GUPTA FABTES PRIVATE LIMITED, Jaipur V. DCIT, Jaipur

ITA 647/JPR/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99599 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 02-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Maximum Marginal Rate; Capital receipt; Revenue expenditure; Capital expenditure
• Section: 234B; 37(1); 201(1)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NOS. 647 & 648/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2011-12 & 12-13. M/S. GUPTA FABTEX PVT. LTD., E-102, EPIP, SITAPURA INDUSTRIAL LTD., TONK ROAD, JAIPUR. CUKE VS. THE DCIT (TDS) JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR/TAN NO. JPRGO 2371 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT . FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY S BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI O.P. BHATEJA (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 19.11.2015. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 16/12/2015. VKNS'K@ ORDER PER SHRI LALIET KUMAR, J.M. THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAINS T THE ORDER OF LD. CIT (A)-III, JAIPUR DATED 30 TH MAY, 2013. THE COMMON GROUNDS RAISED IN THESE APP EALS ARE AS UNDER :- 1. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN HO LDING THAT DEVELOPMENT CHARGES PAID BY THE ASSESSEE TO RAJASTH AN STATE INDUSTRIAL DEVELOPMENT AND INVESTMENT CORPORATION L IMITED (RIICO) TOWARDS ALLOTMENT OF LAND ON LEASE OF 99 YE ARS IS LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S 194I OF THE INCO ME TAX ACT, 1961. 2 ITA NOS. 647 & 648/JP/2013 M/S. GUPTA FABTEX PVT. LTD. VS. DCIT 1.1. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN HO LDING THAT INTEREST PAID ON INSTALLMENT PAYMENT OF DEVELOPMENT CHARGES IS PART OF THE RENT AND THEREFORE LIABLE FO R DEDUCTION OF TAX AT SOURCE U/S 194I. 1.2. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN HO LDING THAT INTEREST U/S 201(1A) IS LEVIABLE FROM THE DATE OF D EDUCTIBILITY TO THE DATE OF FURNISHING OF RETURN OF INCOME BY TH E PAYEE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING OF READYMADE GARMENTS OF VARIOUS BRANDS LIKE BOMBAY DY EING, LIFE STYLE ETC. THE RAJASTHAN STATE INDUSTRIAL DEVELOPMENT AND INVESTME NT CORPORATION LTD. (RIICO) HAD ALLOTTED A PLOT FOR ESTABLISHMENT OF AN INDUSTRY AT RAMCHANDRA PURA INDUSTRIAL AREA, SITAPURA EXTENSION, JAIPUR, VIDE ALLOTMENT LETTER DA TED 07.10.2010 PURSUANT TO THE APPLICATION OF THE ASSESSEE DATED 22.09.2010. VIDE SAID ALLOTMENT LETTER, THE ASSESSEE WAS ALLOTTED THE PLOT ADMEASURING 12066 SQ. METER @ RS. 4043/- PER SQ. METER (AT THE DISCOUNTED RATE). HOWEVER, THE PREVAILING RATE OF D EVELOPMENT CHARGES WAS RS. 4500/- PER SQ. MTR. THEREAFTER, ON THE BASIS OF ALLOTMENT LETTER, A DOCUMENT TILED AS LEASE AGREEMENT WAS ENTERED BETWEEN THE ASSESSEE AND THE RIICO DATED 19.10.2011. AS PER THE SAID ALLOTMENT LETTER AND THE LEASE AGREEMENT, THE LAND WAS ALLOTTED TO THE ASSESSEE FOR 99 YEARS AND THE ASSESSEE WAS REQUIRED TO PAY THE AMOUNT OF RS. 6,05,70,034/-. THE BIFURCATION OF THE SAID AMOUNT WAS AS UNDER :- DEVELOPMENT CHARGES RS. 4,87,96,830/- INTEREST ON DEVELOPMENT CHARGES RS. 1,12,73,566/- SECURITY MONEY RS. 4,87,968/- ECONOMIC RENT RS. 11,670/- 3 ITA NOS. 647 & 648/JP/2013 M/S. GUPTA FABTEX PVT. LTD. VS. DCIT 2.1. THE ASSESSEE PAID 25% OF THE DEVELOPMENT CHARG ES AS PER THE TERMS AND CONDITIONS OF THE LETTER AND OPTED FOR PAYING THE B ALANCE AMOUNT IN 19 EQUAL QUARTERLY INSTALLMENTS ALONG WITH INTEREST. DURING THE FINAN CIAL YEAR 2010-11, ASSESSEE PAID RS. 1,60,59,099/- TO RIICO TOWARDS COST OF THE LAND AND INTEREST, BREAK-UP OF WHICH IS AS UNDER :- 25% OF DEVELOPMENT CHARGES RS. 1,22,54,210/- FIRST INSTALLMENT OF DEVELOPMENT CHARGES RS. 19,23,296/- SECURITY MONEY RS. 4,87,968/- COST OF LAND PAID RS.1,46,65,474/- INTEREST ON DEVELOPMENT CHARGES RS. 13,93,625/ - AMOUNT PAID TO RIICO RS. 1,60,59,099/- 2.2. SIMILARLY, IN THE FINANCIAL YEAR 2011-12 THE A SSESSEE PAID AMOUNT OF RS. 1,15,11,743/- TO THE RIICO, THE DETAILS OF THE SAID AMOUNT IS AS UNDER :- FOUR INSTALLMENTS OF RS. 19,23,296/- EACH TOWARDS DEVELOPMENT CHARGES RS. 76,93,184/- INTEREST ON DEVELOPMENT CHARGES (1035734+988943+930770+863112) RS. 38,18,559/- AMOUNT PAID TO RIICO RS.1,15,11,743/- 2.3. THE SPOT VERIFICATION WAS CARRIED ON 15.03.201 2 FOR THE PURPOSE OF TDS VERIFICATION BY THE REVENUE. DURING THE COURSE OF S UCH VERIFICATION, SOME ALLEGED DISCREPANCIES WERE FOUND AND IN RESPECT THERETO A N OTICE WAS ISSUED TO THE ASSESSEE. IN RESPONSE TO THE NOTICE GIVEN TO THE ASSESSEE, THE A SSESSEE FILED A DETAILED REPLY ON 23.04.2012. THE RELEVANT PARA OF THE SAID REPLY IS AS UNDER :- 4 ITA NOS. 647 & 648/JP/2013 M/S. GUPTA FABTEX PVT. LTD. VS. DCIT WITH REFERENCE TO ABOVE AND REGARDING APPLICABILIT Y OF SECTION 1941 IN RESPECT OF PAYMENT OF MADE TO RIICO FOR ALL OTMENT OF INDUSTRIAL PLOT WE ARE TO SUBMIT AS UNDER:- 1. SECTION 1941 OF INCOME TAX ACT PROVIDES FOR DEDU CTION OF TAX AT SOURCE ON PAYMENT OF INCOME BY WAY OF RENT. THE WOR D RENT HAS BEEN DEFINED IN EXPLANATION TO SECTION 1941 AS RENT MEA NS ANY PAYMENT BY WHATEVER NAME CALLED, UNDER ANY LEASE, SUB LEASE, T ENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR THE USE OF. FORM THE ABOVE DEFINITION OF RENT IT IS CLEAR THAT SECTION 1941 COVER THE RENTING TRANSACTION OF USE OF LAND BUILDING, PL ANT AND MACHINERY ETC. SECTION 1941 COVER THE TRANSACTION OF USE OF PROPER TY IN THE CAPACITY AS TENANT NOT AS OWNER. 2. IN THE PRESENT CASE RIICO IS SELLING LAND ON LEA SE HOLD BASIS I.E. ON 99 YEARS LEASE. THE ENTREPRENEURS WHO WANT TO SET I NDUSTRIAL UNDERTAKING REQUIRE TO APPLY FOR ALLOTMENT OF LAND IN PRESCRIBE D FORM. ACCORDING TO FORM OF APPLICATION, HE IS REQUIRED TO DEPOSIT DEVE LOPMENT CHARGES AS PRICE FOR ALLOTMENT OF LAND. HE IS HAVING ALL THE R IGHT INCLUDING SALE OF LAND, SUBLETTING OF LAND, MORTGAGE, CONSTRUCTION ETC. FRO M THE ABOVE, IT IS VERY MUCH CLEAR THAT ALLOTMENT OF LAND BY RIICO ON LEASE HOLD BASIS IS NOTHING BUT SALE OF LAND FOR A FIXED NUMBER OF YEARS. SECTI ON 1941 OF THE ACT COVERS ONLY THE LEASE/SUBLEASE AGREEMENT WHICH ARE IN THE NATURE OF RENTING AGREEMENT NOT TRANSFER OF OWNERSHIP. SECTIO N 1941 COVERS THE TRANSACTION WHICH PROPERTY IS GIVEN FOR PERIODICAL PAYMENT FOR USE IN THE CAPACITY AS TENANT. SECTION 1941 DOES NOT COVER THE TRANSACTION OF LEASE WHERE OWNERSHIP OF PROPERTY IS TRANSFERRED AND PROP ERTY IS USED IN THE CAPACITY OF OWNER. 3. THERE ARE TWO SYSTEM OF SALE OF LAND ONE IS ON L EASE HOLD BASIS AND SECOND IS ON FREEHOLD BASIS. SALE OF LAND ON FREE H OLD BASIS IS PERMANENT TRANSFER OF OWNERSHIP. IN OTHER WORDS SALE OF LAND ON FREE HOLD BASIS ARE PERMANENT TRANSFER OF OWNERSHIP. TRANSFER OF LAND O N LEASE HOLD BASIS IS TRANSFER OF OWNERSHIP OF LAND FOR FIXED NUMBER OF Y EARS. THUS WHERE THERE IS TRANSFER OF OWNERSHIP MAY BE ON LEASE HOLD BASIS OR ON FREE HOLD BASIS TRANSACTION IS OF PURCHASE/SALE OF LAND. THIS CONCE PT HAS BEEN DULY RECOGNIZED UNDER THE INCOME TAX PROVISION AS WELL A S WEALTH TAX PROVISION. SECTION 269(H) [UNDER CHAPTER XXA I.E. ACQUISITION OF IMMOVABLE 5 ITA NOS. 647 & 648/JP/2013 M/S. GUPTA FABTEX PVT. LTD. VS. DCIT PROPERTIES IN CERTAIN CASES OF TRANSFER TO COUNTERA CT EVASION OF TAX] OF INCOME TAX ACT, 1961 WHICH DEFINES TRANSFER IN RE LATION TO ANY IMMOVABLE PROPERTIES MEANS TRANSFER OF SUCH PROPERT Y BY WAY OF SALE, EXCHANGER LEASE FOR A TERM NOT LESS THAN TWELVE YEA RS. THUS LEASE OF MORE THAN 12 YEARS IS TREATED AS TRANSFER OF IMMOVABLE P ROPERTY. SIMILARLY UNDER THE WEALTH TAX PROVISION URBAN LAND IS TREATE D AS TAXABLE WEALTH AND PART B OF SCHEDULE III SPECIFICALLY PROVIDES RU LES FOR VALUATION THAT WHERE THE IMMOVABLE PROPERTY BEING BUILDING CONSTRU CTED ON LEASEHOLD LAND AND UNEXPIRED LEASE PERIOD IS 50 YEAR OR MORE THAN VALUE IS TO BE DETERMINED BY MULTIPLYING NET MAINTAINABLE RENT BY 10 AND WHERE THE LEASE PERIOD IS MORE THAN 15 YEARS BUT LESS THAN 50 YEAR THAN VALUE IS TO BE DETERMINED BY MULTIPLYING NET MAINTAINABLE RENT BY 8. THUS IN WEALTH TAX ALSO LEASES CONSISTING OWNERSHIP RIGHT ARE TREA TED AS TAXABLE WEALTH. SIMILARLY UNDER THE PROVISION OF RAJASTHAN STAMP DU TY ACT, LEASES MORE THAN TWELVE YEAR ARE TREATED AS SALE OF IMMOVABLE P ROPERTY FOR THE PURPOSE OF LEVY OF STAMP DUTY. THUS FROM ALL THESE IT IS CLEAR THAT LEASES MORE THAN SPECIFIED PERIOD ARE TREATED AS TRANSFER OF OWNERSHIP. 4. FINANCE BILL 2012 PROPOSED TO INSERT NEW SECTION 194LAA WHICH PROVIDES DEDUCTION OF TAX AT SOURCE IN RESPECT OF P URCHASE OF IMMOVABLE PROPERTY OTHER THAN AGRICULTURE LAND. THUS FROM THE ABOVE IT IS ALSO CLEAR THAT TILL NOW TRANSACTION RELATING TO PURCHASE/SALE OF IMMOVABLE PROPERTY IS NOT SUBJECT TO DEDUCTION OF TAX AT SOURCE IN ANY OF THE PROVISION. 5. FROM THE ABOVE DISCUSSION, IT IS CLEAR THAT SECT ION 194-I COVER ONLY TRANSACTION RELATING TO RENTING OF PROPERTY WHICH I S USED OTHERWISE THAN BY OWNER. IF PROPERTY IS USED BY OWNER IN THE CAPACITY OF OWNER, TRANSACTION DOES NOT FALL IN THE PREVIEW OF SECTION 194-I OF TH E ACT. 6. IN THE PRESENT CASE COMPANY HAS MADE THREE TYPES OF PAYMENT TO RIICO I.E. DEVELOPMENT CHARGES, INTEREST ON DEVELOP MENT CHARGES, ECONOMIC RENT & OTHER CHARGES. PAYMENT OF DEVELOPME NT CHARGES IS TOWARDS ALLOTMENT OF LAND I.E. PURCHASE PRICE OF LA ND ON WHICH NONE OF THE PROVISION OF CHAPTER XVIIB APPLY. RIICO BEING PUBLI C FINANCIAL INSTITUTION NOT SUBJECT TO TDS UNDER SECTION 194A OF THE ACT, H ENCE PAYMENT OF INTEREST ON DEVELOPMENT CHARGES IS ALSO NOT LIABLE FOR DEDUCTION OF TAX AT SOURCE. PAYMENT OF ECONOMIC RENT IS VERY MINOR AND BELOW THE MINIMUM LIMIT PRESCRIBED FOR DEDUCTION OF TAX AT SOURCE. PA YMENT OF ECONOMIC RENT 6 ITA NOS. 647 & 648/JP/2013 M/S. GUPTA FABTEX PVT. LTD. VS. DCIT IS VERY MINOR AND BELOW THE MINIMUM LIMIT PRESCRIBE D FOR DEDUCTION OF TAX AT SOURCE. IN VIEW OF ABOVE NONE OF PAYMENT MADE TO RIICO IS L IABLE FOR DEDUCTION OF TAX AT SOURCE. THE AO WAS NOT SATISFIED WITH THE REPLY SUBMITTED B Y THE ASSESSEE, AND IN VIEW THEREOF, HAS HELD AS UNDER :- 7. THE RIICO HAS DIVIDED THE LEASE-AMOUNT UNDER D IFFERENT HEADS/NOMENCLATURE LIKE DEVELOPMENT CHARGES, INTERE ST ON DEVELOPMENT CHARGE, SECURITY MONEY, ECONOMIC RENT ETC. HOWEVER, IF WE GO INTO THE NATURE OF THESE CHARGES, THEY ARE JUST BIFURCATION OF LEASE RENT TO BE PAID BY THE ALLOTTEE TO THE RIICO. MERE GIVING DIFFERENT NAMES TO VARIOUS HEADS OF RENT OR BIFURCATING THEM, DOES NOT QUALIFY IT TO BE OUT OF THE DEFINITION OF LEASE RENT. THE RESPONSIBILITY TO DEDUCT TDS L IES ON THE ASSESSEE DEDUCTOR & THE ONUS CANNOT BE TRANSFERRED TO OTHER PARTY. THE ALLOTTEE WAS REQUIRED TO DEDUCT TDS ON WHOLE AMOUNT OF LEAS E-RENT PAID TO THE RIICO AND THE CONTENTION OF THE ALLOTTEE CANNOT BE ACCEPTED THAT THERE ARE DIFFERENT KINDS OF DUES ON WHICH TDS IS NOT APP LICABLE. HENCE, IT IS VERY CLEAR THAT THE LEASE-RENT PAID BY THE ASSESSEE DEDUCTOR FALLS WITHIN THE DEFINITION OF SECTION 194 1 BY WHAT EVER NAME CALLED AND THE ASSESSEE IS IN DEFAULT OF NOT DEDUCT ING TDS ON THE AMOUNT PAID TO THE ASSESSEE. THE CALCULATION OF TDS AND IN TEREST U/S 201(1A) IS AS UNDER :- DATE OF PAYMENT AMOUNT PAID/CREDIT ED TDS DEDUC TED TDS TO BE DEDUCTED U/S 201(1) AMOUNT OF SHORT DEDUCTION/NON -DEDUCTION SECTIO N DELAY OF MONT H INTERES T U/S 201(1A ) TOTAL F.Y.2010- 11 21.09.2010 12742178 0 1274218 1274218 1941 24 30581 2 1580030 31.03.2011 3316921 0 331692 331692 1941 18 59705 39 1397 31.03.2011 1393625 0 139363 139363 1941 18 25085 16 4448 TOTAL 17452724 1745273 1745273 390602 2135875 F.Y.2011- 12 29.08.2011 1923296 0 192330 192330 1941 13 25003 21 7333 28.09.2011 1923296 0 192330 192330 1941 12 23080 21 5410 20.10.2011 1650000 0 165000 165000 1941 11 18150 18 3150 7 ITA NOS. 647 & 648/JP/2013 M/S. GUPTA FABTEX PVT. LTD. VS. DCIT 28.12.2011 1923296 0 192330 192330 1941 9 17310 209 640 31.03.2012 2786408 0 278641 278641 1941 6 16718 295 359 TOTAL 1206296 1020631 1020631 100261 1120892 3. THE ASSESSEE HAS PREFERRED APPEAL BEFORE LD. CIT (A), WHO HAS CONFIRMED THE ORDER PASSED BY AO HOLDING THAT THE DEVELOPMENT CHA RGES PAID BY THE ASSESSEE TO RIICO TOWARDS ALLOTMENT OF LAND ON LEASE BASIS FOR 99 YEARS IS LIABLE TO BE TAXED UNDER SECTION 194-I AND THE INTEREST PAID ON THE INSTALLM ENTS OF DEVELOPMENT CHARGES ARE LIABLE FOR TAX UNDER SECTION 194-I, THE REASONING G IVEN BY LD. CIT (A) IS AS UNDER :- IT IS EVIDENT FROM THE PERUSAL OF THE AFORESAID C LAUSES OF THE LEASE AGREEMENT THAT THE LAND WAS GIVEN TO THE ASSESSEE O N LEASE AND NOT TRANSFERRED BY WAY OF SALE. UNDER THIS LEASE AGREEM ENT, APPELLANT ONLY ACQUIRED A RIGHT TO USE THE LAND FOR A SPECIFIC PUR POSE AND FOR A SPECIFIED TIME. ASSESSEE DID NOT ACQUIRE ANY OWNERSHIP RIGHTS ON THE SAID LAND. THOUGH THE ASSESSEE HAS TO AY A SUM OF RS. 6,05,70, 034/- TO RIICO ON NON REFUNDABLE BASIS AND CAPITALIZED THE EXPENDITUR E IN ITS BOOKS OF ACCOUNTS, IT WOULD NOT CHANGE THE NATURE OF TRANSAC TION. SINCE THE APPELLANT HAS ACQUIRED A BENEFIT OF ENDURING NATURE BY GETTING THE RIGHT TO USE THE LAND ON LEASE FOR 99 YEARS, IT HAS RIGHTLY CAPITALIZED THE EXPENDITURE. IRRESPECTIVE OF THE FACT THAT THE OUTG O WAS CAPITAL IN NATURE, THE ISSUE IS WHETHER THE DEVELOPMENT CHARGES PAID B Y ASSESSEE TO RIICO WILL FALL WITHIN THE DEFINITION OF RENT AS PROVID ED IN EXPLANATION TO SEC. 194I OF THE ACT, WHICH IS REPRODUCED AS UNDER :- EXPLANATION FOR THE PURPOSE OF THIS SECTION, - (I) RENT MEANS ANY PAYMENT, BY WHATEVER NAME CALLED, UNDER ANY LEASE, SUB-LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR THE USE OF (EITHER SEPARATELY OR TOGETHER) ANY, - (A) LAND; OR (B) BUILDING (INCLUDING FACTORY BUILDING); OR (C) LAND APPURTENANT TO A BUILDING (INCLUDING FACTORY B UILDING); OR 8 ITA NOS. 647 & 648/JP/2013 M/S. GUPTA FABTEX PVT. LTD. VS. DCIT (D) MACHINERY; OR (E) PLANT; OR (F) EQUIPMENT; OR (G) FURNITURE; OR (H) FITTINGS, WHETHER OR NOT ANY OR ALL OF THE ABOVE ARE OWNED BY THE PAYEE; (II) WHERE ANY INCOME IS CREDITED TO ANY ACCOUNT, WHETHE R CALLED SUSPENSE ACCOUNT OR BY ANY OTHER NAME, IN THE BOO KS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH INCOME, SUCH CREDI TING SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT O F THE PAYEE AND THE PROVISIONS OF THIS SECTION SHALL APPLY ACCO RDINGLY. IT IS EVIDENT FROM THE ABOVE DEFINITION OF RENT THA T SEC. 194I DOES NOT MAKE ANY DIFFERENTIATION BETWEEN CAPITAL OUTGO AND REVENUE OUTGO. IT IS AN EXHAUSTIVE DEFINITION WHICH COVERS ANY AND EV ERY PAYMENT MADE FOR THE USE OF LAND. IT DOES NOT SPECIFY THE PERIOD OF USE OF THE LAND FOR WHICH RENT WAS PAID. IN VIEW OF THE CLEAR STATUTORY DEFIN ITION OF RENT SPECIFICALLY PROVIDED IN SEC. 194I, THE DEFINITION OF TRANSFER IN OTHER PROVISIONS OF ACT OR THE NORMAL MEANING OF RENT, CAN NOT BE RELIED UPON WHILE INTERPRETING SEC. 194I OF THE ACT. THE PAYMENT MADE BY THE ASSES SEE TO RIICO AS DEVELOPMENT CHARGES FALLS IN THE DEFINITION OF REN T U/S 194I IN RESPECT OF WHICH THE APPELLANT WAS REQUIRED TO DEDUCT TAX AT S OURCE. IT IS ALSO PERTINENT TO MENTION HERE THAT RIICO ITS ELF WAS NOT THE OWNER OF THE SAID PLOTS OF LAND. THE LAND WAS ALLOT TED BY THE GOVERNMENT TO RIICO ON LEASE HOLD BASIS FOR A PERIOD OF 99 YEA RS FOR SETTING UP AND DEVELOPING INDUSTRIAL AREAS AS MENTIONED IN RULE-2 AND 11-A OF THE RAJASTHAN INDUSTRIAL AREAS ALLOTMENT RULE 1959. CLAUSE (IV) OF RULE 11- A FURTHER PROVIDED THAT RIICO MAY SUB-LEASE THE LEA SED LAND OR PART THEREOF FOR INDUSTRIAL PURPOSES. RIICO SUBLEASED TH E LAND TO THE APPELLANT IN TERMS AND CONDITIONS LAID DOWN IN THE AFORESAID RULES. IT IS THUS EVIDENT THAT WHEN RIICO ITSELF IS NOT THE OWNER OF THE LAND , IT CAN NOT TRANSFER THE OWNERSHIP RIGHTS OF THE LAND TO THE APPELLANT. IT I S A SETTLED POSITION OF LAW THAT THE TRANSFEREE CAN NOT HAVE A BETTER TITLE THA N THE TRANSFEROR. THE ISSUE IS SQUARELY COVERED BY THE DECISION OF HO NBLE ITAT, CHENNAI IN THE CASE OF FOXCONN INDIA DEVELOPER PVT. LTD. (2012) 53 SOT 9 ITA NOS. 647 & 648/JP/2013 M/S. GUPTA FABTEX PVT. LTD. VS. DCIT 13/(2012) 24 TAXMANN.COM. 48. IN THIS CASE, THE AS SESSEE HAD TAKEN ON LEASE A LAND FOR A PERIOD OF 99 YEARS FROM S FOR WHICH AN AMOUNT OF RS 28.41 CORE WAS PAID AS UPFRONT CHARGES FOR LEASE WH ICH WAS NOT REFUNDABLE. AS PER THE LEASE DEED, THE ASSESSEE ALS O PAID LEASE RENT OF RS. 1 PER YEAR. AO HELD THAT UPFRONT FEES FALLS WITHIN THE DEFINITION OF RENT U/S 194I AND THEREFORE ASSESSEE WAS LIABLE TO DEDUC T TAX AT SOURCE THEREFROM. ASSESSEE CLAIMED THAT THE UPFRONT FEES W AS IN THE NATURE OF SALE CONSIDERATION. ON THESE FACTS HONBLE TRIBUNAL HAS HELD AS UNDER :- 9. WHAT THE ASSESSEE HAD PAID TO M/S. SIPCOT LTD. WAS UNDER A LEASE AGREEMENT. ONE OF THE ARGUMENTS TAKEN BY LE ARNED A.R. WAS THAT THE LEASE AGREEMENT WAS DATED AFTER THE E ND OF THE RELEVANT PREVIOUS YEAR AND HENCE THE PAYMENTS MADE OUGHT NOT BE CONSIDERED AS PURSUANT TO THE LEASE AGREEMENT. HOWE VER, IN OUR OPINION, THIS IS NOT RELEVANT. REASON BEING THAT PA YMENTS WERE EFFECTED DURING THE RELEVANT PREVIOUS YEAR AND IT I S AN ACCEPTED POSITION THAT SUCH PAYMENTS WERE FOR THE LEASE OF T HE LAND. SO, THE DATE OF THE AGREEMENT DOES NOT MATTER SINCE THE LEA SE WAS ALREADY IN CONTEMPLATION AND ASSESSEE WOULD NOT HAVE GIVEN THE MONEY UNLESS THE LEASE WAS ATLEAST ORALLY AGREED BETWEEN THE PARTIES. THIS BEING SO, THE PAYMENT MADE BY THE ASSESSEE TO M/S. SIPCOT LTD., BY WHATEVER NAME CALLED, WAS UNDER A LEASE AG REEMENT. DEFINITION OF RENT GIVEN ABOVE WILL DEFINITELY IN CLUDE PAYMENTS OF ANY TYPE UNDER ANY AGREEMENT OR ARRANGEMENT FOR USE OF LAND. ON THE FACE OF SUCH A CLEAR STATUTORY DEFINITION, WE C ANNOT SAY THAT NORMAL MEANING OF RENT HAS TO BE GIVEN WHILE INTE RPRETING SECTION 194-I OF THE ACT. WHILE INTERPRETING RENT AS MENT IONED IN SECTION 194-I, WE HAVE TO APPLY THE DEFINITION GIVEN TO RE NT IN THE EXPLANATION THERETO. THE DEFINITION OF RENT GIVEN UNDER EXPLANATION TO SECTION 194-I OF THE ACT WILL SQUAREL Y COVER THE PAYMENT MADE BY THE ASSESSEE TO M/S. SIPCOT LTD. A ND RENDER SUCH PAYMENT AS SOMETHING ON WHICH ASSESSEE WAS OBL IGED TO DEDUCT TAX AT SOURCE. WE ARE, THEREFORE, OF THE OPI NION THAT ASSESSEE HAVING NOT DEDUCTED SUCH TAX AT SOURCE, RI GOURS OF SECTIONS 201(1) AND 201(1A) OF THE ACT ARE ATTRACTE D. THE FACTS OF THE APPELLANTS CASE ARE EXACTLY SIMIL AR TO THE FACTS OF THE CASE DECIDED BY HONBLE ITAT, CHENNAI. THE CASE LAWS RELIED UPON BY LD. AR ON THE DIFFERENT FACTS AND ISSUES. THE MAIN CONTENTION IN THE CASES RELIED UPON BY THE APPELLANT IS WHETHER THE PAYMENT MADE UNDER A LEASE AGREEMENT FOR LONGER PERIOD WAS A REVENUE EXPENDITU RE OR CAPITAL 10 ITA NOS. 647 & 648/JP/2013 M/S. GUPTA FABTEX PVT. LTD. VS. DCIT EXPENDITURE. HENCE, THESE CASE LAWS ARE NOT RELEVAN T FOR THE INTERPRETATION OF SEC. 194I OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION, THE GROUND RAISED BY THE APPELLANT IS REJECTED AND THE DECISION OF DCIT, TDS IS UPHOLD . I ALSO DO NOT AGREE WITH THE CONTENTION OF THE LD. AR THAT INTEREST PAID ON DEVELOPMENT CHARGES ARE NOT LIABLE FOR TDS EITHER U/S 194I OR 194A OF THE ACT. AS PER THE ALLOTMENT LETTER DATED 07.10.2010, THE APPELLANT HAD AN OPTION EITHER TO PAY ENTIRE DEVELO PMENT CHARGES IN THE YEAR OF THE ALLOTMENT OF LAND OR PAY 75% OF THE DEV ELOPMENT CHARGES IN 19 QUARTERLY INSTALLMENTS OVER A PERIOD OF FIVE YEA RS ALONGWITH INTEREST @ 12% PA. APPELLANT OPTED FOR THE PAYMENT IN QUARTER LY INSTALLMENTS ALONG WITH INTEREST. THE INTEREST PAID BY THE APPELLANT W AS COMPENSATORY IN NATURE AND WAS THEREFORE ONLY IN THE NATURE OF LEAS E RENT. SUCH INTEREST PAID IS ANALOGOUS TO THE INTEREST PAID BY ASSESSEE ON THE DEFERRED/DELAYED PAYMENT OF INCOME TAX. IT WAS HELD BY THE COURTS THAT SUCH INTEREST ON DEFERRED/DELAYED PAYMENT OF TAX WA S COMPENSATORY AND HENCE WAS IN THE NATURE OF TAX ONLY AND CAN NOT BE ALLOWED AS REVENUE EXPENDITURE. INTEREST PAID U/S 234A, 234B AND 234C ARE TREATED AS TAX ONLY. THE INTEREST PAID ON DEFERRED PAYMENT OF DEVE LOPMENT CHARGES ARE COVERED BY THE EXHAUSTIVE DEFINITION OF RENT GIVE N IN EXPLANATION TO SEC. 194I OF THE ACT. 4. NOW THE ASSESSEE IS BEFORE US. 5. THE IMPORTANT QUESTION TO BE DETERMINED FROM THE TERMS OF THE LEASE DEED IS WHETHER PAYMENT OF DEVELOPMENT CHARGES PAID WAS FOR ACQUISITION OF LEASEHOLD RIGHTS OR FOR USE OF LAND. 5.1. IF THE PAYMENT MADE WAS FOR USE OF LAND THEN A SSESSEE WAS REQUIRED TO DEDUCT TAX U/S 194 I OF THE ACT, OTHERWISE NOT. THE RELEVANT TERMS OF THE LEASE DEED ARE EXTRACTED HEREIN BELOW :- IN CONSIDERATION OF THE PREMISES AND OF THE SUM OF RS.1041,41,73,600 (RUPEES ONE THOUSAND FORTY-ONE CR ORE FORTY- 11 ITA NOS. 647 & 648/JP/2013 M/S. GUPTA FABTEX PVT. LTD. VS. DCIT ONE LACS SEVENTY-THREE THOUSAND SIX HUNDRED ONLY) P AID BY THE LESSEE TO THE LESSOR AS A PREMIUM AND OF THE COVENA NTS AND AGREEMENTS ON THE PART OF THE LESSEE HEREINAFTER CO NTAINED, THE LESSOR DOTH HEREBY DEMISE UNTO THE LESSEE ALL THAT PIECE OF LANDTOGETHER WITH ALL RIGHTS EASEMENTS AND APPU RTENANCES THERETO BELONGING TO THE LESSOR TO HOLD THE LAND AND PREMISES HEREINBEFORE EXPRESSED TO BE HEREBY DEMISED UNTO TH E LESSEE FOR THE TERM OF 80 YEARS 5.2. FURTHER AS PER CLAUSE 2(1) OF THE LEASE DEED , AT PAGE 17 OF PB THE ASSESSEE IS FURTHER PERMITTED TO SELL AND MORTGAGE, ASSIGN, UNDERLET OR SUBLET OR PART WITH THE POSSESSION OF THE PREMISES OR ANY PA RT OF THERE OR ANY INTEREST THEREIN THE DEMISED WITH THE PREVIOUS CONSENT OF R IICO. 5.3. THE AFORESAID TERMS OF THE LEASE DEED LEAVES N O MANNER OF DOUBT THAT THE DEVELOPMENT CHARGES OF RS.4.8796830/- ALONG WITH I NTEREST WAS PAID FOR ACQUISITION OF RIGHTS IN THE LEASE HOLD PROPERTY RA THER THAN USE OF LAND. THEREFORE THE PROVISIONS OF SECTION 194 I OF THE ACT ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE. THE PURPORT OF SECTION 194 I OF THE ACT I S NOT TO BRING IN ITS PURVIEW PAYMENTS OF ANY OR EVERY KIND. ONLY THOSE PAYMENTS WHICH ARE IN THE NATURE OF USE OF LAND COME WITHIN THE AMBIT OF SECTION 194 I OF THE ACT. 5.4. THE WORD USE IS THEREFORE OF PRIME IMPORTANC E FOR TRANSACTIONS WHERE THE CONSIDERATION PAID FOR THE PROPERTY WOULD BE TE RMED AS RENT. THE TERM USE ACCORDING TO US HAS TO BE INTERPRETED KEEPING IN MIND THE RELATIONSHIP BETWEEN THE LANDLORD AND THE TENANT. THE SAME CANNOT BE EXT ENDED TO BRING WITHIN ITS 12 ITA NOS. 647 & 648/JP/2013 M/S. GUPTA FABTEX PVT. LTD. VS. DCIT PURVIEW EXPLOITATION OF ANY KIND WITH REFERENCE TO THE PROPERTY BY CHANGING ITS IDENTITY FOR ITS OWN BENEFIT AND THEREAFTER SELLING IT FOR PROFIT. IF THAT BE SO AND THE WORD USE IS GIVEN AN EXTENDED MEANING, THERE WOULD BE NO DIFFERENCE BETWEEN A SALE TRANSACTION AND A TRANSACTION BETWEE N THE LANDLORD AND THE TENANT. THIS WOULD RENDER THE INTENTION OF THE LEGI SLATURE IN IMPORTING THE WORD USE IN SECTION 194 I OF THE ACT OTIOSE. LANDLORD -TENANT RELATIONSHIP DOES NOT CONTEMPLATE SUCH RIGHT BEING GIVEN TO THE TENANT. H OWEVER, THERE MAY BE TRANSACTIONS OF LEASE THAT MAY BE IDENTICAL TO THE TRANSACTIONS BETWEEN A LANDLORD AND TENANT AND THAT IS WHY THE DEFINITION OF THE RE NT INCLUDES LEASE, SUB-LEASE ETC. 5.5. IT IS FURTHER RELEVANT TO MENTION THAT THE AMO UNT PAID BY THE ASSESSEE FOR DEVELOPMENT CHARGES HAS NO CONNECTION WITH THE MARK ET RENT OF THE PROPERTY LEASED TO THE ASSESSEE. FURTHERMORE THE TERM OF LEA SE DEED IS FOR A CONSIDERABLE PERIOD OF 99 YEARS WHICH FURTHER SUPPORTS THE CASE OF THE ASSESSEE THAT THE PAYMENT MADE WAS FOR THE ACQUISITION OF RIGHTS IN T HE LAND ALONG WITH THE RIGHT OF POSSESSION, RIGHT OF EXPLOITATION OF PROPERTY, ITS LONG TERM ENJOYMENT, TO MORTGAGE THE PROPERTY, TO SELL THE PROPERTY ETC. AL SO THE ENTIRE DEVELOPMENT CHARGES OF RS.4,87,96,830/- ALONG WITH INTEREST HA S BEEN PAID IN TERMS OF THE LEASE DEED. 5.6. THE DISTINCTION BETWEEN THE LEASE PREMIUM AND THE RENT HAS BEEN A SUBJECT MATTER OF DISCUSSION IN VARIOUS JUDICIAL PR ONOUNCEMENTS. THE HON'BLE 13 ITA NOS. 647 & 648/JP/2013 M/S. GUPTA FABTEX PVT. LTD. VS. DCIT SUPREME COURT IN THE CASE OR CIT VS PANBARI TEA COM PANY LTD. 57 ITR 422 HAS BROUGHT OUT THE AFORESAID DISTINCTION AND THE RELEV ANT PART IS REPRODUCED AS UNDER :- UNDER S. 105, OF THE TRANSFER OF PROPERTY ACT, A LEASE OF IMMOVABLE PROPERTY IS A TRANSFER OF A RIGHT TO ENJO Y THE PROPERTY MADE FOR A CERTAIN TIME, EXPRESS OR IMPLIED, OR IN PERPETUITY, IN CONSIDERATION OF A PRICE PAID OR PROMISED, OR OF MO NEY, A SHARE OF CROPS, SERVICE OR ANY OTHER THING OF VALUE, TO BE R ENDERED PERIODICALLY OR ON SPECIFIED OCCASIONS TO THE TRANS FEROR BY THE TRANSFEREE, WHO ACCEPTS THE TRANSFER ON SUCH TERMS. THE TRANSFEROR IS CALLED THE LESSOR, THE TRANSFEREE IS CALLED THE LESSEE, THE PRICE IS CALLED THE PREMIUM, AND THE MO NEY, SHARE, SERVICE OR OTHER THING TO BE SO RENDERED IS CALLED THE RENT. THE SECTION, THEREFORE, BRINGS OUT THE DISTINCTION BETW EEN A PRICE PAID FOR A TRANSFER OF A RIGHT TO ENJOY THE PROPERTY AND THE RENT TO BE PAID PERIODICALLY TO THE LESSOR. WHEN THE INTEREST OF THE LESSOR IS PARTED WITH FOR A PRICE, THE PRICE PAID IS PREMIUM OR SALAMI. BUT THE PERIODICAL PAYMENTS MADE FOR THE CONTINUOUS ENJOYME NT OF THE BENEFITS UNDER THE LEASE ARE IN THE NATURE OF RENT. THE FORMER IS A CAPITAL INCOME AND THE LATTER A REVENUE RECEIPT. TH ERE MAY BE CIRCUMSTANCES WHERE THE PARTIES MAY CAMOUFLAGE THE REAL NATURE OF THE TRANSACTION BY USING CLEVER PHRASEOLOGY. IN SOM E CASES, THE SO- CALLED PREMIUM IS IN FACT ADVANCE RENT AND IN OTHER S RENT IS DEFERRED PRICE. IT IS NOT THE FORM BUT THE SUBSTANC E OF THE TRANSACTION THAT MATTERS. THE NOMENCLATURE USED MAY NOT BE DECISIVE OR CONCLUSIVE BUT IT HELPS THE COURT, HAVI NG REGARD TO THE OTHER CIRCUMSTANCES, TO ASCERTAIN THE INTENTION OF THE PARTIES. 5.7. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. PURNENDU MULLICK 116 ITR 0591 OBSERVED THAT IN CASE WHERE THE LEASES IS FOR A LONG PERIOD, THE LUMP SUM PAYMENT CANNOT BE TREATED AS RENT. THE REL EVANT PORTION OF THE JUDGMENT IS EXTRACTED HEREIN BELOW :- 14 ITA NOS. 647 & 648/JP/2013 M/S. GUPTA FABTEX PVT. LTD. VS. DCIT 8. ON FURTHER APPEAL, THE SUPREME COURT HELD THAT T HE TRIBUNAL AND THE HIGH COURT WERE BOTH IN 'ERROR IN TREATING THE SAID SUM OF RS. 55,200 AS ADVANCE PAYMENT OFRENT FOR THE FOLLOWING REASONS: (A) PRIMA FACIE, PREMIUM OR SALAMI WAS NOT INCOME A ND IT WOULD BE FOR THE IT AUTHORITIES TO SHOW THAT THE FACTS EXIST ED WHICH WOULD MAKE IT A REVENUE RECEIPT. (B) THE SUB-LEASE DID NOT CONTAIN ANY CONDITION OR STIPULATION FROM WHICH IT COULD BE INFERRED THAT THE AFORESAID AMOUN T WAS PAID BY WAY OF ADVANCE RENT. (C) IT WAS CLEARLY STATED IN THE LEASE THAT THE MON EY WAS BEING PAID FOR COMPLETION OF THE BUILDING REQUIRED FOR RUNNING AS A CINEMA HOUSE. (D) THE PAYMENT OF THE RENT UNDER THE LEASE WAS TO COMMENCE NOT FROM THE DATE OF THE SUBLEASE WHICH WAS FEBRUARY 23 ,1946, BUT W.E.F. JUNE 1, 1946. (E) THE SUB-LESSEES WOULD ENTER IN TO POSSESSION AF TER THE CINEMA HOUSE WAS SAID TO BE COMPLETED. (F) THE PAYMENT OF THE LUMP SUM WAS OF A NON-RECURR ING NATURE. 9. ON THE BASIS OF THE AFORESAID REASONS .THE SUPREME COURT HELD THAT THE SAID SUM OF RS. 55,200 WAS A CAPITAL RECEIPT AND NOT INCOME. 10. IT APPEARS TO US THAT THE FACTS OF THE PRESENT CASE ARE VERY SIMILAR TO THE FACTS WHICH WERE CONSIDERED BY THE S UPREME COURT IN THE ABOVE DECISION AND THAT THE PRESENT REFERENCE I S COVERED BY THE SAID DECISION. 11. IN THE INSTANT CASE THE LEASE IS FOR A LONG PERIOD WITH PROVISION FOR ESCALATION OF RENT. THE .RENT FIXED IS HIGHER T HAN THE PREVIOUS RENT. THE LEASE PROVIDES FOR DEMOLITION OF THE OLD STRUCTURES AND CONSTRUCTION OF A NEW BUILDING AFTER SUBSTANTIAL EX PENDITURE. THE LUMP SUM PAID IS DESCRIBED AS SALAMI OR PREMIUM AND NOT RENT. THERE IS NO CLAUSE FOR REPAYMENT OF THE LUMP SUM PA ID OR ADJUSTMENT OF THE SAID LUMP SUM AGAINST RENT. THERE IS THING ON RECORD TO SHOW THAT THE PREMIUM OR SALAMI PAID HAD ANY CHARACTERISTIC OF RENT. 15 ITA NOS. 647 & 648/JP/2013 M/S. GUPTA FABTEX PVT. LTD. VS. DCIT 5.8. THE HONBLE DELHI HIGH COURT IN THE CASE OF BH ARAT STEEL TUBES LTD. VS CIT REPORTED IN (2001) 252 ITR 0622 HAS BROUGHT OUT THE DISTINCTION BETWEEN THE LEASE PREMIUM AND THE RENT BY LAYING DOWN BROAD PRINCIPLES RELATING TO THE TERM LEASE PREMIUM/SALAMI. THE SAID PRINCIPLE ARE A PPLICABLE IN THE CASE OF THE ASSESSEE IN AS MUCH AS THE LEASE PREMIUM HAS BEEN P AID BEFORE THE EXECUTION OF THE LEASE WHICH IS FOR A TERM OF A LONG PERIOD OF 8 0 YEARS AND THERE IS NO PROVISION TO TREAT THE SAME AS ADVANCE RENT IN THE SUCCEEDING YEARS. THE RELEVANT PORTION OF THE JUDGMENT IS EXTRACTED HEREI N BELOW : 4. AS WAS OBSERVED BY APEX COURT IN BOARD OF AGRL. IT VS. SINDHURANI CHAUDHARANI (1957) 32 ITR 169 (SC) : TC 31R.278 AND CHINTAMANI SARAN NATHSAH DEO VS. CIT (1961) 41 ITR 506 (SC) : TC 38R.L046. INDICIA OF SALAMI ARE : (I) ITS SIMPLE NON-RECURRING CHARACTER, AND (II) PAYMENT PRIOR TO CREATION OF TE NANCY. IT IS THE CONSIDERATION PAID BY THE TENANT FOR BEING LET INTO POSSESSION AND CAN BE NEITHER RENT NOR REVENUE BUT IT IS CAPITAL R ECEIPT IN THE HANDS OF THE LANDLORD. IN THE FORMER CASE IT WAS OBSERVED THAT SALAMI IS A PAYMENT BY A TENANT AS A PRICE FOR PARTING BY THE L ANDLORD WITH THE RIGHTS UNDER THE LEASE OF THE HOLIDAY AS A CONSIDER ATION FOR WHAT THE LANDLORD TRANSFERS TO THE TENANT. THE BROAD PRI NCIPLE RELATING TO TERM SALAMI ARE AS FOLLOWS: (1) PRIMA FACIE SALAMI OR PREMIUM IS NOT INCOME, IT IS FOR THE TAXING AUTHORITIES TO PROVE THAT THE FACTS EXIST WHICH WOU LD MAKE THE SAME AS INCOME, IF THEY SEEK TO TAX IT. (2) WHERE THE PREMIUM REPRESENTS PAYMENT OF RENT IN ADVANCE IT IS INCOME. BUT IF IT REPRESENTS THE WHOLE OR PART OF T HE PRICE OF THE LAND OR THE SALE PRICE OF THE LEASEHOLD INTEREST IS NOT INCOME BUT CAPITAL. 16 ITA NOS. 647 & 648/JP/2013 M/S. GUPTA FABTEX PVT. LTD. VS. DCIT (3) SALAMI TO BE INCOME SHOULD BE A PERIODICAL MONE TARY RETURN COMING IN WHICH SOME SORT OF REGULARITY OR EXPECTED REGULARITY FROM DEFINITE SOURCES. (4) SALAMI OR PREMIUM PAID AT THE BEGINNING OF A MI NING LEASE FOR A LONG PERIOD ORDINARILY REPRESENTS THE PURCHASE PRIC E OF AN OUT ANTI OUT SALE OF THE PROPERTY AND THE SUM RECEIVED IS CA PITAL AND NOT INCOME BUT RENT OR ROYALTY PAID PERIODICALLY IS INC OME. THE PRINCIPLE IS THE SAME WHETHER THE PREMIUM IS FOR A SIMPLE LEA SE OF LAND OR FOR A LEASE OF MINERAL RIGHTS. BUT ROYALTY PAYABLE UNDER THE MINING LEASE STANDS ON A DIFFERENT FOOTING FROM PREMIUM OR SALAMI. (5) WHEN A PREMIUM IS RECEIVED MERELY AS AN INCIDEN T IN THE POSSESSION OF PROPERTY (EVEN IF LEASEHOLD) AND THER E IS NO FINDING THAT THE LETTING OUT OF THE PROPERTY IS THE BUSINES S OF THE ASSESSEE, THE PREMIUM RECEIPT IS CAPITAL. (6) SALAMI OR PREMIUM PAID IN ADVANCE OF RENT ONCE FOR ALL AT THE OUTSET THE PERIOD OF TENANCY BEING UNCERTAIN AND TH E CHANGES OF THE RESETTLEMENT OF THE SAME LAND TO SOME OTHER TEN ANT BEING REMOTE, IS CAPITAL. (7) PREMIUM (SALAMI) IS A SINGLE PAYMENT MADE FOR T HE ACQUISITION BY THE LESSEE OF THE RIGHT TO ENJOY THE BENEFITS GR ANTED TO HIM BY THE LEASE. MONEY PAID TO PURCHASE THE SAID GENERAL RIGHT IS A PAYMENT ON CAPITAL ACCOUNT. (8) SALAMI IS THE AMOUNT OF MONEY WHICH A LANDLORD INSISTS ON RECEIVING AS CONDITION PRECEDENT FOR PARTING WITH T HE LAND IN FAVOUR OF THE LESSEE AND THAT IT WAS RECEIVED BY THE LANDL ORD NOT BECAUSE OF THE USE OF THE LAND, BUT BEFORE THE LAND WAS PUT INTO USE BY THE ASSESSEE. (9) THE QUESTION OF SALAMI SHOULD NOT BE DECIDED ON THE LENGTH OF THE PERIOD OF THE LEASE BUT ON THE NATURE OF THE RI GHT CONVEYED. THE CHARACTERISTICS OF THE PAYMENT SHOULD BE DECIDE D WITHOUT REFERENCE TO THE NATURE OF THE LEASE INCLUDING THE WASTING NATURE OF THE ASSETS UNDER THE LEASE. THESE BROAD PRINCIPLES WERE SUMMARIZED BY CALCUTTA HIGH COURT IN PROMODE CH. ROY CHOWDHURY VS. CIT (1962) 46 ITR 1064 (CAL) : TC 38R.1092. QUESTION WHETHER A PARTICULAR RECEIPT LIKE SALAMI CAN 17 ITA NOS. 647 & 648/JP/2013 M/S. GUPTA FABTEX PVT. LTD. VS. DCIT BE REGARDED AS REVENUE OR CAPITAL CANNOT BE DECIDED IN THE ABSTRACT AND EACH CASE HAS TO BE DECIDED ON ITS FACTS. 5. RENT IS ALLOWABLE AS DEDUCTION UNDER S. 30 OF THE A CT. WHAT IS ALLOWABLE IS THE RENT PAID OR PAYABLE FOR THE PERIO D DURING WHICH THE PREMISES ARE USED FOR THE PURPOSES OF BUSINESS. SEC. 105 OF THE TRANSFER OF PROPERTY ACT, 1882 (IN SHORT, T.P. ACT) MAKES A DISTINCTION BETWEEN RENT AND PREMIUM PAYABLE UNDER A LEASE WHEN THE INTEREST OF THE LESSOR IS PARTED WITH FOR A PRI CE, THE PRICE PAID IS PREMIUM OR SALAMI. BUT THE PERIODICAL PAYMENTS MADE FOR THE CONTINUOUS ENJOYMENT OF THE BENEFITS UNDER THE LEAS E ARE IN THE NATURE OF RENT. THE FORMER IS CAPITAL AND THE LATTE R IS A REVENUE IN NATURE. 5.9. AGAIN IN THE CASE OF ITO VS. WADHWA & ASSOCIAT ES REALTORS PVT. LTD. (2014) 146 ITD 0694 (MUM) SIMILAR ISSUE AROSE BEFOR E ITAT MUMBAI BENCH WHERE IT WAS HELD AS UNDER : 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERU SED THE ORDER OF THE LOWER AUTHORITIES AND THE MATERIAL EVIDENCE BRO UGHT ON RECORD IN THE FORM OF PAPER BOOK AND THE JUDICIAL DECISION S RELIED UPON BY THE RIVAL PARTIES. THE ENTIRE GRIEVANCE REVOLVES AR OUND THE PREMIUM PAID BY THE ASSESSEE TO M/S. MMRDA LTD. FOR THE LEA SEHOLD RIGHTS ACQUIRED BY THE ASSESSEE THROUGH THE LEASE DEED DT. 22ND NOVEMBER, 2004. IT IS THE SAY OF THE REVENUE THAT T HIS LEASE PREMIUM WAS LIABLE FOR DEDUCTION OF TAX AT SOURCE F AILING WHICH THE ASSESSEE IS TO BE TREATED ASSESSEE IN DEFAULT. IT I S THE SAY OF THE ASSESSEE THAT SUCH LEASE PREMIUM IS IN THE NATURE O F CAPITAL EXPENDITURE AND THEREFORE THERE IS NO QUESTION OF D EDUCTION 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- 1 OF THE ACT. 10. WE HAVE CAREFULLY PERUSED THE LEASE DEED AS EXH IBITED FROM PAGE-L TO 42 OF THE PAPER BOOK. A CAREFUL READING O F 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 18 ITA NOS. 647 & 648/JP/2013 M/S. GUPTA FABTEX PVT. LTD. VS. DCIT 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 REGULATION 4A(II) AND THEREBY INCREASED THE FSI OF THE ENTIRE 'G' BLOCK O F BKC. THE DEVELOPMENT CONTROL REGULATIONS FOR BKC SPECIFY THE PERMISSIBLE FSI. 5.10. IN THE CASE OF ITO (TDS) VS NAVI MUMBAI SEZ PV T. LTD. 147 ITD 0261 (MUM) SIMILAR ISSUE IS HELD IN FAVOUR OF THE ASSESE E IN SIMILAR CONSIDERATION AND THE RELEVANT DECISION IN PARAS 19 AND 20 IS REPRODU CED HEREIN BELOW :- IN THE CASE BEFORE US, THE ASSESSEE HAS ENTERED IN TO LEASE AGREEMENTS WITH CIDCO FOR ACQUISITION OF LEASEHOLD RIGHTS IN THE LAND TO DEVELOP AND OPERATE THE SPECIAL ECONOMIC ZO NE AT NAVI MUMBAI. ASSESSEE HAS PAID PREMIUM FOR DEMISED LEASE LAND. T HE- QUESTION BEFORE US IS AS TO WHETHER THE SAID LEASE PREMIUM PAID BY THE ASSESSEE TO CIDCO TO ACQUIRE LEASEHOLD RIGHTS F OR 60 YEARS UNDER THE LEASE DEED(S) IS LIABLE FOR DEDUCTION OF TAX AT SOURCE BEING RENT WITHIN THE MEANING OF SECTION 194-1 OF T HE ACT OR NOT. AO HAS STATED THAT THE SAID PAYMENT MADE BY ASSESSE E UNDER LEASE AGREEMENTS QUALIFIES FOR RENT FOR THE PURPOSE OF SE CTION 194-1 OF THE ACT AS IT PARTAKES ALL THE CHARACTERISTICS OF R ENT AND WHEREAS THE ASSESSEE HAS CONTENDED THAT THE ASSESSEE HAS OBTAIN ED LEASEHOLD RIGHTS IN THE SAID LEASEHOLD LANDS ON PAYMENT OF LE ASE PREMIUM AND THE SAID LEASE PREMIUM IS NOT PAID UNDER A LEASE. H ENCE, IT IS A CAPITAL EXPENDITURE AND NOT AN ADVANCE RENT. WE OBS ERVE THAT THE MAIN THRUST OF THE AO TO HOLD THE PREMIUM PAID BY A SSESSEE TO HOLD IT AS RENT IS ON THE DEFINITION OF RENT UNDER SECTION 194-1 OF THE ACT THAT IT CREATES A LEGAL FICTION AND THE LEASE D EED(S) ENTERED INTO CONTAIN VARIOUS RESTRICTIVE COVENANTS. THAT THE SAI D PAYMENTS IN SUBSTANCE ARE FOR CONSIDERATION FOR USE OF LAND UND ER THE LEASE DEED(S), HENCE PROVISIONS OF SECTION 194-1 OF THE A CT IS ATTRACTED. 20. ON THE OTHER HAND, WE OBSERVE THAT GOVERNMENT O F MAHARASHTRA APPOINTED CIDCO AS THE NODAL AGENCY FOR SETTING UP OF SPECIAL ECONOMIC ZONE AT NAVI MUMBAI 'NMSEZ'. THAT THE 19 ITA NOS. 647 & 648/JP/2013 M/S. GUPTA FABTEX PVT. LTD. VS. DCIT ASSESSEE HAS BEEN JOINTLY PROMOTED AS A SPECIAL PUR POSE VEHICLE (SPV) BY CIDCO AND DRONAGIRI INFRASTRUCTURE PVT LIM ITED (DIPL) TO DEVELOP AND OPERATE THE SPECIAL ECONOMIC ZONE AT NAVI MUMBAI. PURSUANT THERETO ASSESSEE AND CID CO ENTERED INTO D EVELOPMENT AGREEMENT AND THE ASSESSEE IS REQUIRED TO MAKE PAYM ENT OF LEASE PREMIUM IN RESPECT OF THE LAND WHICH WAS BEING ACQU IRED BY CIDCO AND BEING ALLOTTED TO ASSESSEE FROM TIME TO TIME. A S PER DEVELOPMENT AGREEMENT, THE ASSESSEE IS TO DEVELOP A ND MARKET 'NMSEZ'. THERE IS NO DISPUTE TO THE FACT THAT THE AS SESSEE HAS ACQUIRED LEASEHOLD RIGHT IN THE LAND FOR THE PURPOS E OF DEVELOPING, DESIGNING, PLANNING, FINANCING, MARKETING, DEVELOPI NG NECESSARY INFRASTRUCTURE, PROVIDING NECESSARY SERVICES, OPERA TING AND MAINTAINING INFRASTRUCTURE ADMINISTRATING AND MANAG ING 'SEZ'. BY VIRTUE OF SAID LEASE DEED(S), THE ASSESSEE HAS ACQU IRED THE RIGHTS TO DETERMINE, LEVY, COLLECT, RETAIN, UTILIZE USER CHAR GES FEE FOR PROVISION OF SERVICES AND FOR TARIFFS IN ACCORDANCE WITH TERM S AND CONDITIONS PROVIDED IN THE DEVELOPMENT AGREEMENT AND THE LEASE DEED (S) ENTERED INTO. THEREFORE, WE AGREE WITH ID. CIT(A) T HAT LEASE DEED(S) AND THE DEVELOPMENT AGREEMENT HAVE ASSIGNED TO THE ASSESSEE LEASEHOLD RIGHT WHICH INCLUDES BUNDLE OF R IGHTS. THE ASSESSEE HAS PAID THE PREMIUM FOR LEASE DEED(S) FOR THE DEMISED LAND TO ACQUIRE ENTIRE RIGHTS OF THE LAND FOR A PER IOD OF 60 YEARS. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE S AID PAYMENT OF LEASE PREMIUM IS A PAYMENT FOR ACQUISITION OF LEASE HOLD LAND AND NOT MERELY FOR USE OF LAND. THE ASSESSEE HAS MADE P AYMENT FOR ENTERING INTO LEASE AGREEMENTS TO ACQUIRE LEASE HOL D RIGHTS IN THE LAND FOR A PERIOD OF 60 YEARS AND NOT UNDER A LEASE . SIMILAR ISSUE CAME UP BEFORE THE SPECIAL BENCH ITAT MUMBAI IN THE CASE OF MUKUND LTD. (SUPRA). THE ASSESSEE ACQUIRED A LAND O N LEASE FOR A PERIOD OF 99 YEARS FROM THE MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION (MIDC) AND PAID RS.2.04 CRORES AS PREMI UM OF LEASEHOLD LAND AND APART FROM FIXING ANNUAL RENT AT RS.1 PER ANNUM. THE ASSESSEE CLAIMED THAT THE SAID PREMIUM O N LEASEHOLD LAND IS A REVENUE EXPENDITURE, WHICH WAS DISALLOWED BY THE AA HOLDING IT AS A CAPITAL IN NATURE. LD. CIT(A) HELD THAT THE PREMIUM CANNOT BE TREATED AS CAPITAL EXPENDITURE AS THE ASS ESSEE DID NOT ACQUIRE OWNERSHIP OF LAND. IT WAS HELD THAT IT WAS AN EXPENDITURE RELATABLE TO 99 YEARS AND SHOULD BE ALLOWED ON PROP ORTIONATE BASIS. HOWEVER, ON FURTHER APPEAL TO THE TRIBUNAL, THE TRI BUNAL HELD THAT THE BENEFIT CONFERRED ON THE ASSESSEE ON LEASE HOLD RIGHTS IN 99 YEARS AGAINST LUMP SUM PAYMENT OF THE PREMIUM WAS O F AN ENDURING NATURE. IT WAS HELD THAT THERE WAS NO MATE RIAL ON RECORD TO SUGGEST THAT THE SUM OF RS.2.04 CRORES HAD BEEN PAID BY WAY OF 20 ITA NOS. 647 & 648/JP/2013 M/S. GUPTA FABTEX PVT. LTD. VS. DCIT ADVANCE RENT NOR THERE WAS ANY PROVISION FOR ITS AD JUSTMENT TOWARDS RENT OR FOR ITS RE-PAYMENT TO THE ASSESSEE. IT WAS HELD THAT THE CONSIDERATION PAID BY THE ASSESSEE WAS CAPITAL EXPENDITURE AND ACCORDINGLY THE ISSUE WAS DECIDED AGAINST THE ASSES SEE. 5.11. IN THE AFORESAID DECISION THE ITAT HAS DISTIN GUISHED THE DECISION IN THE CASE OF FOXCONN INDIA DEVELOPERS PVT. LTD. VS ITO 4 92/2010 RENDERED BY ITAT, CHENNAI BENCH. THE DISTINCTION IS BROUGHT OUT IN TH E DECISION OF ITAT MUMBAI BENCH IN THE CASE OF ITO VS NAVI MUMBAI SEZ PVT. LTD (SUPRA) IN THE FOLLOWING PARAS OF THE DECISIONS AT PARA 22 WHICH IS REPRODUC ED HEREIN BELOW :- 22. DURING THE COURSE OF HEARING ID. DR SUBMITTED THAT THE ABOVE DECISIONS OF ITAT, DELHI BENCH AND ITAT MUMBAI BENCH (SUPRA) ARE DISTINGUISHABLE. WHEREAS THE DECISION OF ITAT,C HENNAI BENCH IN THE CASE OF FOXCONN INDIA DEVELOPERS PVT.LTD (SUPRA ) SHOULD BE CONSIDERED AND BE FOLLOWED. WE OBSERVE THAT THE SAI D DECISION OF ITAT HAS BEEN CONSIDEREDBYTHEID.CIT(A)IN PARA 5.40 OF THE IMPUGNED ORDER. ON PERUSAL OF THE SAID ORDER OF ITA T, CHENNAI BENCH, WE OBSERVE THAT IN THE SAID ORDER OF CHENNAI BENCH ONLY THE PROVISIONS OF SECTION 194-1 HAS BEEN CONSIDERED IN RESPECT OF UPFRONT CHARGES PAID IN RESPECT OF LEASEOFLANDFORAP ERIODOF99YEARS. ON PERUSAL OF THE FACTS OF THE CASE, IT IS OBSERVED THAT THE ASSESSEE HAD ALREADY ENTERED INTO LEASE AGREEMENTS AND THE S AID PAYMENT WAS MADE TO SIPCOT LTD UNDER LEASE AGREEMENT. THERE FORE, THE SAID PAYMENT IS FOR LEASE OR USE OF LAND AND ACCORD INGLY THE PAYMENT COULD NOT BE SAID TO HAVE BEEN MADE FOR ACQ UIRING LEASEHOLD LAND AND HENCE, IT IS OBSERVED THAT THE C HENNAI BENCH HAS HELD THAT THE PAYMENT BY THE ASSESSEE COMPANY T O CIDCO IS RENT U/S194-1 OF THE ACT. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ABOVE DECISION OF ITAT CHENNAI BENCH (SUPR A) RELIED UPON BY ID. DR IS NOT APPLICABLE TO THE CASE BEFORE US. ON THE OTHER HAND,THE SPECIAL BENCH DECISION OF ITAT, MUMBAI IN THE CASE OF MUKUND LTD. (SUPRA)SQUARELY APPLY WHEREIN IT HAS BE EN HELD THAT THE PREMIUM PAID FOR ACQUIRING LEASEHOLD RIGHT IN L AND IS A CAPITAL EXPENDITURE. THE SPECIAL BENCH DECIDED THE ISSUE AF TERCONSIDERING THE VARIOUS JUDGMENTS OF THE HON'BLE JURISDICTIONAL HIGH COURT, HON'BLE APEX COURT, VARIOUS DECISIONS OF THE TRIBUN AL AS DISCUSSED 21 ITA NOS. 647 & 648/JP/2013 M/S. GUPTA FABTEX PVT. LTD. VS. DCIT HEREINABOVE WHICH HAVE DISTINGUISHED BETWEEN THE LE ASE PREMIUM AND RENT UNDER THE INCOME TAX ACT. THE HON'BLE APEX COURT HAS HELD IN THE CASE OF ENTERPRISING ENTERPRISES V/S DCI T (2007) 293 ITR 437 (SC) THAT THE ASSESSEE WHICH HAD TAKEN A QU ARRY ON LEASE, THE LEASE RENT PAID WAS CAPITAL EXPENDITURE AND THE HON'BLE HIGH COURT ALSO AFFIRMED THE DECISION OF THE TRIBUNAL. T HE HON'BLE APEX COURT WHILE CONFIRMING THE DECISION OF THE HON'BLE HIGH COURT HELD THAT PREMIUM FOR LEASE OR ANY LUMP SUM PAYMENT FOR OBTAINING A LEASE FOR A LONG PERIOD IS PAYMENT FOR ENDURING ADV ANTAGE, SO THAT IT IS A CAPITAL EXPENDITURE WHICH IS NOT DEDUCTIBLE . EVEN IF THE AFORESAID DECISION OF ITAT CHENNAI BENCH IN THE CASE OF FOXCONN INDIA DEVELOPERS PVT. LTD. (SUPRA) IS TAKEN TO BE AGAINST THE ASSESSEE ON THE ISSUE UNDER CONSIDERATION , WE ARE BOUND TO FOLLOW THE VIEW WHICH IS IN FAVOUR OF THE ASSESSEE AS PER THE RATIO LAID DOWN I N CIT VS VEGETABLE PRODUCTS 88 ITR 192 (SC). BESIDES THE ABOVE LEASE DOCUMENT HAS USED THE 'DEVE LOPMENT CHARGES' AND 'ECONOMIC RENT' TO BE PAYABLE BY THE ASSESSEE. A S THE DOCUMENT HAS USED TWO DIFFERENT PHRASES TO CONNOTE DIFFERENT OBLIGATI ON THEREFORE IN OUR VIEW DEVELOPMENT CHARGES CAN'NOT BE READ AS RENT WITHIN THE PURVIEW OF THE SECTION 194 I. FURTHER LEASE DOCUMENT HAS PROVIDED THE CON SEQUENCES OF NON-PAYMENT OF THE DEVELOPMENT CHARGES BY THE ASSESSEE, IF THE ASSESSEE FAILED TO PAY THE DEVELOPMENT CHARGES, AS MENTIONED IN THE AGREEMENT, THE POSSESSION WAS LIABLE TO BE TAKEN OVER BY THE RIICO, THEREFORE THE DEVELO PMENT CHARGES CAN NOT BE CONSIDERED AS RENT . 22 ITA NOS. 647 & 648/JP/2013 M/S. GUPTA FABTEX PVT. LTD. VS. DCIT 5.12. ACCORDINGLY GROUND NO.1 IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 6. IN THE RESULT, ASSESSEES APPEALS ARE ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 16/12/2015. SD/- SD/- VH-VKJ-EHUK YFYR DQEKJ (T.R. MEENA) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 16/12/2015 DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. GUPTA FABTEX PVT. LTD., JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- THE DCIT (TDS), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 647 & 648/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR 23 ITA NOS. 647 & 648/JP/2013 M/S. GUPTA FABTEX PVT. LTD. VS. DCIT