ACIT (TDS) RG 2 (2), MUMBAI V. OIL AND NATURAL GAS CORPORATION LTD, MUMBAI

ITA 5808/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84493 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 20-11-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 20-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Keywords: Capital asset; Maximum Marginal Rate
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI , , BEFORE SHRI SANJAY ARORA, AM AND SHRI AMIT SHUKLA, JM ./ I.T.A. NO. 5808/MUM/2012 ( / ASSESSMENT YEAR: 2008-09) ASST. CIT (TDS), RANGE 2(2), ROOM NO. 703, 7 TH FLOOR, SMT. K. G. MITTAL AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD, MUMBAI-400 002 / VS. OIL AND NATURAL GAS CORPORATION LTD. GROUND FLOOR, NSE BUILDING, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400 051 ! ./' ./PAN/GIR NO. AAACO 1598 A ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !# & ' / APPELLANT BY : SHRI PREMANAND J $%!# & ' / RESPONDENT BY : SHRI NARESH JAIN & SHRI MAHESH SABOO () * & + / DATE OF HEARING : 20.11.2014 DATE OF ORDER : 03.12.2014 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-14, MUMBAI (CIT(A) FOR SH ORT) DATED 27.07.2012, ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S . 201(1) & 201(1A) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2008-09 VIDE ORDER DATED 30.03.2011. 2 ITA NO. 5808/MUM/2012 (A.Y. 2008-09) ASST. CIT (TDS) VS. OIL AND NATURAL GAS CORPORATION LTD. 2. THE INSTANT APPEAL, RAISING AS MANY AS TWELVE GR OUNDS, AGITATES A SINGLE ISSUE, I.E., THE EXIGIBILITY TO TAX DEDUCTION AT SOURCE (TDS) U/ S.194-I OF THE ACT, OF THE SUM, DESCRIBED AS LEASE PREMIUM AND ADDITIONAL FLOOR SPA CE INDEX (FSI) CHARGES, PAID BY THE ASSESSEE-COMPANY TO MUMBAI METROPOLITAN REGIONAL DE VELOPMENT AUTHORITY (MMRDA) TOWARD LEASEHOLD LAND DURING THE RELEVANT YEAR. AND , CONSEQUENTLY, THE MAINTAINABILITY OR OTHERWISE IN LAW OF THE ORDER U/S. 201(1) AND 201(1 A) OF THE ACT, SINCE VACATED BY THE FIRST APPELLATE AUTHORITY. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE REVENUES CASE IS THAT THE RENT, AS DEFINED U /S.194-I OF THE ACT, IS VERY COMPREHENSIVELY DEFINED TO INCLUDE ANY PAYMENT, BY WHATEVER NAME CALLED, UNDER ANY LEASE, SUB-LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR USE (EITHER SEPARATELY OR TOGETHER) OF ANY LAND, BUILDING, PLANT, MACHINER Y, ETC. BY LEGAL FICTION, THEREFORE, THE SCOPE OF THE TERM RENT STANDS THUS EXTENDED BEYON D ITS COMMON MEANING. THE SAME WOULD, ACCORDINGLY, INCLUDE NOT ONLY THE PAYMENTS O N REVENUE ACCOUNT, BUT ON CAPITAL ACCOUNT AS WELL; THE SAME, I.E., REVENUE OR CAPITAL , BEING IMMATERIAL AS LONG AS THE SUM PAID IS TOWARD THE USE OF ANY OF THE ASSETS SPECIFI ED UNDER THE PROVISION. FURTHER, THE RESTRICTIVE CLAUSES IN THE LEASE AGREEMENT UNDER RE FERENCE VIZ. (XXXI) TO (XXXVIII), TOWARD NON-EXCAVATION, NON-ERECTION, SANITARY, ALTERATION, REPAIRS, INSPECTION AND MISCELLANEOUS WORK, ETC. REVEAL IT TO BE NOT A CASE OF ANY CAPITA L ASSET BUT FOR THE USE OF LAND OVER AN EXTENDED PERIOD OF TIME. RELIANCE STANDS PLACED ON SEVERAL DECISIONS, AS IN THE CASE OF CIT VS. REEBOK INDIA CO . [2007] 291 ITR 455 (DEL); UNITED AIRLINES VS. CIT [2006] 287 ITR 281 (DEL); KRISHNA OBEROI VS. UNION OF INDIA [2002] 257 ITR 105 (AP); AND CIT VS. H.M.T. LTD . [1993] 203 ITR 820 (KAR). THE ASSESSEES CASE, WHICH FOUND FAVOUR WITH THE LD . CIT(A), IS THAT THE LEASE PREMIUM IN THE INSTANT CASE WAS ONLY TOWARD ACQUISI TION OF LEASE HOLD RIGHTS AND ADDITIONAL FSI IN THE LEASED PLOTS AND, THUS, NOT I N THE NATURE OF RENT. THE RESTRICTIVE CLAUSES ARE ONLY STANDARD CLAUSES, REGULATORY IN NA TURE, MEANT FOR THE PROPER DEVELOPMENT OF THE AREA, AND NOT TO IN ANY WAY CONTROL OR CURTA IL THE RIGHTS ACQUIRED BY THE ASSESSEE- 3 ITA NO. 5808/MUM/2012 (A.Y. 2008-09) ASST. CIT (TDS) VS. OIL AND NATURAL GAS CORPORATION LTD. LEASEE. RELIANCE STANDS PLACED ON THE BINDING DECIS IONS IN THE CASE OF RAJA BAHADUR KAMAKSHYA NARAIN SINGH OF RAMGARH VS. CIT [1943] 11 ITR 513 (PC); MEMBER FOR THE BOARD OF AGRICULTURAL INCOME TAX VS. SINDHURANI CHA UDHURANI & ORS. [1957] 32 ITR 169 (SC); MAHARAJA CHINTAMANI SARAN NATH SAH DEO VS. CIT [1961] 41 ITR 506 (SC); CIT VS. PANBARI TEA CO. LTD. [1965] 57 ITR 422 (SC); R.K. PALSHIKAR (HUF) VS. CIT [1988] 172 ITR 311 (SC); A.R. KRISHNAMURTHY VS. CIT [1989] 176 ITR 417 (SC); CIT VS. KHIMLINE PUMPS LTD. [2002] 258 ITR 459 (BOM), BESIDES BY THE SPECIAL B ENCH OF THE TRIBUNAL IN THE CASE OF JT. CIT VS. MUKUND LTD. [2007] 106 ITD 231 (MUM) (SB). IN ALL THESE CASES, LEASE PREMIUM OR SALAMI WAS HELD AS TR ANSFER OF SUBSTANTIAL INTEREST IN FAVOUR OF THE LEASEE, I.E., OUT OF THE ENTIRE BUNDLE OF RI GHTS THAT ABSOLUTE OWNERSHIP ENTAILS. THERE WAS, THEREFORE, CONFERMENT OF A RIGHT IN THE CAPITA L FIELD FOR A PRICE, ADVERTING TO SECTION 105 OF THE TRANSFER OF THE PROPERTY ACT. THE DECISI ONS RELIED UPON BY THE ASSESSING OFFICER (A.O.) WERE ALSO DISTINGUISHED BY HIM. WITHOUT DOUBT, IT IS THE REAL NATURE OF THE ARRANGE MENT OR TRANSACTION, AND NOT MERELY THE WORDS OR PHRASES EMPLOYED, EVEN AS CAUTI ONED BY THE APEX COURT IN PANBARI TEA CO. LTD. (SUPRA), I.E., THE SUBSTANCE OF THE TRANSACTION, T HAT IS RELEVANT AND PARAMOUNT. TO THIS EXTENT, WE ARE IN AGREEMENT WITH THE A.O. I N THE PRESENT CASE, AS FOUND BY THE LD. CIT(A), THE AMOUNT CHARGED BY MMRDA AS LEASE PREMIU M IS EQUAL TO THE RATE PREVAILING AS PER THE STAMP DUTY READY RECKONER FOR THE ACQUIS ITION OF COMMERCIAL PREMISES. THERE IS NO PROVISION IN THE LEASE AGREEMENT FOR TERMINATION OF THE LEASE AT THE INSTANCE OF THE LESSEE AND, HENCE, FOR REFUND OF LEASE PREMIUM UNDE R REGULAR CIRCUMSTANCES. EVEN THE ADDITIONAL FLOOR SPACE INDEX (FSI), GIVEN FOR ADDIT IONAL SPACE, IS AS PER THE READY RECKONER RATE ONLY. THE WHOLE TRANSACTION IS THUS FOR GRANT OF LEASEHOLD RIGHTS, AND ONLY A TRANSFER OF PROPERTY; THE LEASE PREMIUM BEING THE CONSIDERAT ION FOR THE LEASEHOLD RIGHTS, WHICH COMPRISE A BUNDLE OF RIGHTS, INCLUDING THE RIGHT OF POSSESSION, EXPLOITATION AND ITS LONG TERM ENJOYMENT. THE CHARGES FOR FSI ALSO PARTAKE TH E CHARACTER OF A CAPITAL ASSET IN THE FORM OF TRANSFERABLE DEVELOPMENT RIGHTS (TDRS), SO THAT THE OWNER (OF LAND) HAD TRANSFERRED THE RIGHTS OF DEVELOPMENT AND EXPLOITAT ION OF LAND, WHICH ARE AGAIN CAPITAL IN NATURE. THE RESTRICTIVE CONVENTS TOWARD EXCAVATION SEEK TO RETAIN THE RIGHT OF THE STATE TO 4 ITA NO. 5808/MUM/2012 (A.Y. 2008-09) ASST. CIT (TDS) VS. OIL AND NATURAL GAS CORPORATION LTD. ANY MINERALS FROM LAND. EXCAVATION IS PERMITTED FOR THE PURPOSE OF CONSTRUCTION OF THE FOUNDATION OF THE BUILDING, OR FOR EXECUTING ANY WO RK IN PURSUANCE OF THE TERMS OF LEASE. SIMILARLY, RESTRICTION WITH REGARD TO ERECTION BEYO ND BUILDING LINE WAS ONLY IN CONFORMITY WITH DC RULES, CIVIL AVIATION RULES, BMC AND COASTA L REGULATIONS, ETC., I.E., ARE REGULATORY, AND DO NOT DEFINE THE CHARACTER OF THE TRANSACTION PER SE . THE SAME IN FACT WOULD APPLY, I.E., BE IMPOSED BY A LOCAL AUTHORITY WHILE GRANTIN G PERMISSION FOR CONSTRUCTION ON FREE- HOLD LAND. WE ARE IN COMPLETE AGREEMENT WITH THE FINDINGS OF T HE LD. CIT(A). THE TRIBUNAL HAS IN FACT TAKEN A CONSISTENT VIEW FOR SIMILAR TRA NSACTIONS WITH MMRD LTD., CIDCO LTD., AND TOWARD WHICH THE LD. AUTHORIZED REPRESENT ATIVE (AR) WOULD BEFORE US RELY ON THE DECISIONS IN THE CASE OF ITO VS. NAMAN BKC CHS LTD. (IN ITA NOS. 708 & 709/MUM/2012 DATED 12.09.2013) AND TRO VS. SHELTON INFRASTRUCTURE PVT. LTD. (IN ITA NO. 5678/MUM/2012 DATED 19.05.2014). THE DECISIONS RELIED UPON BY THE A.O. STAND ALSO DISTINGUISHED BY THE TRIBUNAL, AS IN ITO VS. DHIRENDRA RAMJI VORA (IN ITA NO.3179/MUM/2012 DATED 09.04.2014) AND NAMAN BKC CHS LTD. (SUPRA). WE ACCORDINGLY UPHOLD THE IMPUGNED ORDER. WE DECIDE AC CORDINGLY. 4. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ,- . ) & , & /0 ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 20, 2014 AT THE CONCLUSION OF THE HEARING ITSELF. SD/- SD/- (AMIT SHUKLA) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER 1* MUMBAI; 2( DATED : 03.12.2014 ).(../ ROSHANI , SR. PS 5 ITA NO. 5808/MUM/2012 (A.Y. 2008-09) ASST. CIT (TDS) VS. OIL AND NATURAL GAS CORPORATION LTD. !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $% !# / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. 5)6 7 $(89 , + 89- , 1* / DR, ITAT, MUMBAI 6. 7 ;< = * / GUARD FILE !' / BY ORDER, )/* + (DY./ASSTT. REGISTRAR) , 1* / ITAT, MUMBAI