ITO (TDS) 2(4), MUMBAI V. NAMAN BKC CHS LTD, MUMBAI

ITA 708/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71092 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-09-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 02-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Maximum Marginal Rate; Capital expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI H L KARWA, PRESIDENT & SHRI N K BILLAIYA, ACCOUNTANT MEMBER ITA NOS.708 & 709/MUM/2012 FOR A.YS: 2009-10 & 2011-12 THE ITO (TDS) 2(4), MUMBAI VS. NAMAN BKC CHS LTD., PLOT NO.R-5A, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI- 400 051 PAN AAAAN5392F (APPELLANT) (RESPONDENT) CO NOS. 10 & 11/M/13 (ARISING OUT OF ITA NOS.708 & 709/MUM/2012 FOR A.YS: 2009-10 & 2011-12) NAMAN BKC CHS LTD. MUMBAI VS. THE ITO (TDS) 2(4), MUMBAI (CROSS-OBJECTOR) (RESPONDENT) FOR THE REVENUE : SHRI MANVENDVA GOYAL FOR THE ASSESSEE : SHRI J D MISTRY DATE OF HEARING : 12.09.2013 DATE OF PRONOUNCEMENT : 12.09.2013 O R D E R PER BENCH: THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGAI NST TWO SEPARATE ORDERS OF THE CIT(A)-14, MUMBAI, DATED 21.11.2011 PERTAINING TO A.YS. 2009-10 AND 2011-12. 2 ITA NOS.708 & 709/M/12 & CO NOS.10 & 11/M/13 AY:2009-10 & 2011-12 THE CROSS-OBJECTIONS ARE BY THE ASSESSEE AGAINST TH E VERY SAME ORDER OF THE CIT(A) RESPECTIVELY. AS COMMON ISSUES ARE INVOLVED IN THE SE APPEALS AND CROSS-OBJECTIONS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA NO.708/MUM/2012 (A.Y : 2009-10) 2. THE REVENUE HAS RAISED AS MANY AS 12 GROUNDS OF APPEAL. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE REVENUE IS THAT T HE CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSEE WAS NOT LIABLE T O DEDUCT TAX AT SOURCE U/S. 194I. FACTS ON RECORD SHOW THAT THE ASSESSING OFFICER REC EIVED INFORMATION THAT THE ASSESSEE HAS PAID LEASE PREMIUM TO MUMBAI METROPOLI TAN REGIONAL DEVELOPMENT AUTHORITY (MMRDA) ON WHICH NO TAX WAS DEDUCTED AT S OURCE. THEREFORE, A SHOW CAUSE NOTICE WAS ISSUED AND SERVED ON THE ASSESSEE REQUIRING TO EXPLAIN AS TO WHY THE SUMS PAID AND TERMED AS PREMIUM SHOULD NOT BE T REATED AS LEASE RENT UNDER THE PROVISIONS OF SECTION 194I OF THE ACT AND WHY THE A SSESSEE SHOULD NOT BE TREATED AS ASSESSEE IN DEFAULT AS PER THE PROVISIONS OF SECT ION 201(1)/201(1A) OF THE ACT. THE ASSESSEE FILED A DETAILED SUBMISSIONS STATING THAT THE TRANSACTION IN QUESTION DOES NOT FALL WITHIN THE AMBIT OF SECTION 194I. THE ASS ESSING OFFICER CONSIDERED THESE SUBMISSIONS OF THE ASSESSEE AND THE DEFINITION OF RENT AND CAME TO THE CONCLUSION THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX AS PER S ECTION 194I OF THE ACT AND AS THE ASSESSEE HAS FAILED TO DO SO, DIRECTED THE ASSESSEE TO PAY TDS ALONG WITH INTEREST AMOUNTING TO RS.1,01,94,503/- 3. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A ) AND EXPLAINED IN DETAIL THE NATURE OF TRANSACTION VIS-A-VIS SECTION 194I OF THE ACT. THE ASSESSEE RELIED UPON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF KHIMLINE PUMPS LTD. 258 ITR 459 AND ALSO DECISION OF THE SPECIAL BENCH OF MUMBAI TRIBUNAL IN THE CASE OF MUKUND LTD. 106 ITD 231 AND SUBMITTED THAT IN BOTH THESE CASES, ON IDENTICAL FACTS, SIMILAR PAYMENT HAS BEEN CONSIDERED AS A CAPITAL EX PENDITURE. AFTER CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE RATIO LAID DO WN BY THE HONBLE JURISDICTIONAL HIGH 3 ITA NOS.708 & 709/M/12 & CO NOS.10 & 11/M/13 AY:2009-10 & 2011-12 COURT IN THE CASE OF KHIMLINE PUMPS LTD. (SUPRA), T HE CIT(A) HELD THAT THE AMOUNT PAID BY THE ASSESSEE IS NOT IN THE NATURE OF RENT A S CONTEMPLATED U/S. 194I OF THE ACT AND HELD THAT THE ASSESSEE WAS NOT REQUIRED TO DEDU CT TAX AT SOURCE U/S. 194I OF THE ACT AND, THUS, DELETED THE ENTIRE DEMAND RAISED BY THE ASSESSING OFFICER. AGGRIEVED BY THIS THE REVENUE IS BEFORE US. 4. AT THE VERY OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THE DECISIONS OF THE TRIBUNAL IN THE CASE OF WADHWA & ASSOCIATES REALTORS PVT. LTD. IN ITA NOS. 695/M/12 FOR A.Y. 2008-09 AND IN THE CASE OF SHREE NAMAN DEVELOPERS LTD. IN ITA NOS. 686 & 687/MUM/2012 FOR A.Y. 2008-09 AND 2009-10 AND SUBMITTED THAT THIS ISSUE HAS BEEN WELL SETTLED IN FAVOUR OF THE A SSESSEE. THE LEARNED DR COULD NOT BRING ANY DISTINGUISHING FACTS IN FAVOUR OF THE REV ENUE. 5. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWE R AUTHORITIES AND THE DECISIONS OF THE TRIBUNAL BROUGHT ON RECORD. WE FI ND THAT THE SAME COMBINATION IN THE CASE OF WADHWA & ASSOCIATES REALTORS PVT. LTD., (SUPRA) AT PARA 9 ON PAGE 6 HAS HELD AS UNDER: 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE ORDER OF THE LOWER AUTHORITIES AND THE MATERIAL EVIDENCE BRO UGHT ON RECORD IN THE FORM OF PAPER BOOK AND THE JUDICIAL DECISIONS R ELIED UPON BY THE RIVAL PARTIES. THE ENTIRE GRIEVANCE REVOLVES AROUN D THE PREMIUM PAID BY THE ASSESSEE TO M/S. MMRDA LTD. FOR THE LEASEHOL D RIGHTS ACQUIRED BY THE ASSESSEE THROUGH THE LEASE DT. 22 ND NOVEMBER, 2004. IT IS THE SAY OF THE REVENUE THAT THIS LEASE PREMIUM WAS LIAB LE FOR DEDUCTION OF TAX AT SOURCE FAILING WHICH THE ASSESSEE IS TO BE T REATED AS ASSESSEE IN DEFAULT. IT IS THE SAY OF THE ASSESSEE THAT SUCH L EASE PREMIUM IS IN THE NATURE OF CAPITAL EXPENDITURE AND THEREFORE THERE I S NO QUESTION OF DEDUCTION OF TAX AT SOURCE. FURTHER, THE SAID LEAS E PREMIUM DOES NOT COME WITHIN THE PURVIEW OF THE DEFINITION OF RENT A S PROVIDED U/S. 194-I OF THE ACT. 10. WE HAVE CAREFULLY PERUSED THE LEASE DEED AS EXH IBITED FROM PAGE-1 TO 42 OF THE PAPER BOOK. A CAREFUL READING OF 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 PRECED ES THE GRANT OF LEASE. THEREFORE, BY ANY STRETCH OF IMAGINATION, IT CANNOT BE EQUATED WITH THE RENT WHICH IS PAID PERIODICALLY. A PERUSAL OF THE RECORDS FURTHER SHOW 4 ITA NOS.708 & 709/M/12 & CO NOS.10 & 11/M/13 AY:2009-10 & 2011-12 THAT THE PAYMENT TO MMRD IS ALSO FOR ADDITIONAL BUI LT 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, MR TP ACT AND OTHER POWERS ENABLING THE SAME HAS APPROVED THE PROPOSAL TO MODIFY REGULATION 4A(II) AND THEREBY INCREASED THE FSI OF THE ENTIRE G BLOCK OF BKC. THE DEVELOPMENT CONTROL REGULATIONS FOR BKC S PECIFY THE PERMISSIBLE FSI. PURSUANT TO SUCH PROVISIONS, THE ASSESSEE BECAME ENTITLED FOR ADDITIONAL FSI AND HAS FURTHER ACQUIRE D/PURCHASED THE ADDITIONAL BUILT UP AREA FOR CONSTRUCTION OF ADDITI ONAL AREA ON THE AFORESAID PLOT. THUS, THE ASSESSEE HAS MADE PAYMEN T TO MMRD UNDER DEVELOPMENT CONTROL FOR ACQUIRING LEASEHOLD AND ADD ITIONAL BUILT UP AREA. THE DECISIONS OF THE TRIBUNAL IN THE CASE OF M/S. NATIONAL STOCK EXCHANGE (SUPRA) AND MUKUND LTD. (SUPRA) HAVE BEEN W ELL DISCUSSED BY THE LD. CIT(A) IN HIS ORDER. THE DECISION OF TH E HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF KHIMLINE P UMPS LTD. (SUPRA) SQUARELY AND DIRECTLY APPLY ON THE FACTS OF THE CAS E WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT PAYMENT FOR ACQUIRING LEASEHOLD LAND IS A CAPITAL EXPENDITURE. CONSIDERING THE ENT IRE FACTS IN TOTALITY IN THE LIGHT OF THE JUDICIAL DECISIONS VIS-A-VIS PROVI SIONS OF SEC. 194-I, DEFINITION OF RENT AS PROVIDED UNDER THE SAID PROVI SION, WE DO NOT FIND ANY REASON TO TAMPER OR INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) WHICH WE CONFIRM. FACTS BEING IDENTICAL, FOLLOWING OUR OWN FINDINGS M ENTIONED HEREIN ABOVE, APPEAL FILED BY THE REVENUE IS DISMISSED. CO NO.10/MUM/2013 FOR A.Y. 2009-10 6. AS WE HAVE DECIDED THAT THE ASSESSEE IS NOT LIAB LE TO DEDUCT TAX AT SOURCE IN THE REVENUES APPEAL IN ITA NO.708/M/2012, THE CROS S-OBJECTION RAISED BY THE ASSESSEE BECOMES OTIOSE. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND THE CROSS-OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. 5 ITA NOS.708 & 709/M/12 & CO NOS.10 & 11/M/13 AY:2009-10 & 2011-12 ITA NO.709/MUM/2012 & CO NO.11/MUM/2013. 7. THE GRIEVANCE OF THE REVENUE IS IDENTICAL TO THE ONE RAISED IN A.Y. 2009-10 IN ITA NO.708/MUM/2012. ON IDENTICAL FACTS AND FOR SI MILAR REASONS THE APPEAL OF THE REVENUE AND THE CROSS-OBJECTION BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH SEPTEMBER 2013. SD/- SD/- (H L KARWA) (N.K.BILLAIYA) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DT : 12 TH SEPTEMBER, 2013 SA COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T, MUMBAI 4. THE CIT (A)-14, MUMBAI 5. THE DR, B- BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI