAS CLEARLY MENTIONED THAT THE PAYME NT MADE BY WHATEVER NAME CALLED AND FOR THE USE OF GETS COVERED BY T HE PROVISIONS OF SECTION 194- 1 OF THE INCOME TAX ACT, 1961. AS A RESULT, BY CALL ING LEASE RENT AS LEASE PREMIUM, DOES NOT CHANGE ITS REAL CHARACTER. THE NO MENCLATURE USED IN RESPECT OF SUCH LEASE PREMIUM PAYMENT IS NOT DECISI VE. HERE IT IS NECESSARY TO MENTION THAT THE LEGISLATURE HAS TAKEN DUE CARE OF SUCH SITUATIONS ARISING BY USAGE OF DIFFERENT TERMINOLOGY BY PROVIDING A COMPR EHENSIVE DEFINITION OF RENT IN THE SECTION ITSELF. IN THE LIGHT OF THE FACTS OF THE CASE, STATUTORY PR OVISIONS OF SECT. 1941 ESPECIALLY DEFINITION OF RENT PROVIDED IN EXPLANATI ON THERETO AND THE CASE LAWS CITED ABOVE THE UNDERSIGNED HAS NO SLIGHTEST HESIT ATION IN ARRIVING AT THE CONCLUSION THAT ASSESSEE WAS REQUIRED TO DEDUCT TAX U/S. 1941 AND PAY IT TO THE GOVT. TREASURY WITHIN THE STIPULATED TIME AS RE QUIRED BY PROVISIONS OF CHAPTER XVI1 B OF THE INCOME TAX ACT. ADMITTEDLY AS SESSEE HAS NOT COMPLIED WITH THE PROVISIONS OF SECTION 1941 AND THEREBY CHA PTER XVII B OF THE INCOME TAX ACT BY DEDUCTING THE TDS FROM THE LEASE RENT PA ID TO THE C1DCO AND NOT PAID IT TO THE GOVERNMENT TREASURY. AS A RESULT ASS ESSEE HAS COMMITTED DEFAULT WITHIN THE MEANING OF SECTION 20 1(1) AND T HEREBY IT IS AN ASSESSEE IN DEFAULT. ACCORDINGLY, ASSESSEE IS TREATED AS ASSES SEE IN DEFAULT AND DIRECTED TO MAKE PAYMENT OF INTEREST U/S. 201(1A). ITA 4523/M/12 4 4. AGAINST THE ORDER PASSED BY THE A.O. U/S 201(1)/ 201(1A) OF THE ACT, THE ASSESSEE FILED ITS APPEAL BEFORE THE LD. CIT(A) AND ELABORATE SUBMISSIONS WERE MADE ON ITS BEHALF BEFORE THE LD. CIT(A) IN SU PPORT OF THE STAND THAT THE LEASE PREMIUM PAID TO CIDCO NOT BEING IN THE NATURE OF ADVANCE RENT WITHIN THE MEANING OF SECTION 194-1 OF THE ACT, THE ASSESS EE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE AND THEREFORE IT COULD NOT BE TREATED AS ASSESSEE IN DEFAULT U/S 201(1) & 201(1A) OF THE ACT. THE SAID SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE BEFORE HIM WERE FORWARDED BY THE LD. CIT(A ) TO THE A.O. FOR HIS COMMENTS. IN THE REMAND REPORT SUBMITTED TO THE LD . CIT(A), THE A.O. OFFERED HIS COMMENTS ON THE SUBMISSIONS MADE ON BEHALF OF T HE ASSESSEE. AFTER CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF THE A SSESSEE AND THE COMMENTS OFFERED BY THE A.O. ON THE SAID SUBMISSION S IN THE REMAND REPORT AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD . CIT(A) FOUND THAT A SIMILAR ISSUE INVOLVING IDENTICAL FACTS AND CIRCUMSTANCES W AS CONSIDERED AND DECIDED BY HIM IN DETAIL VIDE HIS ORDER PASSED IN THE CASE OF NAVI MUMBAI SEZ PVT. LTD. ACCORDINGLY, FOLLOWING THE DECISION IN THE CAS E OF NAVI MUMBAI SEZ PVT. LTD. ON A SIMILAR ISSUE INVOLVING IDENTICAL FACTS, THE LD. CIT(A) HELD THAT THE PREMIUM PAID BY THE ASSESSEE IN RESPECT OF LEASED P LOT OF LAND TO CIDCO DURING THE YEAR UNDER CONSIDERATION WAS NOT IN THE NATURE OF RENT AS CONTEMPLATED U/S 194-I OF THE ACT AND THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE FROM THE PAYMENT OF PREMIUM MA DE TO CIDCO. THE DEMAND RAISED AGAINST THE ASSESSEE BY TREATING IT A S ASSESSEE IN DEFAULT VIDE AN ORDER PASSED BY THE A.O. U/S 201(1) & 201(1A) OF THE ACT FOR THE YEAR UNDER CONSIDERATION, THEREFORE, WAS CANCELLED BY TH E LD. CIT(A). AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE HAS PREFER RED THIS APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT A SIMILAR ISSUE ITA 4523/M/12 5 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 DAT E PASSED IN ITA NO. 688 TO 691/MUM/2012 BY FOLLOWING THE ORDER OF THE CO-ORDIN ATE BENCH OF THIS TRIBUNAL PASSED IN THE CASE OF M/S WADHWA & ASSOCIA TES REALTORS PVT. LTD. VIDE ORDER DATED 3-7-2013 PASSED IN ITA NO. 695/MUM /2012. IN THE CASE OF M/S WADHWA & ASSOCIATES REALTORS PVT. LTD. (SUPRA), A SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE F OR 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 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 AROUN D THE PREMIUM PAID BY THE ASSESSEE TO M/S. MMRDA LTD. FOR THE LEASEHOL D 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 ASSESSEE IS TO B E TREATED AS ASSESSEE IN DEFAULT. IT IS THE SAY OF THE ASSESSEE THAT SUC H LEASE PREMIUM IS IN THE NATURE OF CAPITAL EXPENDITURE AND THEREFORE THE RE IS NO QUESTION OF DEDUCTION OF TAX AT SOURCE. FURTHER, THE SAID LEAS E PREMIUM DOES NOT COME WITHIN THE PURVIEW OF THE DEFINITION OF RENT A S 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 TH E SAID LEASE DEED TRANSPIRES THAT THE PREMIUM IS NOT PAID UNDER A LEA SE BUT IS PAID AS A PRICE FOR OBTAINING THE LEASE, HENCE IT PRECEDES TH E 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 ADDITIONAL BUI LT UP ARE AND ALSO FOR GRANTING FREE OF FSI AREA, SUCH PAYMENT CANNOT BE EQUATED TO RENT. IT IS ALSO SEEN THAT THE MMRD IN EXERCISE OF POWE R U/S. 43 R.W. SEC. 37(1) OF THE MAHARASHTRA TOWN PLANNING ACT 1966, M RTP ACT AND OTHER POWERS ENABLING THE SAME HAS APPROVED THE PRO POSAL TO MODIFY REGULATION 4A(II) AND THEREBY INCREASED THE FSI OF THE ENTIRE G BLOCK OF BKC. THE DEVELOPMENT CONTROL REGULATIONS FOR BKC S PECIFY THE PERMISSIBLE FSI. PURSUANT TO SUCH PROVISIONS, THE ASSESSEE BECAME ENTITLED FOR ADDITIONAL FSI AND HAS FURTHER ACQUIRE D/PURCHASED THE ADDITIONAL BUILT UP AREA FOR CONSTRUCTION OF ADDITI ONAL AREA ON THE AFORESAID PLOT. THUS THE ASSESSEE HAS MADE PAYME NT TO MMRD UNDER DEVELOPMENT CONTROL FOR ACQUIRING LEASEHOLD LAND A ND ADDITIONAL BUILT UP AREA. THE DECISIONS OF THE TRIBUNAL IN THE CASE OF M/S. NATIONAL STOCK EXCHANGE (SUPRA) AND MUKUND LTD (SUPRA) HAVE BEEN WELL DISCUSSED BY THE LD. CIT(A) IS HIS ORDER. THE DECI SION OF THE HONBLE ITA 4523/M/12 6 JURISDICTIONAL HIGH COURT IN THE CASE OF KHIMLINE PUMPS LTD. (SUPRA) SQUARELY AND DIRECTLY APPLY ON THE FACTS OF THE CAS E WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT PAYMENT FOR ACQUIRING LEASEHOLD LAND IS A CAPITAL EXPENDITURE. CONSIDERI NG THE ENTIRE FACTS IN TOTALITY IN THE LIGHT OF THE JUDICIAL DECISIONS VIS --VIS PROVISIONS OF SEC. 194-1, DEFINITION OF RENT AS PROVIDED UNDER THE SAI D PROVISION, WE DO NOT FIND ANY REASON TO TAMPER OR INTERFERE WITH THE FIN DINGS 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 & ASSOCIATES REALTORS PVT. LTD. (SUPRA) AS WELL AS SHREE NAMAN HOTELS PVT. LTD . (SUPRA) DECIDED BY THE TRIBUNAL, WE RESPECTFULLY FOLLOW THE DECISIONS REN DERED IN THE SAID CASES BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL AND UPHOLD T HE IMPUGNED ORDER OF THE LD. CIT(A) HOLDING THAT THE LEASE PREMIUM PAID BY T HE ASSESSEE TO CIDCO NOT BEING IN THE NATURE OF RENT AS CONTEMPLATED IN SECT ION 194-I OF THE ACT, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE FRO M THE SAID PAYMENT AND HENCE COULD NOT BE TREATED AS THE ASSESSEE IN DEFAU LT U/S 201(1) & 201(1A) OF THE ACT. THE APPEAL FILED BY THE REVENUE IS ACCORD INGLY DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH AUGUST, 2013. . '3 / 12* 4')5 14-08-2013 2 / SD/- SD/- (SANJAY GARG) (P.M. JAGTAP ) & !'# JUDICIAL MEMBER !'# / ACCOUNTANT MEMBER MUMBAI ; 4') DATED 14-08-2013 $.&).!./ RK , SR. PS ITA 4523/M/12 7 '3 / -&67 87* '3 / -&67 87* '3 / -&67 87* '3 / -&67 87*/ COPY OF THE ORDER FORWARDED TO : 1. +, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. 9 () / THE CIT(A)- CONCERNED, MUMBAI 4. 9 / CIT CONCERNED, MUMBAI 5. 7$< -&&) , , / DR, ITAT, MUMBAI E BENCH 6. =% > / GUARD FILE. '3)! '3)! '3)! '3)! / BY ORDER, !.7 -& //TRUE COPY// ? ? ? ?/ // /!@ !@ !@ !@ ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI