DCIT (TDS) - 1(1), MUMBAI V. BANK OF INDIA, MUMBAI

ITA 6040/MUM/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8057 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 10-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Keywords: Maximum Marginal Rate
• Section: 201(1); 6; 10; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL , HON'BLE ACCOUNTANT MEMBER ITA NO S . 6039 & 6040 /MUM/201 6 (A.Y S : 2009 - 10 & 2011 - 12 ) D .C.I.T (TDS) 1(1) ROOM NO. 802, K.G. MITTAL HOSPITAL BLDG. CHARNI ROAD (W), MUMBAI 400 002 V. M/S. BANK OF INDIA C - 5, G BLOCK, STAR HOUSE, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI 400 051 PAN: AAACB 0472 C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C. NARESH DEPARTMENT BY : SHRI CHAUDHARY ARUN KUMAR SI N GH DATE OF HEARING : 12.12.2018 DATE OF PRONOUNCEMENT : 20 .12 .2018 O R D E R PER C. N. PRASAD (JM) 1. THESE TWO APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 59 , MUMBAI DATED 28.07.2016 FOR THE ASSESSMENT YEARS 2009 - 10 & 2011 - 12. 2. THE ONLY ISSUE IN BOTH THE APPEALS OF THE REVENUE IS WHETHER THE ASSESSEE REQUIRED TO MAKE TDS U/S. 194 - I OF THE ACT ON THE LEASE PREMIUM PAID FOR ACQUIRING LEASE RIGHTS ON IMMOVABLE PROPERTY FROM MMRDA , TREATING IT AS RENT. 2 ITA NO S . 6039 & 6040/MUM/2016 M/S. BANK OF INDIA 3. BRIEFLY STATED THE FACTS ARE THAT, THE ASSESSEE ENTERED INTO LEASE AGREEMENT WITH MMRDA FOR LEASE OF PLOT S OF LAND AT BKC FOR CONSTRUCTION OF RESIDENTIAL FLATS AND CORPORATE BUILDING AND THE LEASE WAS FOR A PERIOD OF 80 YEARS. ASSESSEE PAID PREMIUM, ADDITIONAL PREMIUM ALONG WITH INTEREST AND LATE FEES FOR THE DELAY IN CONSTRUCTION TO THE MMRDA FOR THE LANDED PROPERTY AND ALSO THE BUILDINGS TO BE CONSTRUCTED INCLUDING ADDITIONAL FSI. THE ASSESSING OFFI CER HELD THAT THESE PAYMENTS WERE IN THE NATURE OF RENT AND THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE ON SUCH PAYMENTS @20% AS SPECIFIED U/S. 194 - I OF THE ACT AND SINCE THE ASSESSEE DID NOT DEDUCT TDS ON THE LEASE PREMIUM PAID TO MMRDA THE ASSESSING OFFICER TREATED THE ASSESSEE AS DEFAULTER WITHIN THE MEANING OF SECTION 201(1) OF THE ACT FOR NON - DEDUCTION OF TAX AND PASSED ORDER U/S. 201 & / 201(1 A ) OF THE ACT. 4. ON APPEAL , THE LD.CIT(A) TAKING INTO CONSIDERATION THE SUBMISSIONS OF THE A SSESSEE, THE REMAND REPORT FROM THE ASSESSING OFFICER AND VARIOUS DECISIONS ON THE ISSUE INCLUDING THE MUMBAI TRIBUNAL IN THE CASE OF M/S. WADHWA ASSOCIATES REALTORS (P) LTD. [36 TAXMAN .COM 526] AND ITO (TDS) V. ORIENTAL BANK OF COMMERCE IN ITA.NO. 1300 & 1301/ MUM / 2014 DATED 23.11.2015, DELHI BENCH OF THE TRIBUNAL IN THE CASE OF THE INDIAN NEWSPAPERS SOCIETY [144 ITD 668], HE HELD THAT THE PAYMENTS MADE BY THE ASSESSEE TO THE MMRDA CANNOT BE EQUATED TO RENT AND T HEREFORE ASSESSEE IS NOT LIABLE TO DEDUCT TDS U/S. 194 - I OF THE ACT. 3 ITA NO S . 6039 & 6040/MUM/2016 M/S. BANK OF INDIA 5. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISIONS OF THE MUMBAI BENCH IN THE CASE OF M/S. WADHWA ASSOCIATES REALTORS (P) LTD. (SUPRA) AND THE DECISION IN THE CASE OF ITO (T DS) V. M/S. ENAM FINANCIAL CONSULTA NTS PVT LTD., IN ITA.NO S . 4421 & 4422/ MUM /2015 DATED 26.04.2017 , WHEREIN IT HAS BEEN HELD THAT T HE LEASE PREMIUM PAID BY THE ASSESSEE TO MMRDA FOR ADDITIONAL FSI IS NOT IN THE NATURE OF RENT AND T HEREFORE ASSESSEE IS NOT LIABLE TO DEDUCT TDS U/S. 194 - I OF THE ACT. 6. LD. COUNSEL FOR THE ASSESSEE FURTHER REFERRING TO CBDT CIRCULAR NO. 35 /2016 DATED 13.10.2016 SUBMITTED THAT THE CENTRAL BOARD OF DIRECT TAXES TAKING NOTE OF THE DECISION S OF THE HON'BLE D ELHI HIGH COURT IN THE CASE OF THE INDIAN NEWSPAPERS SOCIETY (ITA.NO. 918 & 920/2015) , HON'BLE MADRAS HIGH COURT IN THE CASE OF FOXCONN INDIA DEVELOPER LIMITED (TAX APPEAL NO. 801/2013), I T HAS BEEN STATED THAT IN THESE CASES THE COURTS HAVE HELD THAT ONE - TIME NON - REFUNDABLE UPFRONT CHARGES PAID BY THE ASSESSEE FOR THE ACQUISITION OF LEASE HO LD RIGHTS OVER AN IMMOVABLE PROPERTY COULD NOT BE TAKEN TO CONSTITUTE RENTAL INCOME IN THE HANDS OF THE LESSO R , OBLIG ING THE LESSEE TO DEDUCT TAX AT SOURCE U/S. 194 - I O F THE ACT. LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITS THAT BOARD HAS STATED IN THE CIRCULAR THAT THE DEPARTMENT HAS ACCEPTED THE DECISION OF THE HON'BLE HIGH COURTS AND HAS NOT FILED SLPS AND T HEREFORE THE ISSUE OF WHETHER OR NOT TDS U/S. 194 - I IS TO B E MADE ON LUMP SUM LEASE PREMIUM OR ONE - TIME 4 ITA NO S . 6039 & 6040/MUM/2016 M/S. BANK OF INDIA UPFRONT LEASE CHARGES PAID FOR ALLOTMENT OF LAND FOR ANY OTHER PROPERTY ON LONG TERM LEASE BASIS IS NOW SETTLED IN FAVOUR OF THE ASSESSE E. 7. LD. DR VEHEMENTLY SUPPORTED THE O RDERS OF THE ASSESSING OFFICER. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW , THE CASE LAWS RELIED ON AND THE CIRCULAR OF CBDT. ON A PERUSAL OF THE ORDERS PASSED BY THE COORDINATE BENCH IN THE CASE OF M/S. WADHWA ASSOCIATES REALTORS (P) LTD. (SUPRA) AND THE DECISION IN THE CASE OF ITO (TDS) V. M/S. ENAM FINANCIAL CONSULTANTS PVT LTD., (SUPRA), WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THESE DECISIONS WHEREIN THE COORDINATE BENCH HELD THAT THE LEASE PREMIUM PAID BY THE ASSESSEE TO MMRDA FOR ACQUISITION OF LEASE HOLD RIGHTS ON THE PROPERTY IS NOT IN THE NATURE OF RENT AS CONTEMPLATED U/S. 194 - I OF THE ACT AND THE ASSESSEE IS NOT REQUIRED TO DEDUCT TAX AT SOURCE. WE ALSO FIND THAT CBDT IN ITS CIRCULAR NO. 35 / 20 16 DATED 13.10.2016 HAS CLARIFIED AS TO WHETHER LUMP SUM LEASE PREMIUM OR ONE - TIME UPFRONT LEASE CHARGES PAID BY THE ASSESSEE FOR ACQUIRING LONG TERM LEASEHOLD RIGHTS OVER LAND OR ANY OTHER PROPERTY ARE NOT IN THE NATURE OF RENT U/S. 194 - I OF THE ACT . THE CBDT IN ITS CIRCULAR TAKING NOT E OF THE DECISION S OF HON'BLE DELHI HIGH COURT AND HON'BLE MADRAS HIGH COURT IN THE CASE S OF THE INDIAN NEWSPAPERS SOCIETY & FOXCONN INDIA DEVELOPER LIMITED RESPECTIVELY, A ND THE FACT THAT THE REVENUE HAS ACCEPTED THE SAID DECISIONS AND NOT FILED AN SLP, IT HAS 5 ITA NO S . 6039 & 6040/MUM/2016 M/S. BANK OF INDIA B EEN CLARIFIED THAT LUMP SUM LEASE PREMIUM OR ONE - TIME UPFRONT LEASE CHARGES FOR ACQUISITION OF LONG TERM LEASE RIGHTS FOR LAND OR ANY OTHER PROPERTY ARE NOT PAYMENTS IN THE NATURE OF RENT WITHIN THE MEANING OF SECTION 194 - I OF THE ACT. 9. IN THE CASE ON HAND , IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD ENTERED INTO LEASE AGREEMENT WITH MMRDA FOR LEASE OF PLOT OF LAND AT BANDRA KURLA COMPLEX FOR CONSTRUCTION OF RESIDENTIAL FLATS AND OFFICE BUILDING FOR A PERIOD OF 80 YEARS. ASSESSEE HAD PAID PREMIUM AND ALSO AD DITIONAL PREMIUM FOR THE FSI AND ADDITIONAL FSI ALONG WITH INTEREST AND FEE FOR DELAY IN THE CONSTRUCTION OF CORPORATE BUILDING TO MMRDA . THEREFORE, SUCH LEASE PREMIUM PAID BY THE ASSESSEE CANNOT BE EQUATED WITH RENT WITHIN THE MEANING OF SECTION 194 - I OF THE ACT. RESPECTFULLY FOLLOWING THE ABOVE REFERRED DECISION S , WE UPHOLD THE ORDER OF THE LD.CIT(A) AND REJECT THE GROUNDS RAISED BY THE REVENUE. 10. IN THE RESULT, APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 20 TH DECEMBER , 2018 SD/ - SD/ - ( MANOJ KUMAR AGGARWAL ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 20 / 12 / 2018 GIRIDHAR , S R. PS 6 ITA NO S . 6039 & 6040/MUM/2016 M/S. BANK OF INDIA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM