TRO (TDS) RG 3, MUMBAI V. SHELTON INFRASTRUCTURE P.LTD, MUMBAI

ITA 5678/MUM/2012

• Counselvise Citation: 567819914 RSA 2012
• Duration Of Justice: 1 year(s) 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 19-05-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 07-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOURYA PRATAP
• Assessee Lawyers: M P LOHIA AW MR NIKHIL TIWARI
• Keywords: Maximum Marginal Rate; Capital expenditure
• Section: 37(1); 201(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , , BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEM BER . / ITA NO. 5678 / MUM./201 2 ( / ASSESSMENT YEAR : 2 010 11 ) TRO ( TDS ) , RANGE 3 SMT. K.G. MITTAL AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD (W) MUMBAI 400 002 .. / APPELLANT V/S SHELTON I NFRASTRUCTURE PVT. LTD. 73, MAKER CHAMBERS VI 220, NARIMAN POINT, MUMBAI 400 002 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AALCS4101Q / REVENUE BY : MR. MOURYA PRATAP / AS SESSEE BY : MR. M.P. LOHIA A/W MR. NIKHIL TIWARI / DATE OF HEARING 19.05.2014 / DATE OF ORDE R 19.05.2014 / ORDER , / PER AMIT SHUKLA , J.M. THE AFORESAID APPEAL HA S BEEN PREFERRED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER DATED 28 TH JUNE 2012 , PASSED BY T HE LEARNED COMMISSIONER (APPEALS), MUMBAI, FOR THE ASSESSMENT YEAR 20 10 11. THE REVENUE HAS RAISED SEVERAL GROUNDS WHICH ARE MOSTLY SHELTON INFRASTRUCTURE PVT. LTD. 2 ARGUMENTATIVE IN NATURE, HOWEVER, THE SUM AND SUBSTANCE OF THE SAID GROUNDS ARE THAT, THE LEARNED COMMISSIONER (APPEALS) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE AMOUNT PAID BY THE ASSESSEE TO CIDCO (CITY INDUSTRIAL DEVELOPMENT CORPORATION OF MAHARASHTRA LTD.) AS PREMIUM FOR ACQUIRING LEASE HOLD RIGHTS IN RESPECT OF THE LEASED PLOT IS NOT IN THE NATURE OF RENT AS DEFINED UNDER SECTION 194 I OF THE ACT AND, ACCORDINGLY, THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE UNDER SECTION 194 I. 2 . T HE ASSESSING OFFICER HAS T REATED THE PAYMENT OF LEASED PREMIUM TO CIDCO IN THE NATURE OF RENT ON WHICH TDS WAS REQUIRED TO BE DEDUCTED BY THE ASSESSEE UNDER SECTION 19 4 I. ACCORDINGLY, HE PASSED THE ORDER UNDER SECTION 201(1) / 201(1A), DETERMINING THE LIABILITY OF AN AMOUNT OF ` 5 ,56,83,979, ON ACCOUNT OF NON DEDUCTION OF TAX AND INTEREST IN RESPECT OF SUCH PAYMENT. 3 . BEFORE THE LEARNED COMMISSIONER (APPEALS), DETAIL SUBMISSIONS WERE MADE WHICH HAVE BEEN INCORPORATED BY THE LEARNED COMMISSIONER (APPEALS) RIGHT FROM PAGE 2 TO 21 OF T HE APPELLATE ORDER AND AFTER CONSIDERING THE ASSESSEES SUBMISSIONS AND FINDINGS OF THE ASSESSING OFFICER, HE ANALYSED THE NATURE OF PAYMENT AND HELD THAT SUCH A PAYMENT IS NOT IN THE NATURE OF RENT AS CONTEMPLATED UNDER SECTION 194 I, THEREFORE, THE ASSES SEE WAS NOT REQUIRED TO DEDUCT THE TAX AT SOURCE. THE LEARNED COMMISSIONER (APPEALS) HAS GIVEN HIS DETAIL REASONING AND FINDINGS FROM PAGE 22 TO 41 OF THE ORDER. 4 . BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TRIBUNAL, MUMBAI BENCH, IN SERIES OF DECISION ON SIMILAR NATURE OF LEASE PREMIUM PAID TO CIDCO / MMRA HAS HELD THAT THEY ARE NOT IN THE NATURE OF RENT. A LIST OF SUCH DECISIONS GIVEN BEFORE US ARE AS UNDER: SHELTON INFRASTRUCTURE PVT. LTD. 3 1 . THE INDIAN NEWS PAPERS SOCIETY (ITA NO. 5207/DEL/ 2012) DATED 20 JUNE 201 3 (DEL) ; 2 . M/S WADHWA & ASSOCIATES REALTORS PVT T . TD (ITA NO. 695/M/2012) DATED 3 JULY 2013 (MUM); 3 . SHREE NAMAN DEVELOPERS LTD (ITA NO. 686 & 687/M/ 2012) DATED 14 AUGUST 2013 (MUM); 4 . M/S SHAH GROUP BUILDERS LTD (ITA NO. 4523/M/2012) DATED 14 AUGUST 2013 (M UM); 5 . M/S TCG URBAN INFRASTRUCTURE HOLDING PVT LTD (ITA NO. 4563/M/2 012) DATED 14 AUGUST 2013 (MUM); 6 . M/S NAVI MUMBAI SEZ PVT LTD (ITA NO. 738/M/2012) DATED 16 AUGUST 2013 (MUM); 7 . M/S TRENT LIMITED (ITA NO . 4629/M/2012) DATED 21 AUGUST 2013 (MUM) ; 8 . NAMAN BKC CHS LTD (ITA NO . 708/M/2012) DATED 12 SEPTEMBER 2013 (MUM); 9 . PARINEE DEVELOPERS PVT . LTD (ITA NO. 1734/M/2012) DATED 26 SEPTEMBER 2013 (MUM); 10 . DHIRENDRA RAMJ I VORA (ITA NO . 3179/M/2012) DATED 9 APRIL 2014 . HE THUS SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED BY THE ABOVE DECISION S OF THE TRIBUNAL CITED SUPRA. 5 . LEARNED DEPARTMENTAL REPRESENTATIVE , ON THE OTHER HAND, STRONGLY RELIED UPON THE FINDINGS OF THE ASSESSING OFFICER. 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 CONSISTENT VIEW THAT SUCH A PAYMENT OF LEASE PREMIUM DO NOT FALL WITHIN THE REALM OF RENT AS CONTEMPLATED IN SECTION 194 I. THEREFORE, THE ASS ESSEE IS NOT LIABLE FOR DEDUCTING THE TDS O N SUCH A PAYMENT. THE MAIN REASON IS THAT THE LEASE PREMIUM IS CAPITAL EXPENDITURE TO ACQUIRE LAND WITH SHELTON INFRASTRUCTURE PVT. LTD. 4 SUBSTANTIAL RIGHT TO CONSTRUCT AND COVER THE BUILDING COMPLEX. FOR THE SAKE OF READY REFERENCE, WE ARE QUOTIN G THE RELEVANT OBSERVATIONS AND FINDINGS OF THE TRIBUNAL IN ITO V/S TRENT LTD., ITA NO.4629/MUM./2012, ORDER DATED 21 ST AUGUST 2013, WHEREIN THE TRIBUNAL OBSERVED AND HELD AS UNDER: 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE R ELEVANT 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 & ASSOCIATES 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 PARA 9 TO 10 OF ITS ORDER DATED 3 - 7 - 2013 (SUPRA): - 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE ORDER OF THE LOWER AUTHORITIE S AND THE MATERIAL EVIDENCE BROUGHT ON RECORD IN THE FORM OF PAPER BOOK AND THE JUDICIAL DECISIONS RELIED UPON BY THE 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 PRECED ES THE GRANT OF LEASE. THEREFORE, BY ANY STRETCH OF IMAGINATION, IT CANNOT BE EQUATED WITH THE RENT SHELTON INFRASTRUCTURE PVT. LTD. 5 WHICH IS PAID PERIODICALLY. 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. SEC. 37(1) OF THE MAHARASHTRA TOWN PLANNING ACT 1966, MRTP ACT AND OTHER POWERS ENABLING THE SAME HAS APPROVED THE PROPOSAL TO MODIFY REGULAT ION 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/PURCHASE D 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 C ASE 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 IS 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 THE RETO ARE SIMILAR TO THE CASE OF WADHWA & ASSOCIATES REALTORS PVT. LTD. (SUPRA) AS WELL AS SHREE NAMAN HOTELS PVT. LTD. & 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) OF THE ACT. THE APPEAL FILED BY THE RE VENUE IS ACCORDINGLY DISMISSED. SHELTON INFRASTRUCTURE PVT. LTD. 6 7 . T HUS, IN VIEW OF THE CATENA OF DECISION, WE HOLD THAT THE IMPUGNED P AYMENT ON ACCOUNT OF PREMIUM REPRESENTS TRANSFER PRICE OF THE LAND ON LEASE HOLD BASIS AND NO PART THEREOF QUALIFIES TO FALL WITHIN THE MEANING OF RENT AS CONTEMPLATED IN SECTION 194 I AND, THEREFORE, NO DEDUCTION OF TAX AT SOURCE IS REQUIRED. WE, ACCORD INGLY, CONFIRM THE FINDINGS AND CONCLUSION OF THE LEARNED COMMISSIONER (APPEALS) AND DISMISS THE GROUNDS RAISED BY THE REVENUE. 8 . 8 . IN THE RESULT, REVENUE S APPEAL IS DISMISSED. 19 TH MAY 2014 ORDER PRONOUNCED IN THE OPEN COURT O N 19 TH MAY 2014 SD/ - SANJAY ARORA ACC OUNTANT MEMBER SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 19 TH MAY 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