ITO (TDS) 1(1), MUMBAI V. A SURTI DEVELOPERS P.LTD, MUMBAI

ITA 6569/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7822 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 30-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Maximum Marginal Rate; Capital expenditure
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 6569/MUM/2014 ASSESSMENT YEAR: 2009-10 ITO (TDS) 1(1) VS. A SURTI DEVELOPERS P. LTD. R. NO. 804, K.G. MITTAL HOSPITAL 75 HIOTEL, AIR LINK NEAR HOSPITAL BLDG., CHARNI ROAD SANTACRUZ AIR PORT V ILE PARLE(E) MUMBAI 400002 MUMBAI 400057 PAN NO. AAACA8288R (APPELLANT) (RESPONDENT) REVENUE BY : SHRI RAJESH KUMAR YADAV, DR ASSESSEE BY: NONE DATE OF HEARING : 21/1 2/2016 DATE OF PRONOUNCEMENT: 15/03/2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE REVENUE. THE RELEVAN T ASSESSMENT YEAR IS 2009-10. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER (APPEALS) 12, MUMBAI AND ARISES OUT OF ORDER U/S 201(1) & 201(1A) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER:- 1. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE AMOUNT PAID BY THE LE SSEE A. SURTI DEVELOPERS PVT. LTD.) TO THE LESSOR (MMRDA) WAS NOT IN THE NATURE OF RENT, AS DEFINED IN THE EXPLANATION (I) TO SECTION 1941 OF THE ACT FOR THE PURPOSE OF DEDUCTION OF TAX AT SOURCE. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ACCEPTING THE CLAIM OF THE ASSE SSEE THAT NO TAX WAS DEDUCTIBLE UNDER SECTION 194I FROM THE PAYMENT MADE BY THE ASSESSEE TO MMRDA FOR ACQUISITION OF THE PLOT OF LAND ON LEA SE FROM MMRDA. ITA NO. 6569/MUM/2014 2 (III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) HAS ERRED IN NOT CONFIRMING THE ORDER OF THE ASSESSING OFFICER TREATING THE ASSESSEE AS AN ASSESSEE IN DEFAULT U/S 201(1) IN RESPECT OF THE AMOUNT OF TAX WHICH HAS NOT BEEN DEDUCTED UNDER SECTION 194I FROM THE PAYMENT MADE TO MMRDA AND LEVYING INTEREST UNDER SECTION 201(1A). (IV) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN IGNORING THE DEFINITION OF RENT , AS CONTAINED IN SECTION 194I AND IN RESORTING TO INTERPRETATIVE REA SONING WHEREAS AS PER THE SETTLED PRINCIPLE OF JURISPRUDENCE, THIS EX ERCISE IS REQUIRED ONLY WHEN THE LAW IS UNCLEAR. (V) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN GOING INTO THE QUESTION OF TAXA BILITY OF THE PAYMENT MADE BY THE ASSESSEE TO MMRDA DESPITE THE DECISION OF THE APEX COURT IN THE CASE OF THE AGGARWAL CHAMBERS OF COMMERCE V. GANPAT RAI HIRALAL , 33 ITR 245, WHERE IT HAS BEEN HELD THAT THE PERSO NS WHO ARE RESPONSIBLE FOR DEDUCTION OF TAX AT SOURCE ARE NOT CONCERNED WITH THE ULTIMATE RESULT OF ASSESSMENT. 3. BRIEFLY STATED, THE FACTS ARE THAT DURING THE CO URSE OF SURVEY, IT WAS FOUND THAT THE ASSESSEE, A SURTI DEVELOPERS P. LTD. (ASDL) HAD MADE LEASE PAYMENT OF RS. 60,55,050/- TO MUMBAI MET ROPOLITAN REGIONAL DEVELOPMENT AUTHORITY (MMRDA) FOR ALLOTMEN T OF PLOT NO. 288, VILLAGE BANDIVALI, TALUKA ANDHERI, BEHIND AMRU UTI NAGAR, JAGESHWARI (WEST), MUMBAI. HOWEVER, AS PER THE ASSE SSING OFFICER (AO), ASDL HAD NOT DEDUCTED TAX AT SOURCE ON SUCH P AYMENT AS WAS REQUIRED U/S 194I OF THE ACT. IN RESPONSE TO THE SH OW CAUSE NOTICE U/S 201(1) ISSUED BY THE AO, THE AR OF ASDL REPLIED THA T THE SAID PAYMENT WAS MADE TOWARDS PURCHASE OF FREE FSI VIZ. PREMIUM FOR AREA COVERED BY STAIRCASE, LIFT, LOBBIES AND BALCON Y ENCLOSURE FEE, WHICH IS IN THE NATURE OF CAPITAL PAYMENT AND NOT R ENT OR LEASE PAYMENT. THE AO WAS NOT CONVINCED WITH THE SAID REP LY OF ASDL AS IN THE REMARKS COLUMN OF CHEQUE PAYMENT VOUCHER, IT WA S MENTIONED AS BEING PAY ORDER DRAWN IN FAVOUR OF MMRDA TOWARDS L EASE PREMIUM FOR CITY SURVEY NO. 228. THE AO THEN HELD THAT LEA SE PREMIUM OF RS. 60,55,050/- WAS PAID BY ASDL FOR CONTINUOUS USE OF LAND UNDER LEASE ITA NO. 6569/MUM/2014 3 AGREEMENT AND THUS WAS COVERED UNDER THE DEFINITION OF RENT. THE AO THUS HELD ASDL LIABLE FOR NON DEDUCTION OF TAX A T SOURCE U/S 194I OF THE ACT. FINALLY, THE AO RAISED LIABILITY OF RS. 12,47,370/- U/S 201(1) AND INTEREST OF RS. 4,49,042/- U/S 201(1A) O F THE ACT. 4. ASDL FILED AN APPEAL AGAINST THE ORDER OF THE AO BEFORE THE LEARNED CIT(A) AND SUBMITTED THAT THE CASE IS SQUA RELY COVERED BY A DECISION OF THE HON'BLE ITAT, MUMBAI IN THE CASE OF WADHWA & ASSOCIATES REALTORS PRIVATE LIMITED (2013) 36 TAXMANN. COM 526 WHEREIN IT HAS BEEN HELD THAT LEASE PREMIUM PAID FO R LONG TERM LEASE IS NOT RENT WITHIN THE MEANING OF SECTION 194I OF THE ACT AND HENCE THE PROVISION RELATING TO TDS U/S 194I OF THE ACT I S NOT APPLICABLE TO SUCH LEASE RENT. THE AR OF ASDL FILED A WRITTEN SU BMISSION BEFORE THE LEARNED CIT(A) STATING THAT IT IS A LONG TERM LEAS E FOR 60 YEARS, HENCE THE LEASE PREMIUM PAID FOR SUCH LONG TERM LEASE CAN NOT BE TERMED AS RENT WITHIN THE MEANING OF SECTION 194I OF THE ACT . HE RELIED ON THE DECISION IN THE CASE OF (I) ITO VS. INDIAN NEWSPAPER SOCIETY, DELHI 37 TAXMANN. COM 401, (II) SHREE NAMAN HOTELS P. LTD. ITA NO. 686 & 687 DATED 14.08.2013, (III) ITO VS. NAVI MUMBAI SEZ P. LTD. 38 TAXMANN.COM 218 AND (IV) MUKUND LTD. 106 ITD 231. WE FIND THAT THE LEARNED CIT(A) WAS CONVINCED WITH THE SUBMISSION MA DE BY THE AR OF ASDL AND RELYING ON THE DECISION IN THE CASE OF (I ) ITO (TDS) 3(5), MUMBAI VS. WADHWA & ASSOCIATES REALTORS PRIVATE LIM ITED (2013) TAXMANN.COM 526 (A.Y. 2008-09), (II) ITO (TDS) RG. 2, MUMBAI VS. NAVI MUMBAI (SEZ) PRIVATE LTD. (2013) 38 TAXMANN.COM 218, (III) ITO VS. DHIRENDRA RAMJI VORA (2014 TIOL 188 ITAT MUMBAI), (IV) ITO VS. INDIAN NEWSPAPERS SOCIETY (2013) 37 TAXMANN.COM 401 AND (V) JT.CIT, SPL.RG. 25, MUMBAI VS. MUKUND LTD. 106 ITD 231 (MUMBAI ITAT SPECIAL BENCH), HELD THAT THE IMPUGNED PAYMENT ON A CCOUNT OF LEASE PREMIUM DID NOT FALL WITHIN THE PURVIEW OF SECTION 194I. THEREFORE, ITA NO. 6569/MUM/2014 4 THE LEARNED CIT(A) ALLOWED THE APPEAL FILED BY THE ASSESSEE BEFORE HIM. 5. BEFORE US, THE LEARNED DR SUPPORTS THE ORDER PAS SED BY THE AO U/S 201(1) & 201(1A) OF THE ACT. 6. WE HAVE HEARD THE LEARNED DR AND PERUSED THE REL EVANT MATERIAL ON RECORD. THE ISSUE IN THE PRESENT APPEAL IS WHETHER THE LEASE PREMIUM PAID FOR A LONG TERM LEASE OF 60 YEAR S CAN BE TERMED AS RENT WITHIN THE MEANING OF SECTION 194I OF THE AC T. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE CO -ORDINATE BENCH AS MENTIONED AT PARA 4 HERE-IN-ABOVE. IN WADHWA & ASSOCIATES REALTORS PRIVATE LIMITED (SUPRA ) , DURING THE A.Y. 2008-09, THE ASSESSEE TOOK PLOT OF LAND FR OM MMRD AND MADE PAYMENT OF LEASE PREMIUM FOR ALLOTMENT OF PLOT OF LAND AS ALSO PAYMENT FOR ADDITIONAL BUILT UP AREA AND FEES FOR F SI. IT IS HELD IN THE ABOVE CASE THAT (I) SINCE PREMIUM WAS NOT PAID UNDE R LEASE BUT WAS PAID AS A PRICE FOR OBTAINING LEASE, IT PRECEDED GR ANT OF LEASE AND, THEREFORE, BY ANY STRETCH OF IMAGINATION, IT COULD NOT BE EQUATED WITH RENT WHICH WAS PAID PERIODICALLY, (II) PAYMENT FOR ADDITIONAL FSI AREA COULD NOT BE EQUATED TO RENT, AND (III) ASSESSEE WA S NOT LIABLE TO DEDUCT TAX AT SOURCE ON BOTH TYPES OF PAYMENT U/S 1 94I OF THE ACT. IN NAVI MUMBAI (SEZ) PRIVATE LTD. (SUPRA) , IT IS HELD LEASE PREMIUM PAID BY ASSESSEE TO CIDCO FOR ACQUIRING LEA SEHOLD LAND FOR A PERIOD OF 60 YEARS IN ORDER TO DEVELOP A SPECIAL EC ONOMIC ZONE (SEZ) AMOUNTED TO CAPITAL EXPENDITURE WHICH DID NOT FALL WITHIN THE MEANING OF RENT U/S 194I AND THEREFORE, THE ASSES SEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE WHILE MAKING THE SAID PAYME NT. ITA NO. 6569/MUM/2014 5 IN DHIRENDRA RAMJI VORA (SUPRA) , IT HAS BEEN HELD BY THE TRIBUNAL THAT THE LEASE PREMIUM PAID TO CIDCO DOES NOT QUALIFY TO BE A RENT WITHIN THE MEANING OF SECTION 194I SO AS T O BE EXIGIBLE FOR DEDUCTION OF TAX AT SOURCE THERE UNDER. IN INDIAN NEWSPAPERS SOCIETY (SUPRA) , THE MUMBAI DEVELOPMENT AUTHORITY LEASED OUT LAND IN QUESTION TO THE ASSESS EE FOR A PERIOD OF 80 YEARS FOR A CONSIDERATION COMPRISING LEASE PREMI UM OF A SUM. THE AO HELD THAT THE PROVISIONS OF SECTION 194I WAS APP LICABLE ON SUCH LEASE PAYMENT. THE COMMISSIONER (APPEALS) HAVING FO UND THAT SUCH PAYMENT WAS NOT AN ADVANCE RENT BUT WAS A LEASE PAY MENT IN THE NATURE OF CAPITAL EXPENDITURE, HELD THAT SUCH PAYME NT DID NOT FALL WITHIN THE AMBIT OF SECTION 194I OF THE ACT. THE TR IBUNAL HELD THAT SINCE PAYMENT OF LEASE PREMIUM WAS NOT TO BE MADE O N PERIODICAL BASIS BUT IT WAS ONETIME PAYMENT TO ACQUIRE LAND WI TH RIGHT TO CONSTRUCT A COMMERCIAL COMPLEX THEREON, SECTION 194 I WAS NOT APPLICABLE. 6.1 AS THE FACTS REMAIN SIMILAR, WE FOLLOW THE ORDE R OF THE CO- ORDINATE BENCH IN THE DECISIONS MENTIONED AT PARA 6 HERE-IN-ABOVE AND HOLD THAT THE PAYMENT OF LEASE PREMIUM OF RS. 6 0,55,050/- DOES NOT FALL WITHIN THE AMBIT OF SECTION 194I OF THE AC T AND, THEREFORE, THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE WHIL E MAKING THE SAID PAYMENT. ACCORDINGLY, WE UPHOLD THE ORDER PASSED BY THE LEARNED CIT(A). 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/03/2017 SD/- SD/- (MAHAVIR SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBE R ITA NO. 6569/MUM/2014 6 MUMBAI; DATED: 15/03/2017 BISWAJIT, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . B Y ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI