ACIT, New Delhi V. M/s. Paramount Villas Pvt. Ltd., New Delhi

ITA 6540/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4016 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: misc
• Appeal Filed On: 09-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHWANI TANEJA
• Keywords: Retrospective amendment
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI O. P. KANT, ACCOUNTANT MEMBER I.T.A. NO.5795/DEL/2015 ASSESSMENT YEAR: 2012-13 PARAMOUNT VILLAS PVT. LTD., 208, 2 ND FLOOR, SIKKHA MANSION LSC, SAVITA VIHAR, NEW DELHI. V. ITO (TDS), WARD-51(1), NEW DELHI. TAN/PAN: DELP17086G (APPELLANT) (RESPONDENT) I.T.A. NO.6540/DEL/2015 ASSESSMENT YEAR: 2012-13 ACIT, CIRCLE-76(1), NEW DELHI. V. PARAMOUNT VILLAS PVT. LTD., 208, 2 ND FLOOR, SIKKHA MANSION LSC, SAVITA VIHAR, NEW DELHI. TAN/PAN: DELP17086G (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ASHWANI TANEJA, ADV. RESPONDENT BY: SHRI ATIQ AHMAD, SR. D.R. DATE OF HEARING: 15 05 2018 DATE OF PRONOUNCEMENT: 13 08 2018 O R D E R PER AMIT SHUKLA, J.M.: THE AFORESAID CROSS APPEALS HAVE BEEN FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE AGAINST THE IMPU GNED ORDER DATED 07.09.2015, PASSED BY THE CIT (APPEALS) -XLI, NEW DELHI IN RELATION TO THE ORDER PASSED U/S.201(1)/20 1(1A) OF THE ACT FOR THE ASSESSMENT YEAR 2012-13. I.T.AS. NO.5795 & 6540/DEL/2015 2 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE-COMPAN Y IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT AND EXECUTING RESIDENTIAL PROJECT AT GREATER NOIDA NAME D PARAMOUNT GOLF FORESTTE. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, ASSESSEE IN RESPONSE TO THE QUERY, FURNISHED THE DETAILS WITH REGARD TO THE TDS ON THE PAYMENT MADE TO UPSIDC, FROM WHERE THE ASSESSING OFFICER NO TED THAT ASSESSEE HAS NOT DEDUCTED TDS FOR THE PAYMENT OF AN NUAL LEASE RENT OF RS.2,92,02,984/- PAID TO UPSIDC U/S.1 94-I. 3. IN RESPONSE TO THE SHOW CAUSE NOTICE, ASSESSEE F ILED ITS DETAILED SUBMISSION WHEREIN IT WAS CONTENDED THAT T HE LEASE RENT WAS PAID AS ONETIME PAYMENT FOR LEASE OF LAND FOR LONG PERIOD OF 99 YEARS ON A LUMP SUM BASIS; AND ONLY 1% OF THE PLOT PREMIUM WAS TREATED AS LEASE RENT FOR THE PERI OD OF 1 ST TEN YEARS. THE ASSESSEE HAD PURCHASED LAND FROM UPS IDC WHICH WAS A LEASE HOLD LAND TAKEN FOR 99 YEARS FROM FARMERS. ENTIRE PURCHASE OF LAND HAS TREATED AS STOCK-IN-TRA DE AND IT WAS CONTENDED BY THE ASSESSEE THAT SAME SHOULD NOT BE TREATED AS RENT. HOWEVER, THE ASSESSING OFFICER HEL D THAT ASSESSEE SHOULD HAVE DEDUCTED TDS U/S.194-I @ 10%; AND ACCORDINGLY, HELD THAT THE AMOUNT OF RS.29,20,298/- WAS TDS PAYABLE U/S 194I AND TREATED ASSESSEE AS ASSESSEE IN DEFAULT IN TERMS OF SECTION 201(1) AND ALSO LEVIED INTEREST OF RS.9,51,928/-. 4. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED TH AT ONLY 1% OF THE COST OF PURCHASED LAND FROM UPSIDC AT THE MOST I.T.AS. NO.5795 & 6540/DEL/2015 3 CAN BE TREATED AS LEASE RENT AND BE TREATED AS PART OF RENT, HENCE TDS DEFAULT SHOULD BE RESTRICTED TO RS. 2,98, 258/- WHICH IS 10% OF THE LEASE RENT PAID OF RS.29,28,580 /-. ONE IMPORTANT FACT WHICH WAS POINTED OUT THAT, UPSIDC H AS SUBMITTED ITS ACCOUNT AND ALSO CONFIRMED THAT THE A MOUNT PAID BY THE ASSESSEE HAS BEEN CREDITED IN THE STATE MENT OF P&L ACCOUNT AND INCOME TAX HAS BEEN PAID THEREON ON THE TAXABLE PROFIT. THE ENTIRE AMOUNT PAID BY THE ASSES SEE WAS CREDITED BY UPSIDC UNDER THE HEAD LEASE RENT RECEI VED ACCOUNT AS PER THEIR ACCOUNTING POLICY. IT WAS FUR THER PLEADED THAT IN VIEW OF PROVISO TO SECTION 201 WHICH CAME INTO EFFECT FROM 01.07.2012, THE ASSESSEE CANNOT BE TREATED AS ASSESSEE- IN-DEFAULT IF THE PERSON TO WHOM THE PAYMENT HAS B EEN MADE, HAS FURNISHED HIS RETURN OF INCOME U/S.139; HAS TAK EN INTO ACCOUNT SUCH SUM FOR COMPUTING THE INCOME IN SUCH R ETURN OF INCOME; AND HAS PAID THE TAX DUE ON THE INCOME D ECLARED BY HIM IN SUCH RETURN OF INCOME, IF THE PERSON FURN ISHES A CERTIFICATE TO THIS EFFECT FROM AN ACCOUNTANT IN SU CH FORM AS MAY BE PRESCRIBED, THEN NO LIABILITY CAN BE FIXED U /S.201. SINCE THIS IS A BENEFICIAL PROVISION TO REMOVE THE RIGORS, THEREFORE, IT HAS TO BE GIVEN RETROSPECTIVE EFFECT. 5. LD. CIT (A) HELD THAT ASSESSEE IS A DEVELOPER O F A PROPERTY AND HE IS IN THE BUSINESS OF PURCHASING TH E PROPERTY AND DEVELOPING IT AND FINALLY SELLING THEM TO THE C USTOMERS. THE ASSESSEE HAS TREATED THE LAND AS WORK-IN-PROGRE SS AND ALSO DREW ATTENTION TO THE FOLLOWING ACCOUNT SHOWIN G THE TREATMENT OF LAND PURCHASE:- I.T.AS. NO.5795 & 6540/DEL/2015 4 PARTICULARS FY 2010-11 FY 2011-12 OPENING BALANCE _ 93126774 LAND ALLOTMENT COST - 2016857150 STAMP DUTY - 111935572 LEASE RENT - 29202985 INTEREST ON PRINCIPAL AMOUNT - 247990608 PAYMENT TO FARMERS - 45185242 TOTAL - 2451172257 TRANSFER TO SALE LAND COST - 57610344 CONSTRUCTION AND OTHER OVERHEAD - 249655150 CLOSING STOCK 93126775 3795483271 DETAILS OF CLOSING STOCK LAND COST - 2393561913 LD. CIT(A) HELD THAT EVEN THOUGH THE TERM LEASE RE NT HAS BEEN USED IN THE BOOKS OF THE UPSIDC, BUT THE F ACT REMAINS THAT THE LAND HAS BEEN TAKEN FOR 99 YEARS A ND THEREFORE, IT IS LUMP SUM PAYMENT FOR WHICH NO TDS U/S.194- I IS REQUIRED, BECAUSE IT IS NOT IN THE NATURE OF R ENT. HOWEVER, HE HELD THAT IN SO FAR AS LEASE RENT COMPONENT IS C ONCERN, HE HELD THAT 201(1) IS APPLICABLE AND FOR THE BALANCE HE HELD THAT PAYMENT BEING MADE FOR PURCHASE OF LAND WHICH IS ST OCK-IN- TRADE DOES NOT ATTRACT THE TDS PROVISIONS. 6. BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT IT IS NOT IN DISPUTE THAT, FIRSTLY, WHATEVER PAYMENT HAS BEEN MA DE TO UPSIDC THEY HAVE CREDITED TO THEIR P & L ACCOUNT AN D HAS I.T.AS. NO.5795 & 6540/DEL/2015 5 SHOWN IT AS THEIR INCOME IN THE RETURN OF INCOME AN D HAD PAID TAXES THEREON, THEREFORE, IN VIEW OF THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP PVT. LTD., ITA NO.160 & 161 OF 2015; AND HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF CIT VS. M/S. CALCUTTA EXPORT COMPANY, VIDE JUDGMENT AND ORDER DATED 24 TH APRIL, 2018, WHEREIN IT HAS BEEN HELD THAT THE PROVISO ADDED U/S.201(1) AND 40(A)(IA) HAS TO BE GIVEN RETROSPECTIVE EFFECT. HE FURTHER DREW OUR ATTENTION TO THE CBDT CIRCULAR NO.35 OF 2016 DATED 13 TH OCTOBER, 2016, WHEREIN IT HAS BEEN HELD THAT ONE-TIME NON REFUNDAB LE UPFRONT CHARGES PAID BY THE ASSESSEE FOR ACQUISITIO N OF LEASEHOLD RIGHTS OVER AN IMMOVABLE PROPERTY CANNOT BE CONSTITUTED AS RENTAL INCOME AND ASSESSEE IS NOT OB LIGED TO DEDUCT TAX AT SOURCE U/S.194I. THUS, ON THIS GROUND ALONE ASSESSEE CANNOT BE TREATED AS ASSESSEE-IN-DEFAULT U/S. 201(1). APART FROM THAT, HE SUBMITTED THAT ON MERIT S ALSO NOW THERE ARE CATENA OF DECISIONS THAT, IF LEASE PREMIU M PAID BY THE ASSESSEE TO THE AUTHORITIES FOR ACQUIRING A LEA SEHOLD LAND FOR A VERY LONG TERM, THEN IT DOES NOT FALL WITHIN THE MEANING OF RENT U/S.194-I. IN SUPPORT, HE RELIED UPON THE F OLLOWING JUDGMENTS. 1. ITO (TDS), MUMBAI VS. NAVI MUMBAI SEZ (P.) LTD., (2014) 147 ITD 261 (MUM-TRIB.) 2. TRILL INFOPARK LTD. VS. ITO (TDS), (2016) 385 IT R 0465 (MAD) 3. FOXCONN INDIA DEVELOPER (P) LTD. VS. ITO, (2016) 288 CTR 0173 (MAD.) 7. ON THE OTHER HAND, LEARNED DEPARTMENT REPRESENTA TIVE I.T.AS. NO.5795 & 6540/DEL/2015 6 STRONGLY RELIED UPON THE ORDER OF THE ASSESSING OFF ICER. 8. WE HAVE HEARD THE RIVAL SUBMISSION AND ALSO PE RUSED THE RELEVANT FINDINGS GIVEN IN THE IMPUGNED ORDERS AS WELL AS MATERIAL REFERRED TO BEFORE US. IT IS AN UNDISPU TED FACT THAT ASSESSEE HAS PAID TO UPSIDC, ONE-TIME LEASE PR EMIUM FOR ACQUIRING A PLOT FOR A PERIOD OF 99 YEARS FOR W HICH ASSESSEE HAS PAID RS.2,92,02,985/-; AND 1% OF THE C OST OF THE LAND PURCHASED BY UPSIDC WAS TREATED AS LEASE R ENT. IT HAS BEEN BROUGHT ON RECORD THAT UPSIDC HAD SUBMITTE D ITS ACCOUNT WHERE IT HAS DULY CONFIRMED THAT THE AMOUNT PAID BY THE ASSESSEE HAS BEEN CREDITED IN THE STATEMENT OF P&L ACCOUNT AND INCOME TAX HAS BEEN PAID THEREON ON THE TAXABLE PROFIT. THE ENTIRE ACCOUNT HAS BEEN CREDITE D TO THE HEAD LEASE RENT RECEIVED ACCOUNT. ONCE THAT IS SO , THEN IN VIEW OF THE PROVISO TO SECTION 201 WHICH CAME INTO EFFECT FROM 01.07.2012, THEN ASSESSEE CANNOT BE HELD AS ASSESSEE-IN-DEFAULT. THE SAID PROVISO READS AS UNDER: 'PROVIDED- THAT ANY PERSON, INCLUDING THE PRINCIPAL OFFICER OF A COMPANY, WHO FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF THIS CHAPTER O N THE SUM PAID TO A RESIDENT OR ON THE SUM CREDITED TO THE AC COUNT OF A RESIDENT SHALL NOT BE DEEMED TO BE AN ASSESSEE IN D EFAULT IN RESPECT OF SUCH TAX IF SUCH RESIDENT (I) HAS FURNISHED HIS RETURN OF INCOME UNDER SECT ION 139; (II) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME IN SUCH RETURN OF INCOME; AND I.T.AS. NO.5795 & 6540/DEL/2015 7 (III) HAS PAID THE TAX DUE ON THE INCOME DECLARED B Y HIM IN SUCH RETURN OF INCOME, AND THE PERSON FURNISHES A CERTIFICATE TO THIS EFFE CT FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBED 9. THIS PROVISO HAS BEEN HELD TO HAVE RETROSPECTIVE EFFECT BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF ANSAL LAND MARK TOWNSHIP PVT. LTD. (SUPRA) AND BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. CALCUTTA EXPORT CO. (SUPRA) , WHEREIN IT HAS BEEN HELD THAT THE PROVISO BROUGHT U/S. 40(A)(IA) AND 201, HAS TO BE GIVEN RETROSPECTI VE EFFECT. MOREOVER, NOW THE CBDT HAS ISSUED A CIRCULAR NO.35 OF 2016 (SUPRA), WHEREIN IT HAS BEEN CLARIFIED AS UNDER: SECTION 194-I OF THE INCOME-TAX ACT, 1961 (THE ACT) REQUIRES THAT TAX BE DEDUCTED AT RATES FROM PAYMENT OF ANY INCOME BY WAY OF RENT. FOR THE PURPOSES OF THIS SECTION, RENT HAS BEEN D EFINED AS ANY PAYMENT, BY WHATEVER NAME CALLED, UNDER ANY LEASE, SUB-LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR T HE USE OF ANY LAND OR BUILDING OR MACHINERY OR PLANT OR EQUIPMENT OR FURNITURE OR FITTINGS. 2. THE ISSUE OF WHETHER OR NOT TDS UNDER SECTION 194-1 OF THE ACT IS APPLICABLE ON LUMP SUM LEASE PREMIUM OR O NE-TIME UPFRONT LEASE CHARGES PAID BY AN ASSESSEE FOR ACQUIRING LO NG TERM LEASEHOLD RIGHTS FOR LAND OR ANY OTHER PROPERTY HAS BEEN EXAMINED BY CBDT IN VIEW OF REPRESENTATIONS RECEIVED IN THIS REGARD. 3. THE BOARD HAS TAKEN NOTE OF THE FACT THAT IN THE CA SE OF THE INDIAN NEWSPAPER SOCIETY (ITA NO. 918 & 920/2015), THE HONBLE DELHI HIGH COURT HAS RULED THAT LEASE PREMIUM PAID BY THE ASSESSEE FOR ACQUIRING A PLOT OF LAND ON AN 80 YEAR S LEASE WAS IN I.T.AS. NO.5795 & 6540/DEL/2015 8 THE NATURE OF CAPITAL EXPENSE NOT FALLING WITHIN TH E AMBIT OF SECTION 194-1 OF THE ACT. IN THIS CASE, THE COURT REASONED THAT SINCE ALL THE RIGHTS EASEMENTS AND APPURTENANCES IN RESPECT OF TH E SAID LAND WERE IN EFFECT TRANSFERRED TO THE LESSEE FOR 80 YEA RS AND SINCE THERE WAS NO PROVISION IN LEASE AGREEMENT FOR ADJUSTMENT OF PREMIUM AMOUNT PAID AGAINST ANNUAL RENT PAYABLE, THE PAYMEN T OF LEASE PREMIUM WAS A CAPITAL EXPENSE NOT REQUIRING DEDUCTI ON OF TAX AT SOURCE UNDER SECTION 194-1 OF THE ACT. 4. FURTHER, IN THE CASE FOXCONN INDIA DEVELOPER LIMITE D (TAX CASE APPEAL NO. 801/2013), THE HONBLE CHENNAI HIGH COURT HELD THAT THE ONE-TIME NON-REFUNDABLE UPFRONT CHARGES PA ID BY THE ASSESSEE FOR THE ACQUISITION OF LEASEHOLD RIGHTS OV ER AN IMMOVABLE PROPERTY FOR 99 YEARS COULD NOT BE TAKEN TO CONSTIT UTE RENTAL INCOME IN THE HANDS OF THE LESSOR, OBLIGING THE LESSEE TO DEDUCT TAX AT SOURCE UNDER SECTION 194-1 OF THE ACT AND THAT IN S UCH A SITUATION THE LEASE ASSUMES THE CHARACTER OF DEEMED SALE. T HE HONBLE CHENNAI HIGH COURT HAS ALSO IN THE CASES OF TRIL IN FOPARK LIMITED (TAX CASE APPEAL NO. 882/2015) RULED THAT TDS WAS N OT DEDUCTIBLE ON PAYMENTS OF LUMP SUM LEASE PREMIUM BY THE COMPAN Y FOR ACQUIRING A LONG-TERM LEASE OF 99 YEARS. 5. IN ALL THE AFORESAID CASES, THE DEPARTMENT HAS A CCEPTED THE DECISIONS OF THE HIGH COURTS AND HAS NOT FILED AN S LP. THEREFORE, THE ISSUE OF WHETHER OR NOT TDS UNDER SECTION 194-1 OF THE ACT IS TO BE MADE ON LUMP SUM LEASE PREMIUM OR ONE-TIME UPFRO NT LEASE CHARGES PAID FOR ALLOTMENT OF LAND OR ANY OTHER PRO PERTY ON LONG- TERM LEASE BASIS IS NOW SETTLED IN FAVOUR OF THE AS SESSEE. 6. IN VIEW OF THE ABOVE, IT IS CLARIFIED THAT LUMP SUM LEASE PREMIUM OR ONE-TIME UPFRONT LEASE CHARGES, WHICH AR E NOT ADJUSTABLE AGAINST PERIODIC RENT, PAID OR PAYABLE F OR ACQUISITION OF LONG-TERM LEASEHOLD RIGHTS OVER LAND OR ANY OTHER P ROPERTY ARE NOT PAYMENTS IN THE NATURE OF RENT WITHIN THE MEANING O F SECTION 194-I I.T.AS. NO.5795 & 6540/DEL/2015 9 OF THE ACT. THEREFORE, SUCH PAYMENTS ARE NOT LIABLE FOR TDS UNDER SECTION 194-I OF THE ACT. 10. FROM THE AFORESAID CIRCULAR, IT IS ABSOLUTEL Y CLEAR FROM THE CBDT CIRCULAR THAT SUCH A ONETIME NON REFUNDABL E UPFRONT CHARGES PAID BY THE ASSESSEE FOR ACQUISITIO N OF LEASEHOLD RIGHT OR LUMP SUM PAYMENT OF LEASE PREMIU M FOR ACQUISITION OF OVER AN IMMOVABLE PROPERTY FOR 99 YE ARS, NO TDS IS REQUIRED TO BE DEDUCTED U/S.194-I. THUS, IN VIEW OF THE CBDT CIRCULAR AND ALSO THE FACT THAT THE DEDUCTEE H AS SHOWN THE AMOUNT PAID AS INCOME AND ALSO PAID TAXES THERE ON, THEREFORE, THE ASSESSEE CANNOT BE TREATED AS ASSES SEE-IN- DEFAULT AND CONSEQUENTLY, NO INTEREST U/S.201(1A) CAN BE CHARGED. ACCORDINGLY, REVENUES APPEAL IS DISMISSED . 11. IN ASSESSEES APPEAL, ASSESSEE HAS CHALLENGED TREATING OF LEASE RENT OF RS.29,28,580/- LIABLE FOR DEDUCTIO N OF TDS U/S.194-I BY THE CIT(A) HAS BECOME INFRUCTUOUS IN V IEW OF OUR FINDING GIVEN THEREIN THAT THE DEDUCTEE HAS ALREADY PAID THE TAXES ON SUCH PAYMENT. THUS, THE ASSESSEES APPEAL IS TREATED AS ALLOWED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH AUGUST, 2018. SD/- SD/- [O.P. KANT] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 13 TH AUGUST, 2018 PKK: