THE SWASTI PRODUCE CO. P LTD, MUMBAI V. CIT (A) 14, MUMBAI

ITA 6793/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2008 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 24-08-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 10-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Assessee Lawyers: N B GAN DHI
• Keywords: Capital asset; Opportunity of being heard; Principle of natural justice; Capital expenditure
• Section: 133A; 194C; 201(1)

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 6793 /MUM/2014 ( / ASSESSMENT YEAR : 2004-05) THE SWASTI PRODUCE CO. PVT. LIMITED, 207/208, BHAVESHWAR ARCADE, OPP SHREYAS CINEMA, LBS MARG, GHATKOPAR (W), MUMBAI. / V. THE ITO TDS WARD -3(4), CHURNEY ROAD, MUMBAI. ./ PAN : AAACT1886E ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI N.B. GANDHI REVENUE BY : MS. POOJA SWAROOP ,DR / DATE OF HEARING : 25-08-2016 / DATE OF PRONOUNCEMENT : 16-11-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE COMPANY, BEING ITA NO. 6793/MUM/2014, IS DIRECTED AGAINST THE APPELLATE OR DER DATED 1ST AUGUST, 2014 PASSED BY LEARNED COMMISSIONER OF INCOME TAX ( APPEALS)- 14, MUMBAI (HEREINAFTER CALLED THE CIT(A)), FOR THE ASSESSME NT YEAR 2004-05, THE APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARI SING FROM THE ORDER DATED 28 TH MARCH, 2011 PASSED BY THE LEARNED ASSESSING OFFICE R (HEREINAFTER CALLED THE AO) U/S 201(1)/201(1A) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED THE ACT). ITA 6793/MUM/2014 2 2. THE CONCISE GROUNDS OF APPEAL FILED BY THE ASSES SEE WITH THE INCOME- TAX APPELLATE TRIBUNAL, MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) IN LIEU OF GROUNDS FILED ALONG WITH MEMO OF APPEAL FILED WITH THE TRIBUNAL READ AS UNDER:- GROUND 1 THE HON CIT (A)-14,MUMBAI HAS ERRED IN CONFIRMING SHORT DEDUCTION OF TDS OF RS 61,500 ON PAYMENT OF RS 300,000 TO SUZLON ENERGY LTD, MADE TOWARDS ACQUIRING SUB-LEASE RIGHTS OF 5 BIGHA L AND AT BARAMSAR,JAISALMER, RAJASTHAN FOR 19 YEARS. THE APPELLANT COMPANY HUMBLY SUBMITS THAT THE PAYMENT OF RS 300,000 BEING CONSIDERATION FOR ACQUIRING SUB-LEASE RIGHTS THE LAND IS LEASE PREMIUM AND CAPITAL EXPENDITURE AND IS NOT COVE RED BY EXPLANATION (I) TO SECTION 194-I. HENCE THE DEMAND FOR SHORT(NON) DEDUCTION OF TDS MAY PLEASE BE CANCELLED. GROUND 2 THE HON' CIT (A)-14,MUMBAI HAS ERRED IN CONFIRMING SHORT DEDUCTION OF TDS OF RS 61,500 ON PAYMENT OF RS 300,000 TO SUZLON D EVELOPERS PVT. LTD, MADE FOR SHARING INFRASTRUCTURE FACILITY AT VILL AGE BARAMSAR,JAISALMER, RAJASTHAN FOR WIND TURBINE GENER ATOR. THE APPELLANT COMPANY HUMBLY SUBMITS THAT ONE-TIME PAY MENT OF RS.3,00,000/- TOWARDS SHARING INFRASTRUCTURE FACILITI ES FOR WINDMILL FOR ITS LIFETIME IS NOT COVERED BY EXPLANATION(I) TO SECTIO N 194-I AND HENCE THE DEMAND TOWARDS SHORT(NON) DEDUCTION OF TDS OF RS.6 1,500 MAY PLEASE BE DELETED. GROUND 3 THE HON' CIT (A)-14, MUMBAI HAS ERRED IN CONFIRMING LEVY OF INTEREST U/S 201 (LA) OF RS 124,038 ON SHORT DEDUCTION OF TDS OF RS 143,756. THE APPELLANT COMPANY HUMBLY SUBMITS THAT THE DELAY IN PASSING THE ORDEER U/S 201(1) /201(1A) DATED 28.03.2011 (ON ACC OUNT OF SURVEY ON 02.03.2007) WAS NOT ON THE PART OF THE APPELLANT COMPA NY. HENCE NO ITA 6793/MUM/2014 3 INTEREST(IF ANY) SHOULD BE LEVIED BEYOND THE REASONAB LE TIME REQUIRED TO COMPLETE THE ASSESSMENT I.E. SAY 31-03-2008.. 3. THE BRIEF FACTS OF THE CASE ARE THAT A SURVEY U/ S. 133A OF THE ACT WAS CONDUCTED BY THE REVENUE IN THE CASE OF THE ASSESSE E ON 2 ND MARCH, 2007 IN ITS OFFICE PREMISES SITUATED AT 207/208, BHAVESHWAR ARCADE, OPP. SHREYAS CINEMA, LBS MARG, GHATKOPAR(WEST), MUMBAI-400 086. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF POWER GE NERATION. IT WAS OBSERVED DURING THE COURSE OF SURVEY AND SUBSEQUENT PROCEEDI NGS U/S 201 OF THE ACT THAT THE ASSESSEE HAD INCURRED EXPENSE ON ACCOUNT O F ACQUIRING SUB-LEASE RIGHTS OF 5 BIGHA LAND FOR 19 YEARS. HOWEVER, NO T AX WAS DEDUCTED AT SOURCE ON PAYMENT OF RS. 3 LACS MADE TO SUZLON ENERGY LTD FOR THE ABOVE SAID EXPENSES. THE ASSESSEE WAS ASKED TO EXPLAIN THE SAM E WHEREBY IT WAS SUBMITTED THAT THE AMOUNT PAID AS CONSIDERATION TOW ARDS ACQUIRING SUBLEASE RIGHTS OF 5 BIGHA LAND FOR19 YEARS AND HENCE THE SU BLEASE RIGHTS ON WHICH NO TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE UNDER THE PROVISIONS OF ACT SINCE THE SAID SUM IS PAID FOR PURCHASE OF RIGHTS IN IMMO VABLE PROPERTY. THE A.O. REJECTED THE CONTENTION OF THE ASSESSEE AN D RELIED UPON THE PROVISIONS OF SECTION 194-I OF THE ACT WHEREBY THE AO HELD THAT THE ASSESSEE IN ITS SUBMISSION HAD STATED THAT THIS PAYMENT OF R S. 3 LACS HAD BEEN MADE TOWARDS SUBLEASE OF 5 BIGHA LAND WHICH WAS CLEARLY COVERED IN THE DEFINITION OF RENT AS STIPULATED U/S 194-I OF THE ACT AND HENC E THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE U/S 194-I OF THE ACT. SINCE , THE ASSESSEE DID NOT DEDUCTED TAX AT SOURCE U/S 194-I OF THE ACT ON THE PAYMENT MADE TO SUZLON ENERGY LIMITED ON ACCOUNT OF RENT CALLED BY THE A SSESSEE AS PAYMENT FOR SUBLEASE , THE ASSESSEE WAS HELD TO BE ASSESSEE IN DEFAULT WITHIN PROVISIONS OF SECTION 201 OF THE ACT , WHEREBY IT WAS HELD THA T THE DEFAULT WAS TO THE TUNE OF RS. 61,500/- ( 20.5% OF RS. 3,00,000/- ) AN D AS SUCH , AN AMOUNT OF ITA 6793/MUM/2014 4 RS. 61,500/- WAS SHORT DEDUCTED U/S 201 OF THE ACT, VIDE ORDERS DATED 28-03- 2011 PASSED BY THE AO U/S 201(1) AND 201(1A) OF THE ACT. SIMILARLY, NO TAX WAS DEDUCTED AT SOURCE ON PAYMENT OF RS. 3 LACS MADE TO SUZLON DEVELOPERS PVT. LTD. ON ACCOUNT OF SHARING INFRASTRUCTURE FACILITY AT VILLAGE BARAMSAR, TO RUN AND MAINTAIN WIND MILL IN THE WIND MILL FIELD DEVELOPED BY SUZLON DEVELOPERS PRIVATE LIMITED. THE ASSESSEE WAS ISSUED SHOW CAUSE NOTICE ASKING IT TO SHOW CAUSE AS TO WHY IT SHOULD NOT BE HELD AS AN ASSESSEE IN DEFAULT IN RESPECT OF THE ABOVE SAID DEFAULTS. IN REPLY, THE ASSESSEE SUBMITTED THAT THE ENTIRE WIND MILL FIELD AT VILLAGE BARAMSAR, DIST. JAISALMER (RAJASTHAN) WAS DEVELOPED BY SUZLON DEVEL OPERS PVT, LTD. TO CONSTRUCT, RUN AND MAINTAIN ITS THOUSANDS OF WIND M ILLS INSTALLED IN THE SAID WIND MILL FIELD AT JAISALMER. THE AMOUNT PAID BY TH E COMPANY WAS TOWARDS ITS CONTRIBUTION FOR UNDIVIDED UNDETERMINED COMMON INFR ASTRUCTURE FACILITY TO BE UTILIZED DURING THE LIFE TIME OF THE SAID WIND MILL . AS THIS AMOUNT WAS PAID AS CONTRIBUTION FOR THE COMMON POOL RAISED /CREATED FO R THE DEVELOPMENT OF WIND MILL AND TO PROVIDE COMMON FACILITIES PERMANENTLY F OR YEARS, NO TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE ON SUCH CONTRIBUT ION. IT WAS FURTHER SUBMITTED THAT M/S SUZLON DEVELOPER PRIVATE LIMITED IS MERELY COLLECTION AND DISBURSEMENT FACILITATOR WHEREAS THE ACTUAL DEVELOP MENT OF INFRASTRUCTURE IS CARRIED OUT BY VARIOUS AGENCIES FOR YEARS TOGETHER AND IN SUCH CIRCUMSTANCES CONTRIBUTION OF RS. 3 LACS AMOUNTS TO ACQUIRING COM MON FACILITY FOR LIFE TIME OF THE WIND MILL AND DOES NOT ATTRACT ANY PROVISIONS O F THE TAX DEDUCTION AT SOURCE. THE A.O. RELIED UPON THE PROVISIONS OF SECTION 194- I OF THE ACT AND OBSERVED THAT THE EXPENSE INCURRED BY THE ASSESSEE IS CLEARL Y COVERED BY THE DEFINITION OF RENT AND IT DOES NOT MATTER THAT THE FACILITIE S DEVELOPED ARE OWNED BY THE PAYEE OR BY ANY OTHER ELSE AND HENCE THE ASSESSEE W AS LIABLE TO DEDUCT TAX AT SOURCE U/S 194-I OF THE ACT ON THE SAID PAYMENTS AN D HENCE THE ASSESSEES ITA 6793/MUM/2014 5 CONTENTIONS WERE REJECTED BY THE AO AND SINCE THE A SSESSEE COMPANY DID NOT DEDUCT TAX AT SOURCE U/S 194-I OF THE ACT ON THE PA YMENTS MADE TO SUZLON DEVELOPERS PRIVATE LIMITED ON ACCOUNT OF RENT CAL LED BY THE ASSESSEE AS PAYMENT FOR SHARING INFRASTRUCTURE FACILITY, THE ASSESSEE WAS DEEMED TO BE AN ASSESSEE IN DEFAULT WITHIN THE PROVISIONS OF SEC TION 201 OF THE ACT AND THE ASSESSEES DEFAULT WAS DETERMINED AT RS. 61,500/- ( 20.5% OF RS. 3,00,000/-) AND AS SUCH , AN AMOUNT OF RS. 61,500/- WAS SHORT D EDUCTED U/S 201 OF THE ACT, VIDE ORDERS DATED 28-03-2011 PASSED BY THE AO U/S 201(1) AND 201(1A) OF THE ACT. THUS, THE AO PASSED THE ORDER U/S 201(1) AND 201(1A ) OF THE ACT , DATED 28.03.2011 AGAINST THE ASSESSEE WHEREBY CONSEQUENTI AL INTEREST WAS ALSO LEVIED ON THE AFORESAID DEFAULT BY THE AO. 4. AGGRIEVED BY THE ORDER DATED 28.03.2011 PASSED B Y THE AO U/S 201(1) AND 201(1A) OF THE ACT, THE ASSESSEE CARRIED THE MATTER IN FIRST APPEAL BEFORE THE LEARNED CIT(A) . 5. BEFORE THE LD. CIT(A) , THE ASSESSEE SUBMITTED T HAT DURING FINANCIAL YEAR 2003-04, THE ASSESSEE COMPANY ENTERED INTO CONTRACT WITH SUZLON ENERGY LTD. FOR TURN-KEY PROJECT OF PURCHASE, INSTALLATION, COM MISSIONING AND MAINTAINING WINDMILL TURBINE GENERATION J-38 (WINDMILL) AT VILL AGE BARAMSAR, DISTRICT JAISALMER, RAJASTHAN FOR TOTAL CONSIDERATION OF RS. 1,36,50,000/-. THE ASSESSEE COMPANY PAID RS. 3 LACS BY VIRTUE OF WHICH IT ACQUIRED SUB-LEASE RIGHTS FOR A PERIOD OF 19 YEARS OF THE 5 BIGHA LAND AT VILLAGE BARAMSAR VIDE SUB-LEASE DATED 12-08-2004 W.E.F. 19-02-2004, HENCE , THIS ACQUISITION OF LEASE RIGHTS CANNOT BE TREATED AS PAYMENT FOR LEASE RENT. THE PAYMENT OF RS. 3 LACS WAS PAID TO SUZLON ENERGY LTD. FOR OBTAINING T HE LEASE RIGHT OF THE SAID PIECE OF LAND WHICH IS A ONETIME PAYMENT BEING CONS IDERATION/PREMIUM FOR ACQUIRING THE SAID RIGHT FOR 19 YEARS. THE ASSESSEE SUBMITTED THAT AS AGAINST ITA 6793/MUM/2014 6 THE PAYMENTS MADE BY THE ASSESSEE, THE LEASE RENT A LWAYS IS A RECURRING EXPENSE WHICH IS REQUIRED TO BE PAID EITHER MONTHLY OR YEARLY TO CONTINUE THE LEASE RIGHTS YEAR AFTER YEAR, BUT THE AMOUNT OF RS. 3 LACS IS NOT COVERED BY AND CANNOT BE HELD AS RENT FOR THE PURPOSE OF SECTION 1 94-I OF THE ACT AND HENCE PRAYER WAS MADE TO LEARNED CIT(A) TO DELETE THE TDS DEMAND OF RS. 61,500/-. IT WAS FURTHER SUBMITTED THAT PAYMENT OF RS. 3 LACS TO M/S SUZLON DEVELOPERS PVT. LTD. WAS MADE TOWARDS CHARGES FOR SHARING OF I NFRASTRUCTURE FACILITY AT VILLAGE BARAMSAR, JAISALMER (RAJASTAN] FOR WIND TUR BINE GENERATOR. IT WAS SUBMITTED THAT SUZLON DEVELOPERS PRIVATE LIMITED HA S DEVELOPED WINDMILL FARM AT VILLAGE BARAMSAR, JAISALMER, RAJASTHAN . I N THE SAID WIND MILL FARM, SUZLAN ENERGY LTD. HAS INSTALLED THOUSANDS OF WINDM ILL FOR ITS VARIOUS CUSTOMERS AS LONG TERM TURN-KEY PROJECT. IT WAS SU BMITTED THAT THE ASSESSEE COMPANY WAS ONE OF THE CUSTOMERS FOR WHOM SUZLON EN ERGY LTD. INSTALLED ONE WINDMILL DURING FINANCIAL YEAR 2003-04. AS A PART O F THE WINDMILL TURN-KEY PROJECT THE COMPANY PAID RS. 3 LACS TO SUZLON DEVEL OPERS PVT. LTD. AS ITS SHARE TO THE UNDIVIDED COMMON INFRASTRUCTURE FACILI TIES TO BE ENJOYED THROUGHOUT THE LIFE OF THE WINDMILL. WITHOUT PREJUD ICE , IT WAS SUBMITTED THAT SUZLON DEVELOPERS PVT. LIMITED I.E. THE PAYEE HAS N O TAX DUES PAYABLE AS IT HAD PAID ITS ENTIRE TAX LIABILITY FOR THE ASSESSMEN T YEAR 2004-05 HENCE NO TAXES CAN BE DETERMINED/RECOVERED FROM THE ASSESSEE IN VIEW OF THE HONBLE SUPREME COURT JUDGMENT IN THE CASE OF CIT V. HINDUS TAN COCO COLA BEVERAGE PVT LTD., (2007)293ITR226(SC). THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, RELIED UPON THE ORDER OF THE CHENNAI BENCH OF THE TRIBUNAL IN T HE CASE OF FOXCONN INDIA DEVELOPER (P) LTD. V. ITO, (2012) 53 SOT 213(CHENN. TRIB.) ,WHEREBY THE LD. CIT(A) OBSERVED THAT THE DEFINITION OF RENT WOULD D EFINITELY INCLUDE PAYMENTS OF ANY TYPE UNDER ANY AGREEMENT OR ARRANGEMENT FOR THE USE OF LAND. THE LEARNED CIT(A) OBSERVED THAT FOR THE PURPOSES OF SE CTION 194-I OF THE ACT, THE ITA 6793/MUM/2014 7 NORMAL MEANING OF THE TERM RENT COULD NOT BE USED B UT THAT THE SPECIFIC DEFINITION OF RENT HAS TO BE APPLIED, HENCE, THE PA YMENT MADE BY THE ASSESSEE TO M/S SUZLON DEVELOPERS PVT. LTD. IS COVERED BY TH E PROVISIONS OF SECTION 194-I OF THE ACT AND NO TAX WAS DEDUCTED AT SOURCE BY THE ASSESSEE AND HENCE THE AO ACTION OF TREATING THE ASSESSEE IN DEFAULT W AS UPHELD BY LEARNED CIT(A). THE ARGUMENT OF THE ASSESSEE THAT THE DEDUC TEE-PAYEE HAS PAID THE TAXES AND HENCE THE ASSESSEE COULD NOT BE TREATED A S ASSESSEE IN DEFAULT WAS REJECTED BY LEARNED CIT(A) AS NO EVIDENCE WAS FILED BY THE ASSESSEE TO THAT EFFECT. THE LEARNED CIT(A) ALSO UPHELD LEVY OF INTE REST U/S 201(1A) OF THE ACT BEING COMPENSATORY IN NATURE AND ALSO MANDATORY.THE LEARNED CIT(A) RELIED UPON DECISIONS OF HONBLE BOMBAY HIGH COURT IN THE CASE OF BENETT COLEMAN AND COMPANY LIMITED V. ITO (1986) 157 ITR 812(BOM.) AND DECISION OF HONBLE DELHI HIGH COURT DECISION IN THE CASE OF CI T V. PREM NATH MOTORS (2002) 120 TAXMAN 584(DELH) WHEREIN THE COURTS HELD THAT LEVY OF INTEREST IS COMPENSATORY . 6. AGGREIVED BY THE APPELLATE ORDERS DATED 01-08-20 14 PASSED BY LEARNED CIT(A), THE ASSESSEE FILED SECOND APPEAL WITH THE T RIBUNAL. 7. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT PAYMENT OF RS. 3 LACS WAS PAID TO M/S SUZLON ENERGY LIMITED FOR ACQUIRING SUBLEASE RIGHTS OF 5 BIGHA OF LAND FOR 19 YEARS WHICH IS FURTHER EXTENDA BLE FOR 11 YEARS . THE LD. COUNSEL SUBMITTED THAT FURTHER PAYMENT OF RS. 3 LAC S WAS PAID TO SUZLON DEVELOPERS PRIVATE LIMITED TOWARDS COMMON INFRASTRU CTURE FACILITIES AT WIND MILL FARM IN VILLAGE BARAMSAR, JAISALMER. IT IS SU BMITTED THAT THE ASSESSEE ACQUIRED THE WIND MILL FOR A CONSIDERATION OF RS. 1 .36 CRORES INCLUDING THE PAYMENT OF RS. 3 LACS TO M/S SUZLON ENERGY LIMITED TOWARDS PREMIUM FOR ACQUIRING SUBLEASE RIGHTS OF 5 BIGHA LAND FOR 19 YE ARS WHICH IS FURTHER EXTENDABLE FOR 11 YEARS. IT WAS SUBMITTED THAT THE SAID PAYMENT OF RS. 3 LACS TO SUZLON ENERGY LIMITED IS IN-FACT LEASE PREMIUM P AID FOR ACQUIRING LAND FOR ITA 6793/MUM/2014 8 19 YEARS AND IS NOT PAID FOR USE OF LAND WHICH COUL D BE BROUGHT WITHIN AMBIT OF DEFINITION OF RENT FOR THE PURPOSES OF SECTION 1 94-I OF THE ACT AS PER EXPLANATION(I) TO SECTION 194-I OF THE ACT DEFINING RENT AS WAS APPLICABLE FOR ASSESSMENT YEAR 2004-05.IT WAS SUBMITTED THAT AS PA RT OF THE WINDMILL TURN- KEY PROJECT THE COMPANY PAID RS. 3 LACS TO SUZLON D EVELOPERS PVT. LTD. AS ITS SHARE OF THE UNDIVIDED COMMON INFRASTRUCTURE FACILI TIES THROUGHOUT THE LIFE OF THE WINDMILL WHICH DOES NOT ATTRACT ANY PROVISIONS FOR TAX DEDUCTION AT SOURCE. IT WAS SUBMITTED THAT SECTION 194-I OF THE ACT HAS BEEN AMENDED W.E.F. 13 TH JULY 2006 BY TAXATION LAW (AMENDMENT) ACT, 2006 WH EREBY NEW EXPLANATION(I) HAS BEEN INCORPORATED IN LIEU OF OLD EXPLANATION(I) DEFINING THE MEANING OF RENT IT WAS ALSO STATED THAT TDS WAS APPLICABLE WHETHER OR NOT THE BUILDING WAS OWNED BY THE PAYEE OR NOT AS PER T HE PRE-AMENDED DEFINITION WHILE NO SUCH EXCLUSION WAS THERE IN PRE-AMENDED DE FINITION W.R.T. LAND AND HENCE W.R.T. LAND IT WAS COMPULSORY THAT THE LAND M UST BE OWNED BY THE PAYEE. IT WAS SUBMITTED THAT THE PAYMENT OF RENT FO R USE OF LAND IS COVERED BY THE EXPLANATION (I) OF SECTION 194-I OF THE ACT ONL Y IF THE PAYEE IS THE OWNER OF THE LAND AS PER PRE-AMENDED DEFINITION AND PAYMENT MADE FOR ACQUIRING LAND OR CAPITAL ASSETS CANNOT BE BROUGHT WITHIN AMBIT OF DEFINITION OF RENT AS PER SECTION 194-I OF THE ACT. IT IS SUBMITTED THAT IN ASSESSEES CASE THE PAYEE M/S SUZLON ENERGY LTD. IS NOT THE OWNER OF LAND BUT THE LESSEE OF THE LAND GRANTED BY GOVERNMENT OF RAJASTHAN AND THE ACTUAL OWNER IS GOVERNMENT OF RAJASTHAN AND THE RAJASTHAN GOVERNMENT LEASED OUT T HE ENTIRE LAND OF 307 BIGHA 03 BISWA SITUATED AT VILLAGE BARMSAR, TEHSIL & DISTRICT JAISALMER, RAJASTHAN IN FAVOUR OF SUZLON ENERGY LTD. VIDE LEAS E DEED DATED 19 TH FEBRUARY, 2004 AND THE INSTANT CASE IS FOR ASSESSME NT YEAR 2004-05 WHICH IS COVERED BY PRE-AMENDED DEFINITION OF RENT. IN AD DITION TO THE LUMPSUM PAYMENT OF RS. 3 LACS TOWARDS SUB-LEASE PREMIUM, TH E ASSESSEE PAID RENT OF RS. 225/- PERIODICALLY TOWARDS THE USE OF THE LAND. THE LD. COUNSEL INVITED OUR ATTENTION TO THE AGREEMENT PLACED ON RECORD VID E PAPER BOOK PAGE 3 TO 18 WHEREBY THE ASSESSEE IS ENTITLED TO MORTGAGE OR ASS IGN LAND IN FAVOUR OF ANY ITA 6793/MUM/2014 9 FINANCIAL INSTITUTIONS OR BANKS AND HAS ONLY TO NO TIFY WITHIN A PERIOD OF THREE MONTHS OF TAKING LOAN ETC. TO THE SUB-LESSOR AND GO VERNMENT OF RAJASTHAN, HENCE THE PAYMENT IS NOT COVERED BY SECTION 194-I O F THE ACT AS LEASE PREMIUM DOES NOT FALL UNDER THE DEFINITION OF RENT . THE LD. COUNSEL RELIED UPON THE JUDICIAL DECISIONS:- SL NO. PARTICULARS DATE OF ORDER 1 THE ITO (TDS) 3(5) V. M/S WADHWA & ASSOCIATES REALTORS PVT. LTD. ITA NO. 695/MUM/2012 03-07-2013 2 THE ITO (TDS) 3(2) V. M/S SHAH GROUP BUILDERS LTD. ITA NO. 4523/MUM/2012 14-08-2013 3 THE ITO (TDS) 3(2) V. SHREE NAMAN DEVELOPERS LTD. ITA NO 686 & 687/MUM/2012 04-08-2013 4 THE ITO (OSD)(TDS)- 3(2) V. M/S TRENT LIMITED ITA NO. 4629/MUM/2012 21-08-2013 5 THE ITO (OSD)(TDS) RANGE 2 V. M/S NAVI MUMBAI SEZ P. LTD.. ITA NO. 738 TO 741/MUM/2012 16-08-2013 6 M/S FOXCONN INDIA DEVELOPER (P) LTD. V. THE INCOME TAX OFFICER, TDS WARD II(3) (2016) 239 TAXMAN 513(MAD. HC) 04-04-2016 IT IS SUBMITTED THAT DECISION OF THE TRIBUNAL IN TH E CASE OF FOXCONN RELIED UPON BY THE AUTHORITIES BELOW HAS BEEN REVERSED BY THE H ONBLE MADRAS HIGH COURT IN 239 TAXMAN 513(MAD.HC)(SUPRA). WITH RESPECT TO GROUND NO. 2, IT IS SUBMITTED THAT THE DEFINITION OF RENT HAS BEEN AMENDED BY THE TAXATION LAWS (AMENDMENT) ACT,2 006 W.E.F. 13 TH JULY, 2006 FOR THE PURPOSES OF SECTION 194-I OF THE ACT. IT IS AN OLD CASE RELEVANT TO ASSESSMENT YEAR 2004-05 AND GOVERNED BY PRE-AMENDED DEFINITION OF RENT IN EXPLANATION(I) TO SECTION 194-I OF THE ACT. IT WAS SUBMITTED THAT IN PRE- AMENDED DEFINITION PLANT AND MACHINERY AND EQUIPMEN TS WERE NOT COVERED BY THE DEFINITION OF RENT U/S 194-I OF THE ACT AND H ENCE PAYMENT OF RS. 3 LACS ITA 6793/MUM/2014 10 FOR SHARING COMMON INFRASTRUCTURE FACILITIES CANNOT BE BROUGHT WITHIN AMBIT OF SECTION 194-I OF THE ACT AND AT BEST ,WITHOUT PR EJUDICE, IT COULD BE COVERED U/S 194-C OF THE ACT BEING CONTRACTUAL PAYMENTS. TO THIS EFFECT CERTIFICATE U/S 197(1) OF THE ACT WAS ISSUED BY THE REVENUE-ACIT IN FAVOUR OF SUZLON DEVELOPERS PRIVATE LIMITED TO DEDUCT TDS @0.55% FOR WHICH THE ASSESSEE MAY BE HELD AS ASSESSEE IN DEFAULT TO THAT EXTENT, WHIC H CERTIFICATE ISSUED BY THE REVENUE U/S 197(1) OF THE ACT IS PLACED AT PAPER B OOK PAGE 19. IT WAS SUBMITTED THAT THE CHARTERED ACCOUNTANT OF SUZLON D EVELOPERS P. LTD. HAS GIVEN CERTIFICATE THAT THEY HAVE DULY DEPOSITED THE TAX WITH THE GOVERNMENT WHEREBY THE RECEIPT OF RS. 3.0 LACS FROM THE ASSESS EE FOR THE IMPUGNED ASSESSMENT YEAR I.E. 2004-05 WAS DULY INCLUDED IN T HE INCOME OF THE SUZLON DEVELOPERS PRIVATE LIMITED IN THE RETURN OF INCOME FILED WITH THE REVENUE, COPY OF WHICH IS PLACED VIDE PAPER BOOK PAGE 20. GROUND NO. 3 IS WITH RESPECT TO THE LEVY INTEREST U /S 201(1A) OF THE ACT. IT WAS SUBMITTED BY LEARNED COUNSEL FOR THE ASSESSEE T HAT THE SURVEY WAS CONDUCTED BY THE REVENUE ON 02-03-2007 AND THE ASSE SSEE HAD MADE SUBMISSION BEFORE THE A.O. IN THE MONTH OF DECEMBER 2007 WITH RESPECT TO ALLEGED VIOLATIONS OF SECTION 194-I OF THE ACT FOR NON DEDUCTION OF TAX AT SOURCE BY THE ASSESSEE U/S 194-I OF THE ACT, WHILE THE OR DER U/S 201/201(1A) OF THE ACT WAS PASSED IN YEAR 2011 I.E. AFTER MORE THAN TH REE YEARS .IT WAS SUBMITTED THAT THERE WAS INORDINATE DELAY OF MORE THAN THREE YEARS BY THE REVENUE IN PASSING ORDERS U/S 201/201(1A) OF THE ACT AND THE A SSESSEE IS NOT AT FAULT FOR SUCH INORDINATE DELAYS OF MORE THAN THREE YEARS BY THE AO IN FRAMING THE IMPUGNED ORDER U/S 201(1) AND 201(1A) OF THE ACT AN D HENCE THE ASSESSEE SHOULD NOT BE PENALIZED FOR SUCH INORDINATE DELAYS OF MORE THAN THREE YEARS BY THE REVENUE IN FRAMING THE IMPUGNED ORDER AND TH EREBY IMPOSING HEAVY INTEREST U/S 201(1A) OF THE ACT FOR NO-FAULT OF THE ASSESSEE. ITA 6793/MUM/2014 11 8. THE LD. D.R. SUBMITTED THAT EVEN AS PER THE OLD PRE-AMENDED DEFINITION OF RENT , SUB-LEASE OF LAND IS COVERED WITHIN DEFIN ITION OF RENT AND TAX IS TO BE DEDUCTED AT SOURCE ON SUCH PAYMENTS AND THE LD. CIT (A) IS QUITE JUSTIFIED IN PASSING HIS ORDER. THE LEARNED DR SUBMITTED THAT IT IS NOT KNOWN WHETHER THE REVENUE HAS ACCEPTED THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF FOXCONN INDIA DEVELOPERS PRIVATE LIMITED(SUPRA). INTEREST IS MANDATORY FOR NON-DEDUCTION OF TDS AND THE REVENUE HAS RIGHTLY IM POSED INTEREST U/S 201(1A) OF THE ACT. IT WAS SUBMITTED THAT INTEREST IS COMPENSATORY IN NATURE RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COUR T IN THE CASE OF BENETT COLEMAN & COMPANY LIMITED V. ITO (1986) 157 ITR 812 (BOM.) AND THE CASE OF CIT V. PREM NATH MOTORS (2002) 120 TAXMAN 584(DE L.). WITH RESPECT TO DELAY IN PASSING THE ORDER U/S 201(1A) OF THE ACT A S CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE, IT WAS SUBMITTED BY LEARN ED DR THAT THIS FACTS NEED TO BE VERIFIED FROM THE RECORDS AND THE MATTER MAY BE REMANDED TO THE AO TO FIND OUT WHEN THE ASSESSEE SUBMITTED ITS REPLIES TO THE QUERIES RAISED BY THE AO. 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING CASE LAWS RELIED UPON BY BOTH THE PARTIES. WE HAVE OBSERVED THAT THE ASSESSEE IS IN THE BUSINESS OF GENERATION OF POWER. THE ASSESSEE HAD GIVEN CONTRACT TO SUZLON ENERGY LIMITE D TO SUPPLY, INSTALL, COMMISSION AND OPERATE WIND TURBINE GENERATION J38( WINDMILL) IN WIND FARM SITUATED AT VILLAGE BARAMSAR , TEHSIL AND DIST RICT JAISALMER, RAJASTHAN FOR TOTAL CONSIDERATION OF RS.1,36,50,000/- . WE HA VE OBSERVED THAT THE ASSESSEE HAS MADE PAYMENT OF RS. 3 LACS TO M/S SUZL ON ENERGY P. LTD. WHICH WAS INCLUDED IN THE AFORE-STATED TOTAL PAYMENT OF R S. 1,36,50,000/-, FOR ACQUISITION OF SUB LEASE RIGHTS FOR A PERIOD OF 19 YEARS OF THE 5 BIGHA LAND AT VILLAGE BARAMSAR WITH AN OPTION FOR FURTHER EXTENS ION FOR 11 YEARS. THE SAID PAYMENT OF RS. 3 LACS INCLUDED PAYMENT FOR STAMP DU TY, REGISTRATION , LEGAL AND ADMINISTRATION CHARGES. THE SAID LAND WAS SUB- LEASED TO THE ASSESSEE BY ITA 6793/MUM/2014 12 SUZLON ENERGY PRIVATE LIMITED FOR SETTING UP WINDMI LL PROJECT. THE GOVERNMENT OF RAJASTHAN HAS ALLOTTED 307 BIGHA 3 BI SWA LAND ON LEASE BASIS TO SUZLON ENEREGY PRIVATE LIMITED AT VILLAGE BARAMS AR , TEHSIL AND DISTRICT JAISALMER, RAJASTHAN FOR A PERIOD OF THIRTY YEARS F OR THE PURPOSE OF SETTING UP WINDMILL PROJECTS VIDE LEASE DEED DATED 19-02-2004 WHICH CAN BE FURTHER EXTENDED BEYOND 30 YEARS, AND IN TURN SUZLON ENERGY PRIVATE LIMITED HAS SUB-LEASED 5 BIGHA LAND AT VILLAGE BARAMSAR , TEHSI L AND DISTRICT JAISALMER, RAJASTHAN TO THE ASSESSEE FOR A PERIOD OF 19 YEARS FOR RS. 3 LACS WITH FURTHER OPTION TO RENEW IT FOR 11 YEARS FOR SETTING UP WIND MILL PROJECT AND IN CASE GOVERNMENT OF RAJASTHAN EXTENDS LEASE WITH SUZLON E NERGY PRIVATE LIMITED BEYOND 30 YEARS, THEN THE ASSESSEE WILL HAVE FURTHE R OPTION FOR EXTENSION EVEN BEYOND 30 YEARS, VIDE SUB-LEASE DEED DATED 12-08-20 04 EFFECTIVE FROM 19-02- 2004 AFTER SEEKING APPROVAL FROM GOVERNMENT OF RAJA STHAN(PB/PAGE 3-18). THE ASSESSEE IS ALSO IN ADDITION LIABLE TO PAY YEAR LY RENT OF RS. 225/- TO THE GOVERNMENT OF RAJASTHAN DIRECTLY WITH RESPECT TO TH IS SUB-LEASED LAND SITUATED AT VILLAGE BARAMSAR , TEHSIL AND DISTRICT JAISALMER, RAJASTHAN (PB/PAGE8) . AS PER THE SUB-LEASE AGREEMENT CLAUSE IV WITH SUZLON ENERGY LIMITED, THE ASSESSEE IS ENTITLED AND PERMITTED BY GOVERNMENT OF RAJASTHAN AND SUZLON ENERGY PRIVATE LIMITED TO MORTGAGE OR AS SIGN THE LAND IN FAVOUR OF ANY FINANCIAL INSTITUTIONS OR BANKS FOR AVAILING LO AN AND THE ASSESSEE HAS TO MERELY NOTIFY THE GOVERNMENT OF RAJASTHAN AND SUZLO N ENERGY PRIVATE LIMITED WITHIN THREE MONTHS AND THE SAID MORTGAGE OR ASSIGN MENT BY THE ASSESSEE SHALL CONVEY GOOD TITLE IN FAVOUR OF MORTGAGEE AND/ OR ASSIGNEE(PB/PAGE 9). IN OUR CONSIDERED VIEW, IT IS AN ACQUISITION BY THE A SSESSEE OF THE RIGHTS AKIN TO OWNERSHIP RIGHTS IN THE PROPERTY CONSISTING OF 5 B IGHAS OF LAND SITUATED AT VILLAGE BARAMSAR , TEHSIL AND DISTRICT JAISALMER, R AJASTHAN FOR A PERIOD OF 19 YEARS WITH RIGHT TO FURTHER EXTENSION FOR 11 YEARS AND FURTHER OPTION TO EXTEND EVEN BEYOND 30 YEARS IF GOVERNMENT OF RAJASTHAN EXT ENDS THE LEASE OF SUZLON ENEREGY PRIVATE LIMITED AND HENCE THIS PAYMENT OF R S. 3,00,000/- BY THE ASSESSEE TO SUZLON ENERGY PRIVATE LIMITED IS NOT ME RELY PAYMENT OF RENT FOR ITA 6793/MUM/2014 13 USE OF LAND.. FURTHER WE HAVE OBSERVED THAT THERE I S NO PROVISION IN THE SUB- LEASE DEED DATED 12-08-2004 THAT THIS PAYMENT OF RS . 3 LACS IS ADJUSTABLE AGAINST YEARLY RENT . HENCE IN OUR CONSIDERED VIEW THIS UP-FRONT ONE TIME PAYMENT OF SUB-LEASE CHARGES OF RS. 3 LACS PAID TO SUZLON ENERGY PRIVATE LIMITED TOWARDS SUB-LEASE OF LAND FOR 19 YEARS CAN NOT BE SAID TO BE PAID FOR USE OF LAND TO BRING WITHIN THE AMBIT AND MANDATE O F PROVISIONS OF SECTION 194-I OF THE ACT FOR DEDUCTING TAX AT SOURCE. WE HA VE OBSERVED THAT THE ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE C ASE OF WADHWA & ASSOCIATES REALTORS PVT. LTD.(SUPRA) AND ALSO DECISION OF HON BLE MADRAS HIGH COURT IN THE CASE OF FOXCONN INDIA DEEVEOPER PRIVATE LIMITED (SUPRA) AS WELL OTHER DECISIONS RELIED UPON BY THE ASSESSEE AS DETAILED I N PRECEDING PARAS ALBEIT IN THE SAID DECISIONS THE COURT/TRIBUNAL WERE CONCERNE D WITH UP-FRONT LEASE PREMIUM PAID FOR ACQUISITION OF LAND ON LONG TERM L EASE BASIS WHILE IN THE INSTANT CASE LAND IS ACQUIRED FOR SETTING UP WIND M ILL BY ENTERING INTO SUB- LEASE DEED WHERE IN THE LESSOR HAS GRANTED SUB-LEAS E IN FAVOUR OF THE ASSESSEE WITH THE APPROVAL OF THE OWNERS OF THE LAND I.E. GO VERNMENT OF RAJASTHAN FOR A PERIOD OF 19 YEARS WITH FURTHER OPTION OF EXTENDIN G BY 11 YEARS AND ALSO FURTHER OPTION OF EXTENSION BEYOND 30 YEARS IF GOVE RNMENT OF RAJASTHAN EXTENDS THE LEASE WITH SUZLON ENERGY PRIVATE LIMITE D BEYOND 30 YEARS, WITH THE PERMISSION OF THE OWNERS OF LAND I.E. GOVERNMEN T OF RAJASTHAN. WE HAVE ALSO GONE THROUGH THE RECENT CBDT CIRCULAR NO. 35/2 016 [F NO. 275/29/2015-IT (B)] DATED 13 TH OCTOBER, 2016 WHEREBY CBDT HAVE ACCEPTED THE DECISION OF THE HONBLE HIGH COURTS AND HAS ACC EPTED THAT NO TDS IS DEDUCTIBLE ON PAYMENT OF ONETIME UP-FRONT LEASE PRE MIUM PAID TO ACQUIRE PROPERTY ON LONG-TERM LEASE. THE CBDT CIRCULAR NO. 35/2016 [F NO. 275/29/2015-IT (B)] DATED 13 TH OCTOBER, 2016 IS REPRODUCED BELOW:- CIRCULAR 0.35/2016 [F. 0.275/29/2015-IT (B)] ITA 6793/MUM/2014 14 SECTION 194-I OF THE INCOME-TAX ACT, 1961 - DEDUCTI ON OF TAX AT SOURCE - RENT - APPLICABILITY OF TDS PROVISIONS OF SECTION 194-I ON LUMPSUM LEASE PREMIUM PAID FOR ACQUISITION OF LONG TERM LEASE. CIRCULAR NO.35/2016 [F.NO.275/29/2015-IT (B)], DATED 13-10-2016. SECTION 194-I OF THE INCOME-TAX ACT, 1961 (THE ACT) REQUIRES THAT TAX BE DEDUCTED AT SOURCE AT THE PRESCRIBED RATES F ROM PAYMENT OF ANY INCOME BY WAY OF RENT. FOR THE PURPOSES OF T HIS SECTION, 'RENT' HAS BEEN DEFINED AS ANY PAYMENT, BY WHATEVER NAME CALLED, UNDER ANY LEASE, SUB-LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR THE USE OF ANY LAND OR BUILDING OR MACHINERY OR PLANT OR EQUIPMENT OR FURNITURE OR FIT TINGS. 2. THE ISSUE OF WHETHER OR NOT TDS UNDER SECTION 19 4-I OF THE ACT IS APPLICABLE ON 'LUMP SUM LEASE PREMIUM' OR 'ONE-T IME 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 RECEIVE D IN THIS REGARD. 3. THE BOARD HAS TAKEN NOTE OF THE FACT THAT IN THE CASE OF THE INDIAN NEWSPAPER SOCIETY (ITA NOS. 918 & 920/2015), THE HON'BLE DELHI HIGH COURT HAS RULED THAT LEASE PREMI UM PAID BY THE ASSESSEE FOR ACQUIRING A PLOT OF LAND ON AN 80 YEARS LEASE WAS IN THE NATURE OF CAPITAL EXPENSE NOT FALLING WITHIN THE AMBIT OF SECTION 194-I OF THE ACT. IN THIS CASE, THE COURT R EASONED THAT SINCE ALL THE RIGHTS EASEMENTS AND APPURTENANCES IN RESPECT OF THE SAID LAND WERE IN EFFECT TRANSFERRED TO THE LES SEE FOR 80 YEARS AND SINCE THERE WAS NO PROVISION IN LEASE AGREEMENT FOR ADJUSTMENT OF PREMIUM AMOUNT PAID AGAINST ANNUAL RE NT PAYABLE, THE PAYMENT OF LEASE PREMIUM WAS A CAPITAL EXPENSE NOT REQUIRING DEDUCTION OF TAX AT SOURCE UNDER SECTION 194-I OF THE ACT. 4. FURTHER, IN THE CASE FOXCONN INDIA DEVELOPER LIM ITED (TAX CASE APPEAL NO. 801/2013), THE HON'BLE 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 ITA 6793/MUM/2014 15 INCOME IN THE HANDS OF THE LESSOR, OBLIGING THE LES SEE TO DEDUCT TAX AT SOURCE UNDER SECTION 194-I OF THE ACT AND TH AT IN SUCH A SITUATION THE LEASE ASSUMES THE CHARACTER OF 'DEEME D SALE'. THE HON'BLE CHENNAI HIGH COURT HAS ALSO IN THE CASES OF TRIL INFOPARK LIMITED (TAX CASE APPEAL NO. 882/2015) RULED THAT T DS WAS NOT DEDUCTIBLE ON PAYMENTS OF LUMP SUM LEASE PREMIUM BY THE COMPANY 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-I OF THE ACT IS TO BE MADE ON LUMP SUM LEASE PREMIUM OR ONE-TIME UP FRONT LEASE CHARGES PAID FOR ALLOTMENT OF LAND OR ANY OTH ER PROPERTY ON LONG-TERM LEASE BASIS IS NOW SETTLED IN FAVOUR OF T HE ASSESSEE. 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 OF THE ACT. THEREFORE, SUCH PAYMENTS ARE NOT LIABLE FOR TDS UNDER SECTION 194-I OF THE ACT. THUS, KEEPING IN VIEW OUR DETAILED DISCUSSIONS AND REASONING AS SET-OUT ABOVE WE ARE OF CONSIDERED VIEW THAT THIS PAYMENT O F RS. 3 LACS PAID BY THE ASSESSEE TO SUZLON ENERGY LIMITED TOWARDS SUBLEASE CHARGES FOR 5 BIGHA LAND AT BARAMSAR, TEHSIL AND DISTRICT JAISALMER, RAJASTH AN FOR SETTING UP WINDMILL PROJECT IS NOT COVERED WITHIN THE AMBIT AND MANDATE OF SECTION 194-I OF THE ACT AND NO TAX IS DEDUCTIBLE AT SOURCE AS THE PAYME NT IS MADE ALBEIT AS SUB- LEASE CHARGES FOR ACQUIRING THE RIGHTS IN PROPERTY WHICH IS AKIN TO OWNERSHIP RIGHTS.WE ORDER ACCORDINGLY. THE ASSESSEE HAD ALSO MADE PAYMENT OF RS. 3 LACS AS ITS CONTRIBUTION FOR AVAILING AND USE OF COMMON INFRASTRUCTURE FACILITY TO M/S SUZLON DEVELOPERS LIMITED WHICH ARE CONSTRUCTED, DEVELOPED AND OPERAT ED BY SUZLON DEVELOPERS PRIVATE LIMITED. THE COMMON INFRASTRUCTURE FACILITI ES ARE : ITA 6793/MUM/2014 16 A) ACCESSIBILITY TO THE WINDMILL B) PROTECTION AND GUARDING OF THE WIND TURBINE C) TRANSMISSION OF ELECTRICITY GENERATED FROM WIND TUR BINE TO COMMON GRID STATION WITHIN THE WINDMILL FARM D) METER READING OF THE ELECTRICITY GENERATED AND TRAN SMISSION INTO GRID E) DAY TO DAY ELECTRICITY GENERATION AND TRANSMISSION REPORT TO THE CUSTOMER F) REGULAR MONITORING OF THE WINDMILL TO ENSURE SMOOTH AND CONTINUOUS RUNNING OF THE WINDMILL. WE HAVE OBSERVED THAT SUZLON DEVELOPERS PRIVATE LIM ITED HAS DEVELOPED WINDMILL FARM AT VILLAGE BARAMSAR, JAISALMER, RAJAS THAN . IN THE SAID WIND MILL FARM, SUZLAN ENERGY LTD. HAS INSTALLED THOUSAN DS OF WINDMILL FOR ITS VARIOUS CUSTOMERS AS LONG TERM TURN-KEY PROJECT. W E HAVE OBSERVED THAT THE ASSESSEE COMPANY WAS ONE OF THE CUSTOMERS FOR WHOM SUZLON ENERGY LTD. INSTALLED ONE WINDMILL DURING FINANCIAL YEAR 2003-0 4. AS A PART OF THE WINDMILL TURN-KEY PROJECT THE COMPANY PAID RS. 3 LA CS TO SUZLON DEVELOPERS PVT. LTD. AS ITS SHARE TO THE UNDIVIDED COMMON INFR ASTRUCTURE FACILITIES TO BE ENJOYED THROUGHOUT THE LIFE OF THE WINDMILL. IT IS ALSO THE CLAIM OF THE ASSESSEE,WITHOUT PREJUDICE, THAT SAID PAYMENT AT BE ST COULD BE COVERED U/S 194C OF THE ACT IT IS ALSO THE CLAIM OF THE ASSESSE E THAT SUZLON DEVELOPERS PVT. LIMITED I.E. THE PAYEE HAS NO TAX DUES PAYABLE AS I T HAD PAID ITS ENTIRE TAX LIABILITY FOR THE ASSESSMENT YEAR 2004-05 HENCE NO TAXES CAN BE DETERMINED/RECOVERED FROM THE ASSESSEE IN VIEW OF T HE HONBLE SUPREME COURT JUDGMENT IN THE CASE OF CIT V. HINDUSTAN COCO COLA BEVERAGE PVT LTD., (2007)293ITR226(SC). IN OUR CONSIDERED VIEW, THESE COMMON INFRASTRUCTUR E FACILITIES AS DETAILED ABOVE REQUIRE RENDERING OF SERVICES ASSOCIATED WITH THESE INFRASTRUCTURE FACILITIES FOR AVAILING THESE INFRASTRUCTURE FACILI TIES WHICH ARE IN THE NATURE OF ITA 6793/MUM/2014 17 PAYMENT TO CONTRACTOR FOR CARRYING OUT THE WORK ASS OCIATED WITH THE UTILIZATION OF THESE COMMON INFRASTRUCTURE FACILITI ES. THESE ARE PAYMENTS HICH ARE CONTRACTUAL PAYMENT FOR PROVISION OF VARIOUS C OMMON INFRASTRUCTURE FACILITIES BY SUZLON DEVELOPERS PRIVATE LIMITED TO THE ASSESSEE AND IS COVERED U/S 194-C OF THE ACT. THE ASSESSEE HAS CLAIMED THA T THE LOWER DEDUCTION CERTIFICATE WAS ISSUED BY ACIT IN FAVOUR OF SUZLON DEVELOPERS PRIVATE LIMITED TO DEDUCT TAX AT SOURCE @0.55% ON CONTRACTUAL PAYM ENTS DURING THE FINANCIAL YEAR 2003-04 WHICH WAS PRODUCED BY THE PA YEE (PB/PAGE 19). IN OUR CONSIDERED VIEW,THIS PAYMENT OF RS. 3 LACS WAS COVERED UNDER THE PROVISIONS OF SECTION 194-C OF THE ACT AND THE ASSE SSEE HAS DEFAULTED IN NOT DEDUCTING TAX AT SOURCE U/S 194-C OF THE ACT ON THI S PAYMENT OF RS. 3 LACS TO SUZLON DEVELOPERS PRIVATE LIMITED. THE VERIFICATION IS REQUIRED FROM THE SIDE OF A.O. W.R.T. CLAIMS OF THE ASSESSEE THAT THE SAID SU ZLON DEVELOEPRS PRIVATE LIMITED HOLD LOWER DEDUCTION CERTIFICATE ISSUED BY REVENUE U/S 197(1) OF THE ACT AS ALSO THE CLAIM OF THE ASSESSEE THAT THE SAID SUZLON DEVELOEPRS PRIVATE LIMITED HAS DULY PAID TAXES ON THESE PAYMENT OF RS. 3 LACS PAID BY THE ASSESSEE( PAGE 19-20/PB) AND ACCORDINGLY WE SET ASI DE AND RESTORE THIS ISSUE TO THE FILE OF THE A.O. WITH A DIRECTION TO VERIFY THE AFORE-STATED CONTENTIONS OF THE ASSESSEE THAT M/S SUZLON DEVELOPERS P. LTD. HAS PRODUCED TDS CERTIFICATE ISSUED U/S 197(1) OF THE ACT IN THEIR FAVOUR FOR TH E IMPUGNED ASSESSMENT YEAR 2004-05 FOR LOWER DEDUCTION OF TAX AT SOURCE @0.55% ON CONTRACTUAL PAYMENTS AND ALSO THAT THEY HAVE DULY PAID THE TAX ES TO REVENUE AFTER INCLUDING AFORE-STATED RECEIPTS. THE BINDING DECISI ON OF HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA-COLA(SUPRA) SHA LL APPLY W.R.T. TO INTEREST LIABILITY ACCORDINGLY AFTER VERIFICATION BY THE AO. SIMILARLY, WITH RESPECT TO THE CONTENTION OF THE ASSESSEE THAT THERE WAS AN IN-ORD INATE DELAY BY REVENUE OF MORE THAN THREE YEARS IN PASSING THE ORDER IN 2011 WHILE THE ASSESSE GAVE ALL DETAILS BY DECEMBER 2007 AND HENCE THE ASSESSEE SHO ULD NOT BE PENALIZED FOR INTEREST FOR MORE THAN THREE YEARS FOR NO FAULT OF ASSESSEE, THIS CONTENTION OF THE ASSESSEE NEEDS VERIFICATION BY THE AO AND WE AR E INCLINED TO SET ASIDE AND ITA 6793/MUM/2014 18 RESTORE THIS ISSUE TO THE FILE OF THE AO FOR VERIFI CATION OF CONTENTIONS OF THE ASSESSEE AND PASS APPROPRIATE ORDERS AFTER VERIFICA TION ON MERITS IN ACCORDANCE WITH LAW. NEEDLESS TO SAY THAT PROPER A ND ADEQUATE OPPORTUNITY OF BEING HEARD SHALL BE PROVIDED BY THE AO TO THE A SSESSEE IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WITH LA W. THE ASSESSEE IS DIRECTED TO CO-OPERATE WITH THE AUTHORITIES BELOW , SO THAT ISSUES SET ASIDE AND RESTORED TO THE FILE OF THE AO BY US BE DECIDED ON MERITS I N ACCORDANCE WITH LAW. THE AO SHALL ALLOW THE ASSESSEE TO FILE RELEVANT EVIDEN CES AND EXPLANATIONS IN ITS DEFENSE . WE ORDER ACCORDINGLY. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO. 6793/MUM/2014 FOR THE ASSESSMENT YEAR 2004-05 IS PA RTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH NOVEMBER, 2016. # $% &' 16-11-2016 ( ) SD/- SD/- (C.N. PRASAD) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 16-11-2016 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI E BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// ITA 6793/MUM/2014 19 / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI