Jaiprakash Associates Ltd., Noida V. ACIT (TDS), Noida

ITA 5167/DEL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4988 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 19-06-2017
• Assessment Year: 2014-2015
• Appeal Filed On: 30-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NAVEEN CHANDRA
• Assessee Lawyers: A K GARG
• Section: 201(1)

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D : NEW DELHI BEFORE SHRI H.S.SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 5167/DEL/2016 (ASSESSMENT YEAR: 2014 - 15 ) JAIPRAKASH ASSOCIATES LTD, (ERSTWHILE JAPEE SPORTS INTERNATIONAL LTD), SECT - 128, NOIDA PAN:AABCB1562A VS. ACIT (TDS), NOIDA (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AK GARG, ADV REVENUE BY: SHRI NAVEEN CHANDRA, CIT DR DATE OF HEARING 19/06 / 2017 DATE OF PRONOUNCEMENT 28 / 08 / 2017 O R D E R PER PRASHANT MAHARISHI , A. M. 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT(A), NOIDA DATED 20.06.2016 PASSED U/S 250(6) OF THE INCOME TAX ACT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THAT THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER HOLDING THE APPELLANT TO BE ASSESSEE - IN - DEFAULT UNDER S. 201(1) READ WITH S. 1941 OF THE ACT FOR NON DEDUCTION OF TAX FROM THE ANNUAL LEASE - RENT PAID TO YAMUNA EXPRESSWAY INDUSTRIAL DEVELOPMEN T AUTHORITY ('YEIDA') IN RESPECT OF THE 90 - YEAR LEASES OF LAND, AND DIRECTING THE APPELLANT TO PAY THE ALLEGED TAX - IN - DEFAULT OF RS 2,56,52,430/ - UNDER S. 201(1) ALONG WITH INTEREST OF RS. 30,78,292/ - UNDER S. 201(1A). 2. THAT IN HOLDING AS AFORESAID THE LEARNED CIT (A) HAS IGNORED THAT - I. THE SUBJECT LEASES ARE A FORM OF SALE ON LEASEHOLD BASIS WHICH TRANSFER RIGHTS AKIN TO OWNERSHIP. THEY TRANSFER SUBSTANTIALLY ALL THE RISKS AND REWARDS INCIDENTAL TO OWNERSHIP TO THE LESS EE WHO VIRTUALLY BECOMES THE OWNER. II. THE RIGHTS TRANSFERRED INCLUDE THE RIGHT OF DEVELOPMENT, CONSTRUCTION, MORTGAGE AND FURTHER SALE (BY SUB - LEASE) FOR PROFIT. SUCH LEASES CANNOT BE SEEN AS GIVING LAND FOR 'USE' WITHIN THE PURVIEW OF S. 1941 OF THE ACT. III. I F THE WORD 'USE' WERE TO BE GIVEN AN EXTENDED MEANING TO COVER WITHIN ITS AMBIT THE DEVELOPMENT AND CONSTRUCTION UPON LAND AND SELLING THE SAME FOR PROFIT, THERE WOULD BE NO DIFFERENCE BETWEEN A TRANSACTION OF SALE AND A TRANSACTION OF RENT. THIS WOULD REN DER THE INTENTION OF THE LEGISLATURE IN IMPORTING THE WORD 'USE' IN SECTION 194 - 1 OTIOSE. PAGE 2 OF 5 IV. TRANSACTION OF RENT FOR THE USE OF LAND PREDICATES A LANDLORD - TENANT RELATIONSHIP WHICH IS ABSENT IN THIS CASE. LANDLORD - TENANT RELATIONSHIP DOES NOT CONTEMPLATE RIGH TS OF DEVELOPMENT, CONSTRUCTION, MORTGAGE AND FURTHER SALE TO BE GIVEN TO THE TENANT. V. THEREFORE THE LEASE RENT IN THE CASE OF 90 - YEAR LEASES OF LAND DOES NOT FALL WITHIN THE MEANING AND SCOPE OF WORDS 'RENT FOR THE USE OF LAND' OCCURRING IN S. 1941 OF THE ACT. 3. THAT THE LEARNED CIT (A) HAS ERRED IN NOT ADJUDICATING THE ALTERNATE GROUND (OF THE APPELLANT) THAT EVEN IF IT IS FOUND THAT THE LEASE RENT IN QUESTION WAS LIABLE TO TAX DEDUCTION UNDER S. 1941, THE APPELLANT CANNOT BE REQUIRED TO PAY THE TAX HE HAS N OT DEDUCTED AND THE PAYMENT OF WHICH REMAINS THE LIABILITY OF THE PAYEE WHOSE INCOME IS TO BE CHARGED. THIS IS THE LAW LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN JAGRAN PRAKASHAN LTD V. DCIT (TDS) [2012] 345 ITR 288. 4. THAT THE LEARNED CIT (A) LIAS FURTHE R ERRED IN NOT ADJUDICATING THE ALTERNATE GROUND (OF THE APPELLANT) THAT A DIRECTION TO PAY THE INTEREST UNDER S. 201(1A) CANNOT BE GIVEN WITHOUT ASCERTAINING AND RECORDING A FINDING WHETHER THE TAX HAS BEEN PAID BY THE PAYEE OF INCOME DIRECT, AND LIMITING THE COMPUTATION OF INTEREST UP TO THE DATE OF SUCH PAYMENT, IF ANY. NON DEDUCTION OF TAX FROM INTEREST COMPONENT OF THE INSTALLMENTS O F TEASE PREMIUM & EXTERNAL DEVELOPMENT CHARG I S PAID TO YEIDA 5. THAT THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER HOLDING THE APPELLANT AS ASSESSEE - IN - DEFAULT UNDER S. 201 READ WITH S. 194A OF THE ACT FOR NON DEDUCTION OF TAX FROM THE INTEREST COMPONENT OF THE INSTALLMENTS OF LEASE PR EMIUM AND EXTERNAL DEVELOPMENT CHARGES PAID TO YEIDA, AND DIRECTING THE APPELLANT TO PAY THE ALLEGED TAX - IN - DEFAULT OF RS. 12,86,97,532/ - UNDER S. 201(1) ALONG WITH INTEREST OF RS. 1,54,43,704/ - UNDER S. 201(1 A). 6. THAT IN DOING AS AFORESAID THE LEARNED CI T (A) HAS IGNORED THAT - I. DELAYED OR INSTALLMENT PAYMENT OF CONTRACTUAL DUES DOES NOT AMOUNT TO BORROWING OF MONEY OR INCURRING OF DEBT WITHIN THE MEANING OF S. 2(28A) OF THE ACT. II. IN INSTALLMENT PAYMENT OF CONTRACTUAL DUES, INTEREST IS AN ACCRETION TO THE DUES AND PARTAKES OF THE CHARACTER OF SUCH DUES. SUCH INTEREST CANNOT BE SEPARATED FROM THE PRINCIPAL DUES AND TREATED DIFFERENTLY. III. THUS THE INTEREST COMPONENT OF THE INSTALLMENT PAYMENTS OF LE ASE PREMIUM AND EXTERNAL DEVELOPMENT CHARGES PAYABLE TO YEIDA DOES NOT FALL WITHIN THE MEANING OF S. 194A READ WITH S. 2(28A) OF THE ACT. 7. THAT, IN ANY CASE, THE QUESTION WHETHER TAX IS DEDUCTIBLE FROM INTEREST PAID TO INDUSTRIAL DEVELOPMENT AUTHORITIES (SU CH AS NOIDA, GNIDA AND YEIDA) ESTABLISHED BY AND UNDER THE UTTAR PRADESH INDUSTRIAL AREA DEVELOPMENT ACT, 1976 HAS NOW BEEN DECIDED AGAINST THE REVENUE BY THE JURISDICTION HIGH COURT IN CIT (TDS), KANPUR V. CANARA BANK (INCOME - TAX APPEAL NO. 64 OF 2016 DEC IDED ON 4.4.2016). THESE AUTHORITIES HAVE BEEN HELD TO BE COVERED PAGE 3 OF 5 UNDER THE CENTRAL GOVT. NOTIFICATION DATED 22.10.1970 ISSUED UNDER S. 194A(III)(F) OF THE ACT AND, THEREFORE, INTEREST PAYMENTS TO THEM WOULD BE EXEMPT FROM DEDUCTION OF TAX. 3. BRIEF FACTS OF THE CASES THAT ASSESSEE IS A COMPANY WHO WAS ISSUED AT EDS VERIFICATION LETTER ON 25/04/2014 FOR THE PURPOSE OF COMPLIANCE OF THE APPLICABLE TEDIOUS PROVISIONS. DURING THE ENQUIRY, IT WAS FOUND THAT ASSESS EE HAS PAID LEASE RENT OF RS. 5652 4296/ AND NO T AX HAS BEEN DEDUCTED ON SUCH SUM WHICH WAS PAID TO YAMUNA EXPRESS INDUSTRIAL DEVELOPMENT AUTHORITY AS ACCORDING TO THE LD. ASSESSING OFFICER IT WAS PA YMENT OF RENT UNDER SECTION 194 I OF THE INCOME TAX ACT. THEREFORE, A SHOW CAUSE NOTICE S WAS ISSUED UNDER SECTION 201/201 (1A ) OF THE ACT. ASSESSEE REPLIED TO THE NOTICE SUBMITTING THAT PAYMENT MADE BY THE ASSESSEE IS NOT A LEASE RENT BUT IN FACT THE FORM OF THE TRANSACTION IS PLEASE BUT IN SUBSTANCE, THE LESSEE BECOMES THE OWNER. ASSESSEE FURTHER RELIED UPON ACCOUNTING STANDARD 19 AND INTERNATIONAL ACCOUNTING STANDARD IAS 17. TO SUPPORT HIS CONTENTION. IT WAS FURTHER CONTENDED THAT PROVISIONS OF SECTION 194 I COVERS ONLY OPERATING LEASES WHEREIN RENT IS CHARGED FOR THE USE OF LAND AND SUBSTANTIALLY ALL OF T HE RISK AND REWARDS INCIDENTAL TO OWNERSHIP ARE RETAINED BY THE LESSOR. IT WAS FURTHER CONTENDED THAT IT IS A LONG - TERM LEASE OF THE FINANCE OR CAPITAL LEASE AND IT IS NOT JUST THE RIGHT OF USE BUT ARE MUCH LARGER BUNDLE OF RIGHTS AKIN TO THE OWNERSHIP. TH EREFORE TAX IS NOT REQUIRED TO BE DEDUCTED ACCORDING TO THE ASSESSEE ON SUCH PAYMENT. THE LD. ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE AND HELD THAT ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE ON THE ABOVE PAYMENT AND DETERMINED THE SHORT DEDUCTION OF TAX OF RS. 2 565 2430/ UNDER SECTION 201 OF THE INCOME TAX ACT AND FURTHER DERIVED AMOUNT OF INTEREST UNDER SECTION 201 (1A) OF RS. 3 078 292/ - FOR INTEREST THEREON. 4. ON APPEAL BEFORE THE LD. CIT (A), HE REJECTED THE CONTENTION OF THE ASSESSEE HOLDING THAT THE CONCEPT OF OWNERSHIP OF LAND, SALE OF LAND. COMMONLY IS OF LAND AND LONG - TERM LEASE OF LAND OR SHORT - TERM LEASE OF LAND. HOWEVER, THESE TERMS ARE VERY FREQUENTLY USED BY THE ACT BUT HE HELD THAT DURATION OF THE LEASE IS NO REFERENCE FOR DE CIDING THE NATURE OF TRANSFER. THEREFORE, HE HELD THAT IMPUGNED ASSESSMENT ORDER ON THE ISSUE OF APPLICABILITY OF SECTION 194I OF THE INCOME TAX ACT DOES NOT SUFFER FROM ANY INFIRMITY. THEREFORE, ASSESSEE IS IN APPEAL BEFORE US ON THIS ISSUE BY GROUND NO. 1 TO 4 OF THE APPEAL. 5. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE LEASEHOLD GIVEN BY THE YAMUNA DEVELOPMENT AUTHORITY TO THE ASSESSEE WAS FOR 90 YEARS FOR DEVELOPMENT OF A SPECIAL DEVELOPMENT ZONE WITH SPORTS AS CORE ACTIVITY. FOR THIS ASSESSEE IS LIABLE TO PAGE 4 OF 5 PAY ONE - TIME LEASE PREMIUM, EXTERNAL DEVELOPMENT COST AND ANNUAL LEASE RENT AT THE RATE OF 2.5% OF THE LEASE PREMIUM. HE FURTHER STATED THAT 80% OF THE LEASE PREMIUM AND THE EXTERNAL DEVELOPMENT CHARGES HAVE BEEN ALLOWED TO BE PAID IN HALF YEARL Y INSTALLMENTS OVER A PERIOD OF 10 YEARS. THEREFORE HE SUBMITTED THAT PROVISIONS OF SECTION 194I DO NOT APPLY TO THE TRANSACTION. 6. LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LOWER AUTHORITIES STATING THAT ASSESSEE HAS PAID RENT AN D THE TRANSACTION IS SQUARELY COVERED UNDER SECTION 194I OF THE INCOME TAX ACT AND THEREFORE TAKES SHOULD HAVE BEEN DEDUCTED ON THIS SUM.. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PARTIES HAVE ALSO DRAWN OUR ATTENTION TO THE DECISION OF THE H O NBLE DELHI HIGH COURT DATED 16.02.2017 IN WP (C) 8085/2014 WHEREIN THIS ISSUE HAS BEEN DECIDED IN CASE OF SEVERAL ASSESSEES ON IDENTICAL FACTS AND CIRCUMSTANCES WHERE THE LEASE OF 90 YEARS WAS GRANTED BY GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY AND COURTS HAVE HELD THAT AMOUNT IS PAID AS PART OF THE LEASE PREMIUM IN TERMS OF THE TIMES IT DUES TO THE LEASE DEED IS EXECUTED BETWEEN THE PETITIONER AND GREATER NOIDA DEVELOPMENT AUTHORITY TOWARDS ACQUISITION OF LEASEHOLD RIGHTS ARE SUBJECT TO TDS. FURTHE R, IT WAS STATED THAT AMOUNTS CONSTITUTING ANNUAL LEASE RENT ARE RENT AND THEREFORE THEY ARE SUBJECT TO TDS. THEREFORE WE SET ASIDE THE ISSUE OF PAYMENT OF LEASE RENT AND TAX DEDUCTIBLE THEREON BACK TO THE FILE OF THE LD. ASSESSING OFFICER TO DECIDE THE IS SUE IN ACCORDANCE WITH THE DECISION OF THE HONBLE DELHI HIGH COURT. IN THE PRESENT CASE THE AMOUNT OF ANNUAL LEASE RENT ARE HELD TO BE SUBJECT TO TDS U/S 194I OF THE ACT. AS THE DEMAND ARISING ON NON - DEDUCTION IS WITH RESPECT TO ANNUAL LEASE RENT THE ASSE SSEE HAS RELIED UPON THE DECISION OF HON'BLE DELHI HIGH COURT IN CASE OF JAGRAN PRAKASHAN LTD VS. DCIT 345 ITR 288 TO STATE THAT WHERE THE TAX HAS NOT BEEN DEDUCTED THE LIABILITY TO PAY THE TAX CONTINUES ON THE RECIPIENT OF INCOME AND SAME CANNOT BE REALIZ ED FROM THE PAYER OF THE INCOME. AT THE MOST THE PAYER OF THE INCOME IS LIABLE FOR INTEREST. FURTHERMORE, PROVISIONS OF SECTION 201 HAS BEEN AMENDED WITH EFFECT FROM 01.07.2012 WHICH PROVIDES THAT IF A PERSON FAILS TO DEDUCT THE WHOLE OR PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII OF THE ACT ON SUM PAID TO THE RESIDENT, THE ASSESSEE SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX PROVIDED THE RECIPIENT OF INCOME HAS FURNISHED HIS RETURN OF INCOME, TAKEN SUCH AMO UNT INTO ITS ACCOUNT AND HAS PAID DUE TAX THEREON. THE VICARIOUS LIABILITY OF THE TAX DEDUCTOR COMES TO AN END IF HE FURNISHES A CERTIFICATE TO THIS EFFECT IN A PRESCRIBED FORM, IN A PRESCRIBED MANNER . IN VIEW OF THIS WE SET ASIDE GROUND NO. 1 TO 4 OF THE APPEAL OF THE ASSESSEE TO THE FILE OF THE LD. ASSESSING OFFICER TO GRANT AN PAGE 5 OF 5 OPPORTUNITY TO THE ASSESSEE TO GIVE BENEFIT OF FIRST PROVISO TO SECTION 201 OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF FAILURE OF DEDUCTION OF TAX AT SOURCE ON LEASE RENT PAI D. IN THE RESULT, THE ABOVE GROUND NOS. 1 TO 4 ARE ADJUDICATED AND ALLOWED WITH ABO VE DIRECTION. 8. GROUND NO. 5 TO 7 ARE RELATED TO NON - DEDUCTION OF TAX AT SOURCE FROM INTEREST COMPONENT OF THE INSTALLMENT OF LEASE PREMIUM AND EXTERNAL DEVELOPMENT CHARGES PA ID TO YAMUNA DEVELOPMENT AUTHORITY . BOTH THE PARTIES CONFIRMED BEFORE US THAT ABOVE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF HON'BLE ALLAHAB A D HIGH COURT IN ITA NO. 64/2016 DATED 04.04.2016. THE LD DR COULD NOT SHOW US ANY OTHER CONTRARY DECISION. IN THE ABOVE DECISION THE HON'BLE ALLAHABAD HIGH COURT WHILE DECIDING THE ISSUE ON PAYMENT OF INTEREST TO NOIDA HAS HELD THAT AUTHORITIES CONSTITUTED BY THE STATE ACT ARE ENTITLED TO EXEMPTION OF PAYMENT OF TAX AT SOURCE U/S 194A OF THE ACT. SIM ILARLY IN THE CASE OF THE ASSESSEE THE RECIPIENT WAS ALSO CONSTITUTED BY A STATE ACT. IN THE RESULT GROUND NO. 5 TO 7 OF THE APPEAL OF THE ASSESSEE ARE ALLOWED. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 10. ORD ER PR ONOUNCED IN THE OPEN COURT ON 2 8 / 08 / 2017 . - S D / - - S D / - ( H.S.SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 8 / 08 / 2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI