ITO (TDS) 2(5), MUMBAI V. PYRAMID PROPERTIES, NAVI MUMBAI

ITA 5163/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3683 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 12-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY BAREDR
• Keywords: Maximum Marginal Rate; Capital expenditure
• Section: 37(1); 201(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.5163/MUM/2014 ASSESSMENT YEAR-2011-12 ITO(TDS) - 2(5), R. NO.706, 7 TH FLOOR, SMT. K.G. MITTAL AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD (W), MUMBAI-400002 / VS. M/S PYRAMID PROPERTIES, PLOT NO.PAP-R-24, TTC INDUSTRIAL AREA, MIDCRABALE, NAVI MUMBAI-400701 PAN NO. AALFP4402A ( / REVENUE) ( / ASSESSEE) / REVENUE BY SHRI SANJAY BARE-DR / ASSESSEE BY NONE / DATE OF HEARING : 19/05/2016 / DATE OF ORDER: 19/05/2016 ITA NO.5163/MUM/2014 M/S PYRAMID PROPERTIES 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 17/06/2014 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI. THE ONLY GROUND RAISED IN THE PRESENT APPEA L PERTAINS TO HOLDING THAT THE AMOUNT PAID BY THE LES SEE (M/S PYRAMID PROPERTIES) TO THE LESSOR (CIDCO) WAS NOT I N THE NATURE OF RENT AS DEFINED IN EXPLANATION (I) TO SEC TION 194 I OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) F OR THE PURPOSES OF DEDUCTION AT SOURCE AND CONSEQUENTLY FU RTHER ERRED IN NOT CONFIRMING THE ASSESSMENT ORDER TREATI NG THE ASSESSEE IN DEFAULT U/S 201(1) IN RESPECT OF THE AM OUNT OF TAX WHICH HAS NOT BEEN DEDUCTED U/S 194 I FROM THE PAYMENT MADE TO CIDCO AND LEVYING THE INTEREST U/S 201(1A) OF THE ACT. 2. DURING HEARING, NOBODY WAS PRESENT FOR THE ASSESSEE. HOWEVER, ONE PERSON, WHO WAS NOT AUTHORIZ ED TO REPRESENT THE ASSESSEE, MOVED AN APPLICATION SEEKIN G ADJOURNMENT. CONSIDERING THE CONTENTS OF THE APPLIC ATION AND THE FACTS, THE ADJOURNMENT APPLICATION IS REJEC TED. WE ITA NO.5163/MUM/2014 M/S PYRAMID PROPERTIES 3 NOTE THAT THIS APPEAL WAS FILED BY THE REVENUE ON 12/08/2014. THE REGISTERED NOTICE OF HEARING, SENT TO THE ASSESSEE WAS DULY RECEIVED ON 13/01/2016 AS IS EVID ENT FROM POSTAL ACKNOWLEDGMENT AVAILABLE ON RECORD. THE ASSESSEE DID NOT MAKE EFFECTIVE ARRANGEMENT TO PURS UE THE APPEAL, THEREFORE, WE HAVE NO OPTION BUT TO PROCEED EX- PARTE, QUA THE ASSESSEE, AND TEND TO DISPOSE OF THE APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. THE L D. DR, SHRI SANJAY BARE, DEFENDED THE CONCLUSION ARRIVED A T IN THE IMPUGNED ORDER AND ADVANCED ARGUMENTS WHICH IS IDEN TICAL TO THE GROUND RAISED BY DEFENDING THE ASSESSMENT OR DER. 2.1. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE F ACTS, IN BRIEF ARE THAT THE ASSESSEE IS A BUILDER/DEVELOPER, ENGAGED IN THE BUSINESS OF CONSTRUCTION OF RESIDENTIAL/COMM ERCIAL PROPERTIES. IT WAS GATHERED BY THE LD. ASSESSING O FFICER THAT M/S PYRAMID PROPERTIES HAS PAID RS.11,77,86,250/- A S LEASE PREMIUM, PURSUANT TO LEASE AGREEMENT OF PLOT NO.68 IN SECTOR 19 AT AIROLI MEASURING 1884.58 SQ. MTS., TO CIDCO DURING THE FINANCIAL YEAR 2010-11. THE LD. ITA NO.5163/MUM/2014 M/S PYRAMID PROPERTIES 4 ASSESSING OFFICER WAS OF THE VIEW THAT PAYMENT OF L EASE PREMIUM IS A RENT WITHIN THE MEANING OF SECTION 194 I OF THE ACT AND CIDCO NEITHER GOVERNMENT NOR A CORPORAT ION ACCORDINGLY, IT DOES NOT QUALIFY FOR EXCLUSION FROM TDS AS PROVIDED U/S 196 OF THE ACT, THEREFORE, THE ASSESSE E COMMITTED DEFAULT U/S 201(1) OF THE ACT AND LIABLE FOR INTEREST U/S 201(1A) OF THE ACT. 2.2. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEAL), IT WAS EXPLAINED THAT LEASE PR EMIUM CANNOT BE QUOTED TO RENT AS DEFINED U/S 194 I OF TH E ACT AS IT CATEGORICALLY DISTINGUISHES RENT FROM LEASE PREM IUM. RELIANCE WAS PLACED UPON THE DECISION IN CIT VS PAN BARI TEA COMPANY 57 ITR 422 (SC), CIT VS KHIMLINE PUMPS LTD. 258 ITR 459 (BOM.) AND JCIT VS MUKUND LIMITED (106 ITD 231) (TRIBUNAL). THE LD. COMMISSIONER OF INCOME TAX (APPEAL) CONSIDERING THE DECISION OF THE TRIBUNAL I N CASE OF M/S SHAH GROUP BUILDERS LTD. (ITA NO.4523/MUM/2012) DATED 14/08/2013, DELETED THE ADDITION. 2.3. THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEF ORE THIS TRIBUNAL. WE FIND THAT THE TRIBUNAL IN THE CAS E OF M/S ITA NO.5163/MUM/2014 M/S PYRAMID PROPERTIES 5 SHAH GROUP BUILDER LTD. VIDE AFORESAID ORDER DATED 14/08/2013 FOR ASSESSMENT YEAR 2008-09 HELD AS UNDE R:- 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON REC ORD. IT IS OBSERVED THAT A SIMILAR ISSUE INVOLVED IN THE CASE OF SHREE NAMAN HOTELS PVT. LTD. HAS BEEN DECIDED BY US IN FA VOUR OF THE ASSESSEE VIDE AN ORDER OF EVEN DATE PASSED IN I TA NO. 688 TO 691/MUM/2012 BY FOLLOWING THE ORDER OF THE C O- ORDINATE BENCH OF THIS 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 & ASSOCIATES 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 RECORD IN THE FORM OF PAPER BOOK AND THE JUDICIAL D ECISIONS RELIED UPON BY THE RIVAL PARTIES. THE ENTIRE GRIEVANCE REV OLVES 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 REVEN UE THAT THIS LEASE PREMIUM WAS LIABLE FOR DEDUCTION OF TAX AT SO URCE 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 T HE NATURE OF CAPITAL EXPENDITURE AND THEREFORE THERE IS NO QUEST ION OF DEDUCTION OF TAX AT SOURCE. FURTHER, THE SAID LEASE PREMIUM DOES NOT COME WITHIN THE PURVIEW OF THE DEFINITION OF RE NT AS PROVIDED U/S. 194-1 OF THE ACT. JURISDICTIONAL HIGH COURT I N THE CASE OF KHIMLINE PUMPS LTD. (SUPRA) SQUARELY AND DIRECTLY A PPLY ON THE FACTS OF THE CASE WHEREIN THE HONBLE JURISDICTIONA L HIGH COURT HAS HELD THAT PAYMENT FOR ACQUIRING LEASEHOLD LAND IS A CAPITAL EXPENDITURE. CONSIDERING THE ENTIRE FACTS IN TOTALI TY IN THE LIGHT OF THE JUDICIAL DECISIONS VIS--VIS PROVISIONS OF SEC. 194-1, 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. ITA NO.5163/MUM/2014 M/S PYRAMID PROPERTIES 6 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 P RECEDES THE 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 AL SO 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. SEC. 37(1) OF THE MAHARASHTRA TOWN PLANNING ACT 1966, MRTP ACT AND OTHER POWERS E NABLING THE SAME HAS APPROVED THE PROPOSAL TO MODIFY REGULA TION 4A(II) AND THEREBY INCREASED THE FSI OF THE ENTIRE G BLO CK OF BKC. THE DEVELOPMENT CONTROL REGULATIONS FOR BKC SPECIFY THE PERMISSIBLE FSI. PURSUANT TO SUCH PROVISIONS, THE ASSESSEE BECA ME ENTITLED FOR ADDITIONAL FSI AND HAS FURTHER ACQUIRED/PURCHASED T HE ADDITIONAL BUILT UP AREA FOR CONSTRUCTION OF ADDITIONAL AREA O N THE AFORESAID PLOT. THUS THE ASSESSEE HAS MADE PAYMENT TO MMRD UN DER DEVELOPMENT CONTROL FOR ACQUIRING LEASEHOLD LAND AN D ADDITIONAL BUILT UP AREA. THE DECISIONS OF THE TRIBUNAL IN THE CASE OF M/S. NATIONAL STOCK EXCHANGE (SUPRA) AND MUKUND LTD (SUP RA) 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 P UMPS LTD. (SUPRA) SQUARELY AND DIRECTLY APPLY ON THE FAC TS OF THE CASE WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HAS H ELD THAT PAYMENT FOR ACQUIRING LEASEHOLD LAND IS A CAPITAL EXPENDITU RE. 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 PRO VIDED UNDER THE SAID PROVISION, WE DO NOT FIND ANY REASON TO TAMPER OR I NTERFERE 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 & ASSOCIATES REALTORS PVT. LTD. (SUPRA) AS W ELL AS SHREE NAMAN HOTELS PVT. LTD. (SUPRA) DECIDED BY THE TRIBUNAL, WE RESPECTFULLY FOLLOW THE DECISIONS REND ERED IN THE SAID CASES BY THE CO-ORDINATE BENCH OF THIS TRI BUNAL AND UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) HOLDING THAT THE LEASE PREMIUM PAID BY THE 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 T AX AT SOURCE FROM THE SAID PAYMENT AND HENCE COULD NOT BE TREATED AS THE ASSESSEE IN DEFAULT U/S 201(1) & 201 (1A) OF ITA NO.5163/MUM/2014 M/S PYRAMID PROPERTIES 7 THE ACT. THE APPEAL FILED BY THE REVENUE IS ACCORDI NGLY DISMISSED. WE FIND THAT IN THE AFORESAID ORDER, THE TRIBUNAL HAS DULY DISCUSSED THE DECISION OF WADHWA & ASSOCIATED REALTORS PVT. LTD. AS WELL AS THE CASE OF SHRI NAMA N HOTELS PVT. LTD. AND HELD THAT LEASE PREMIUM PAID BY THE A SSESSEE TO CIDCO IS NOT IN THE NATURE OF RENT AS CONTEMPLAT ED IN SECTION 194 I OF THE ACT, THUS, THE ASSESSEE WAS NO T LIABLE TO DEDUCT TAX AT SOURCE, THUS, THE ASSESSEE CANNOT BE TREATED IN DEFAULT U/S 201(1)/201(1A) OF THE ACT, CONSEQUEN TLY, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. COMMISSIO NER OF INCOME TAX (APPEAL) AND AFFIRMED THE SAME. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 19/05/2016. SD/- SD/- (RAJENDRA) (JOGINDER SINGH) ' # / ACCOUNTANT MEMBER $ # / JUDICIAL MEMBER MUMBAI; # DATED : 19/05/2016 F{X~{T? P.S/. .. ITA NO.5163/MUM/2014 M/S PYRAMID PROPERTIES 8 !%$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. %& '( / THE APPELLANT (RESPECTIVE ASSESSEE) 2. )*'( / THE RESPONDENT. 3. ++ , ( %& ) / THE CIT, MUMBAI. 4. ++ , / CIT(A)- , MUMBAI, 5. /01)2 , +%& %23 , / DR, ITAT, MUMBAI 6. 145 / GUARD FILE. ! / BY ORDER, */&) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI