DCIT TDS 1(1), MUMBAI V. AVENUE SUPERMARTS (P) LTD, MUMBAI

ITA 514/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92250 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-04-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 18-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S PADMAJA
• Keywords: Capital asset; Capital expenditure
• Section: 201(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , . , BEFORE SHRI I.P. BANSAL, JM AND RAJENDRA, AM ./ I.T.A. NO.514/MUM/2013 ( / ASSESSMENT YEAR : 2008-09 ./ I.T.A. NO.515/MUM/2013 ( / ASSESSMENT YEAR : 2009-10 ./ I.T.A. NO.516/MUM/2013 ( / ASSESSMENT YEAR : 2010-11 DCIT TDS - 1 (1), ROOM NO.804, KG MITTAL HOSPITAL BLDG., CHARNI ROAD, MUMBAI -2 / VS. M/S.AVENUE SUPERMARTS (P) LTD., ANJANEYA CO-OP. HOUSING SOCIETY LTD., OPP. HIRANANDANI FOUNDATION SCHOOL, POWAI, MUMBAI 400 076. ./ ./ PAN/GIR NO. : AACCA8432H ( / APPELLANT ) .. ( / RESPONDENT ) APPELLANT BY MS. S. PADMAJA REVENUE BY SHRI SUBHASH S. SHETTY ' #$ / DATE OF HEARING : 09/04/2015 ' #$ / DATE OF PRONOUNCEM ENT : 09/04/2015 / O R D E R PER I.P.BANSAL, J.M: ALL THESE APPEALS ARE FILED BY THE REVENUE AND T HEY ARE DIRECTED AGAINST A CONSOLIDATED ORDER PASSED BY LD. CIT(A) D ATED 31/10/2012 FOR ASSESSMENT YEAR 2008-09, 2009-10 AND 2010-11. 2. GROUNDS OF APPEAL FILED IN ALL THESE APPEALS ARE LENGTHY AND NARRATIVE. THEREFORE, FOR THE SAKE OF BREVITY THEY ARE NOT REP RODUCED. HOWEVER, THE ONLY ./ I.T.A. NO.514TO 516/MUM/2013 2 ISSUE IS THAT WHETHER OR NOT ASSESSEE IS LIABLE TO DEDUCT TAX ON THE PAYMENTS MADE BY IT TO CITY AND INDUSTRIAL DEVELOPMENT CORPO RATION LTD. (CIDCO). 3. THE ASSESSEE IS ENGAGED IN RUNNING A SUPER MARK ET. DURING THE SURVEY CARRIED IN THE CASE OF CIDCO ON 4/2/2011 IT WAS FOUND THAT CIDCO HAS RECEIVED PAYMENT OF RS.5,10,64,200/-, RS.10,47, 65,400/- AND RS.32,49,01,399/- FOR ASSESSMENT YEAR 2008-09, 2009 -10 AND 2010-11 RESPECTIVELY. ACCORDING TO REVENUE SUCH PAYMENTS M ADE BY THE ASSESSEE AS LEASE PREMIUM TO CIDCO WERE LIABLE FOR TAX DEDUCTI ON UNDER SECTION 194I OF THE INCOME TAX ACT, 1961 (THE ACT). ACCORDINGLY, O RDERS UNDER SECTION 201(1) AND 201(1A) WERE PASSED AND DEMANDS OF RS.1, 71,25,297/-, RS.3,10,99,190/- AND RS.6,67,67,237/- WERE RAISED I N RESPECT OF ASSESSMENT HEARS 2008-09, 2009-10 AND 2010-11 RESPE CTIVELY. LD. CIT(A) HAS DELETED THE LEVY OF TAX BY HOLDING THAT SECTION 194I WAS NOT APPLICABLE AND ASSESSEE WAS NOT LIABLE FOR DEDUCTION OF TAX. ACCORDINGLY, LD. CIT(A) ALLOWED THE APPEALS FILED BY THE ASSESSEE. THE DEP ARTMENT IS AGGRIEVED, HENCE, HAS FILED THESE APPEALS. 4. EARLIER APPEALS WERE FIXED FOR HEARING ON 7/4/20 15 WHEN IT WAS CLAIMED BY LD. AR THAT THIS ISSUE IS COVERED IN FA VOUR OF THE ASSESSEE BY SEVERAL ORDERS OF THE TRIBUNAL, WHEREIN SIMILAR PAY MENTS MADE BY OTHER ASSESSEES TO CIDCO HAVE BEEN HELD TO BE NOT LIABLE FOR DEDUCTION OF TAX UNDER SECTION 194I OF THE ACT. LD. AR OF THE ASSES SEE HAD SUBMITTED COPY OF THOSE ORDERS. LD. DR SOUGHT TIME TO GO THROUGH THE SAME. ACCORDINGLY, THESE APPEALS WERE ADJOURNED TO 9/4/2015. ON 9/4/2 015 LD. DR RELIED UPON THE ORDER PASSED BY AO AND SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION REFERRED TO BY LD. AR. THOSE DECISIONS ARE AS FOLLOWS: 1. ITO VS. SHREE RAJAL ENTERPRISES, ITA NO.2577/MUM /2013 A.Y. 2009-10, ORDER DATED 9/7/2014 2.ITO (TDS) (OSD),VS. NAVI MUMBAI SEZ (P) LTD., 38 TAXMANN.COM 218 (MUM). ./ I.T.A. NO.514TO 516/MUM/2013 3 5. IN THIS VIEW OF THE SITUATION, RESPECTFULLY FOLL OWING THE AFOREMENTIONED ORDERS OF TRIBUNAL WE FIND NO INFIRMITY IN THE ORDE R PASSED BY LD. CIT(A) VIDE WHICH THE IMPUGNED RELIEF HAS BEEN GIVEN TO THE ASS ESSEE. FOR THE SAKE OF COMPLETENESS THE RELEVANT OBSERVATION OF THE TRIBUN AL IN THE CASE OF ITO VS. RAJAL ENTERPRISES (SUPRA) ARE REPRODUCED BELOW. IN THIS CASE TRIBUNAL HAS FOLLOWED THE AFOREMENTIONED DECISION OF CO-ORDINAT E BENCH IN THE CASE OF ITO VS. NAVI MUMBAI SEZ. PVT. LTD. 5. WE HAVE GONE THROUGH THE DECISION RENDERED BY TH E CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF NAVI MUMBAI SEZ (P.)LTD (SU PRA) AND FOR THE SAKE OF CONVENIENCE, WE EXTRACT THE OPERATIVE PORTION OF TH E DECISION GIVEN BY THE COORDINATE BENCH OF THE TRIBUNAL AS UNDER (PARAS 19 AND 21.2) : 19. IN THE CASE BEFORE US, THE ASSESSEE HAS ENTERE D IN TO LEASE AGREEMENTS WITH CIDCO FOR ACQUISITION OF LEASEHOLD RIGHTS IN T HE LAND TO DEVELOP AND OPERATE THE SPECIAL ECONOMIC ZONE AT NAVI MUMBAI. A SSESSEE HAS PAID PREMIUM FOR DEMISED LEASE LAND. THE QUESTION BEFORE US IS AS TO WHETHER THE SAID LEASE PREMIUM PAID BY THE ASSESSEE TO CIDCO TO ACQUIRE LEASEHOLD RIGHTS FOR 60 YEARS UNDER THE LEASE DEED(S) IS LIABLE FOR DEDUCTION OF TAX AT SOURCE BEING RENT WITHIN THE MEANING OF SECTION 194-I OF T HE ACT OR NOT. AO HAS STATED THAT THE SAID PAYMENT MADE BY ASSESSEE UNDER LEASE AGREEMENTS QUALIFIES FOR RENT FOR THE PURPOSE OF SECTION 194-I OF THE ACT AS IT PARTAKES ALL THE CHARACTERISTICS OF RENT AND WHEREAS THE ASSESSEE HA S CONTENDED THAT THE ASSESSEE HAS OBTAINED LEASEHOLD RIGHTS IN THE SAID LEASEHOLD LANDS ON PAYMENT OF LEASE PREMIUM AND THE SAID LEASE PREMIUM IS NOT PAID UNDER A LEASE. HENCE, IT IS A CAPITAL EXPENDITURE AND NOT AN ADVANCE RENT . WE OBSERVE THAT THE MAIN THRUST OF THE AO TO HOLD THE PREMIUM PAID BY ASSESS EE TO HOLD IT AS RENT IS ON THE DEFINITION OF RENT UNDER SECTION 194-I OF THE A CT THAT IT CREATES A LEGAL FICTION AND THE LEASE DEED(S) ENTERED INTO CONTAIN VARIOUS RESTRICTIVE COVENANTS. THAT THE SAID PAYMENTS IN SUBSTANCE ARE FOR CONSIDERATION FOR USE OF LAND UNDER THE LEASE DEED(S), HENCE PROVISIONS O F SECTION 194-I OF THE ACT IS ATTRACTED. 21.2 WE OBSERVE THAT IN THE CASE BEFORE US, THERE IS A TRANSFER OF SUBSTANTIVE INTEREST OF LESSOR FOR THE LEASEHOLD LA ND IN FAVOUR OF THE ASSESSEE. THAT THERE IS A CONFERMENT OF RIGHT ON THE LESSEE B Y ACQUIRING LEASEHOLD LAND AND THE PREMIUM HAS BEEN PAID IN LIEU THEREOF AND N OT FOR THE PURPOSE OF USE OF LAND. THE CASE CITED BY THE LD. CIT(A) OF RAJA B AHADUR KAMAKHYA NARAIN SINGH OF RAMGARH (SUPRA) AND THE CASE OF THE HONBL E APEX COURT IN THE CASE OF PANBARI TEA CO. LTD. OF INDIA (SUPRA) SQUARELY APPLY TO THE FACTS OF THE CASE BEFORE US THAT THE LEASE PREMIUM PAID BY THE A SSESSEE TO CIDCO FOR ACQUIRING LEASEHOLD LAND IS CAPITAL EXPENDITURE TO ACQUIRE CAPITAL ASSET AND NOT FOR THE USE OF LAND. THEREFORE, WE AGREE WITH L D. AR THAT THE LEASE PREMIUM PAID BY THE ASSESSEE FOR ACQUIRING LEASEHOLD LAND W ITH A RIGHT TO DEVELOP AND MARKET, NMSEZ, CANNOT BE SAID TO BE AN ADVANCE PAYM ENT OF RENT. ACCORDINGLY, PREMIUM PAID BY THE ASSESSEE FOR ACQUI RING LEASEHOLD LAND UNDER THE LEASE DEED(S) ENTERED INTO, ALTHOUGH WITH RESTR ICTIVE COVENANTS IS A CAPITAL ./ I.T.A. NO.514TO 516/MUM/2013 4 EXPENDITURE, AND IT DOES NOT FALL WITHIN THE AMBIT OF RENT UNDER SECTION 194-I OF THE ACT. 5. WE ALSO NOTICE THAT ANOTHER CO-ORDINATE BENCH O F THE MUMBAI TRIBUNAL HAS TAKEN IDENTICAL VIEW IN THE CASE OF ITO (TDS) V/S WADHWA & ASSOCIATES REALTORS (P) LTD (2013) 36 TAXMANN.COM 526 (MUMBAI-TRIB) AND THE SAI D DECISION ALSO REFERRED BY THE TRIBUNAL IN THE CASE OF ITO V/S NAVI MUMBAI SEZ (P. )LTD (SUPRA). HENCE CONSISTENCE WITH THE VIEW TAKEN BY THE CO-ORDINATE BENCHES OF T HE TRIBUNAL WE HOLD THAT THE PROVISIONS OF SECTION 194-I OF THE ACT ARE NOT ATTR ACTED TO THE LEASE PREMIUM AMOUNT PAID BY THE ASSESSEE TO CIDCO FOR ACQUIRING THE LEA SEHOLD RIGHTS. ACCORDINGLY, WE CONFIRM THE ORDER OF LD. CIT(A) ON THIS ISSUE. 5. IN VIEW OF ABOVE DISCUSSION APPEALS FILED BY THE REVENUE ARE DISMISSED. 6. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09/04/2015 ' + ,- 09/04/2015 ' SD/- SD/- (RAJENDRA) . . (I.P.BANSAL) /ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; , DATED 09/04/2015 !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 0# ( ) / THE CIT(A)- 4. 0# / CIT 5. 12 #34 , $ 34 , / DR, ITAT, MUMBAI 6. 5 / GUARD FILE. / BY ORDER, 1# # //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . . .VM , SR. PS