A.C.I.T. (TDS)-2(2), THANE V. PARADISE INFRA-CON.PVT. LTD., KALYAN

ITA 4592/MUM/2012

• Counselvise Citation: 459219914 RSA 2012
• Duration Of Justice: 1 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 20-02-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 06-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Maximum Marginal Rate; Capital expenditure
• Section: 154; 37(1); 201(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI . , , , BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUD ICIAL MEMBER . / ITA NO. 4592 /MUM./ 2012 ( / ASSESSMENT YEAR : 2 0 0 8 0 9 ) DY. COMMISSIONER OF INCOME TAX TDS CIRCLE, THANE, QUARESHI MANSION NAUPADA, THANE (W), 400 602 .. / APPELLANT V/S M/ S. PARADISE INFRA CON PVT. LTD. AMIT ASHIMA, NR. GOAL MAIDAN OPP. DHARAMDAS SOCIETY, BHAJI MARKET ULHAS NAGAR, KALYAN 421 002 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AAECP1110D / ASSESSEE B Y : MR. ANUJ KISNADWALA / REVENUE BY : MR. SUMIT KUMAR / DATE OF HEARING 18 .06.2014 / DATE OF ORDE R 26.06.2014 / ORDER , / PER AMIT SHUKLA , J.M. THE PRESENT APPEAL HA S BEEN PREFERRED BY THE REVENUE , CHALLENGING THE IMPUGNED ORDER DATED 24 TH APRIL 2012 , PASSED BY THE LEARNED COMMISSIONER (APPEALS ) XIV , MUMBAI , IN RELATION TO THE ORDER PASSED UNDER SECTION 201(1) / 201(1A) AND UNDER SECTION 154 R/W M/S. PARADISE INFRA CON PVT. LTD. 2 201( 1) / 201(1A) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 20 08 0 9 . 2 . THE MAIN ISSUE INVOLVED IN THIS APPEAL IS THAT, WHETHER THE LEARNED COMMISSIONER (APPEALS) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE AMOUNT PAID BY TH E ASSESSEE TO CIDCO (CITY AND INDUSTRIAL DEVELOPMENT CORPORATION), TOWARDS PREMIUM FOR ACQUIRING LEASE HOLD RIGHTS IS IN THE NATURE OF RENT OR NOT AS DEFINED IN SECTION 194 I OF THE ACT, AND ACCORDINGLY, THE ASSESSEE WAS NOT REQUIRED TO DEDUCT THE TAX AT S OURCE UNDER SECTION 194 I. 3 . BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED BY A SERIES OF DECISIONS GIVEN BY THE TRIBUNAL, MUMBAI BENCH, IN VARIOUS CASES, WHEREIN IT HAS BEEN CONSISTENTLY BEEN HELD THAT THE AMOUNT OF PREMIUM IN SUCH CASES TO THE GOVERNMENT AUTHORITIES REPRESENTS TRANSFER PRICE OF THE LAND ON LEAS E HOLD BASIS AND NO PART THEREOF FALLS WITHIN THE MEANING OF RENT AS CONTEMPLATED UNDER SECTION 194 I AND, THEREFORE, NO TDS IS REQUIRED TO BE DEDUCTED. 4 . THE L EARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, AGREED THAT THIS ISSUE HAS COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN VARIOUS CASES AND THE SAME HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. HOWEVER, ON MERITS, HE STRONGLY RELIED UPON THE REASON ING GIVE IN THE ORDER OF THE ASSESSING OFFICER. 5 . AFTER CAREFULLY CONSIDERING THE RELEVANT FINDINGS OF THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS) AS WELL AS VARIOUS DECISIONS RELIED UPON BY THE ASSESSEE I N ITO (TDS) V/S WADHWA & ASSOCIATES REALTORS PVT. LTD., [2004] 146 ITR 694 , AND TRO V/S SHELTON INFRASTRUCTURES PVT. LTD., ITA NO.5678/MUM./2012, ORDER DATED 19 TH MAY 2014, WE FIND THAT THE ISSUE INVOLVED HEREIN BEFORE US M/S. PARADISE INFRA CON PVT. LTD. 3 IS SQUARELY COVERED BY THE DECISION S OF THE TRIBUNAL. IN THIS CASE, T HE ASSESSEE HAS MADE PAYMENT AMOUNTING TO ` 6,60,71,665, IN THE FINANCIAL YEAR 2007 08 TOWARDS LEASE PREMIUM IN RESPECT OF THE PLOT OF LAND AT NEW PANVEL, NAVI MUMBAI, TO CIDCO. SINCE THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE ON THE AMOUNT OF PAYMENT PAI D TO THE CIDCO, THE ASSESSING OFFICER HELD THAT THE ASSESSEE IS AT DEFAULT UNDER SECTION 201(1) AND IS ALSO LIABLE TO PAY INTEREST UNDER SECTION 201(1A). THE ASSESSING OFFICER HELD THAT THE PAYMENT MADE TOWARDS LEASE PREMIUM WAS WITHIN T H E DEFINITION OF RE NT AS STIPULATED UNDER SECTION 194 I OF THE ACT. 6 . THE LEARNED COMMISSIONER (APPEALS), AFTER CONSIDERING THE DETAIL SUBMISSIONS OF THE ASSESSEE AND ANALYZING VARIOUS DECISIONS AND ALSO THE LEASE DEED BETWEEN THE ASSESSEE AND CIDCO, CAME TO THE CONCLUSION TH AT SUCH A PAYMENT CANNOT BE TREATED AS IN THE NATURE OF RENT WITHIN THE MEANING OF SECTION 194 I. THE TRIBUNAL IN SHELTON INFRASTRUCTURES PVT. LTD. (SUPRA), AFTER NOTING SERIES OF DECISIONS OF THE TRIBUNAL, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND A GAINST THE REVENUE AFTER OBSERVING AND HOLDING AS UNDER: 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE PERUSED THE VARIOUS DECISIONS OF THE TRIBUNAL RELIED UPON BY THE ASSESSEE. WE FIND THAT THE TRIBUNAL, MUMBAI BENCH, OF THE TRIBUNAL HAS TAKEN A CONS ISTENT VIEW THAT SUCH A PAYMENT OF LEASE PREMIUM DO NOT FALL WITHIN THE REALM OF RENT AS CONTEMPLATED IN SECTION 194 I. THEREFORE, THE ASSESSEE IS NOT LIABLE FOR DEDUCTING THE TDS ON SUCH A PAYMENT. THE MAIN REASON IS THAT THE LEASE PREMIUM IS CAPITAL EX PENDITURE TO ACQUIRE LAND WITH SUBSTANTIAL RIGHT TO CONSTRUCT AND COVER THE BUILDING COMPLEX. FOR THE SAKE OF READY REFERENCE, WE ARE QUOTING THE RELEVANT OBSERVATIONS AND FINDINGS OF THE TRIBUNAL IN ITO V/S TRENT LTD., ITA NO.4629/MUM./2012, ORDER DATED 2 1 ST AUGUST 2013, WHEREIN THE TRIBUNAL OBSERVED AND HELD AS UNDER: M/S. PARADISE INFRA CON PVT. LTD. 4 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT A SIMILAR ISSUE INVOLVED IN THE CASE OF SHREE NAMAN HOTELS PVT. & SHREE NAMAN DEVELOPERS LTD. HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE VIDE AN ORDER DATED 14 - 08 - 2013 PASSED IN ITA NO. 688 TO 691/MUM/2012 BY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH RENDERED IN THE CASE OF M/S WADHWA & ASSO CIATES 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 FOR THE FOLLOWING REASONS GIVEN IN P ARA 9 TO 10 OF ITS ORDER DATED 3 - 7 - 2013 (SUPRA): - 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE ORDER OF THE LOWER AUTHORITIES AND THE MATERIAL EVIDENCE BROUGHT ON RECORD IN THE FORM OF PAPER BOOK AND THE JUDICIAL DECISIONS RELIED UPON BY TH E 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 THE LEASE DEED DT. 22ND 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 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 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 - I OF THE ACT. 10. WE HAVE CAREFULLY PERUSED THE LEASE DEED AS EXHIBITED 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 PE RIODICALLY. A PERUSAL OF THE RECORDS FURTHER SHOW THAT THE PAYMENT TO MMRD IS ALSO FOR ADDITIONAL 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 IN EXERCISE OF POWER U/S. 43 R.W. S EC. 37(1) OF THE MAHARASHTRA TOWN PLANNING ACT 1966, MRTP ACT AND OTHER POWERS ENABLING THE SAME HAS APPROVED THE PROPOSAL TO M/S. PARADISE INFRA CON PVT. LTD. 5 MODIFY REGULATION 4A(II) AND THEREBY INCREASED THE FSI OF THE ENTIRE G BLOCK OF BKC. THE DEVELOPMENT CONTROL REGULATIONS FOR BKC SPECIFY THE PERMISSIBLE FSI. PURSUANT 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 PAYMENT TO MMRD UNDER DEVELOPMENT CONTROL FOR ACQUIRING LEASEHOLD LAND AND 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 DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF KHIMLINE PUMPS LTD. (SUPRA) SQUARELY AND DIRECTLY APPLY ON THE FACTS OF THE CASE WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT PAYMENT FOR ACQUIRING LEASEHOLD LAND I S A CAPITAL EXPENDITURE. CONSIDERING THE ENTIRE FACTS IN TOTALITY IN THE LIGHT OF THE JUDICIAL DECISIONS VIS - - VIS PROVISIONS OF SEC. 194 I , DEFINITION OF RENT AS PROVIDED 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. 8. 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 SHREE NAMAN HOTELS PVT. LT D. & SHREE NAMAN DEVELOPERS LTD. (SUPRA) DECIDED 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. CIT(A) HOLDING THAT THE LEASE PREMIUM PAID BY THE ASSESSEE TO MMRDA 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(1A) O F THE ACT. THE APPEAL FILED BY THE RE VENUE IS ACCORDINGLY DISMISSED. 8. THUS, IN VIEW OF THE CATENA OF DECISION, WE HOLD THAT THE IMPUGNED PAYMENT ON ACCOUNT OF PREMIUM REPRESENTS TRANSFER PRICE OF THE LAND ON LEASE HOLD BASIS AND NO PART THEREOF QUALIFI ES TO FALL WITHIN THE MEANING OF RENT AS CONTEMPLATED IN SECTION 194 I AND, THEREFORE, NO DEDUCTION OF TAX AT SOURCE IS REQUIRED. WE, ACCORDINGLY, CONFIRM THE FINDINGS AND CONCLUSION OF THE LEARNED COMMISSIONER (APPEALS) AND DISMISS THE GROUNDS RAISED BY THE REVENUE. M/S. PARADISE INFRA CON PVT. LTD. 6 7 . THUS, CONSISTENT WITH THE VIEW TAKEN BY THE TRIBUNAL, WE ALSO HOLD THAT THE PAYMENT MADE BY THE ASSESSEE TO THE CIDCO REPRESENT TRANSFER PRICE OF THE LAND ON LEASE HOLD BASIS AND IT CANNOT BE CONTEMPLATED AS RENT WITHIN THE MEANING OF SECTI ON 194 I. ACCORDINGLY, THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) IS AFFIRMED ON THIS SCORE. THUS, THE GROUND RAISED BY THE REVENUE STANDS DISMISSED. 8 . 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED. 25 TH JUNE 2014 ORDER PRONOUNCED IN THE OPEN COURT O N 25 TH JUNE 2014 SD/ - . D. KARUNAKARA RAO ACCOUN TANT MEMBER SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 25 TH JUNE 2014 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI