Appeal Details
Counselvise Citation
[2013] 140 COUNSELVISE.COM (IT) 70765 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 6 month(s) 12 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-08-2013
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
B
Assessment Year
2007-2008
Appeal Filed On
03-02-2012
Judgement Text
, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE S/SHRI B.R.MITTAL,(JM) AND SANJAY ARORA (AM) . . , , & ./I.T.A. NOS.738 TO 741/MUM/2012 ( / ASSESSMENT YEARS:2006-07 TO 2009-10) INCOME TAX OFFICER - (TDS), (OSD), RANGE-2, ROOM NO.704, 7 TH FLOOR, K.G.MITTAL AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD, MUMBAI-400002 / VS. M/S NAVI MUMBAI SEZ PVT.L TD., 1 ST FLOOR, JAI CENTRE, P.D.MELLO ROAD, MASJIT, MUMBAI-40009 ./ ./PAN/GIR NO. : AACCN0042N ( / APPELLANT) .. ( / RESPONDENT) / APPELLANT BY : SHRI PRITAM SINGH /RESPONDENT BY : SHRI DEVESH VASAVADA ' / DATE OF HEARING : 23.7.2013 12.8.2013 ' /DATE OF PRONOUNCEMENT :16.08.2013 / O R D E R PER BENCH: THE DEPARTMENT HAS FILED THESE APPEALS FOR ASSESS MENT YEARS 2006-07 TO 2009- 10 AGAINST SEPARATE ORDERS OF LD. CIT(A) ALL DATED 24.11.2011. IN ALL THESE APPEALS, THE FACTS AND THE ISSUE INVOLVED IS COMMON. HENCE, WE H AVE HEARD THESE APPEALS TOGETHER AND DISPOSE OFF THE SAME BY A COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. WE MAY STATE THAT THE GROUNDS OF APPEAL TAKEN BY DEPARTMENT ARE ELABORATIVE IN ALL THESE APPEALS BUT THE ONLY ISSUE INVOLVED IN THE APPEALS IS AS TO WHETHER THE LEASE PREMIUM PAID BY ASSESSEE TO THE CITY AND INDUSTRIA L DEVELOPMENT CORPORATION OF MAHARASHTRA LTD. (CIDCO) FOR ACQUIRING DEVELOPMENT AND LEASE-HOLD RIGHTS FOR A PERIOD OF 60 YEARS UNDER THE LEASE DEED(S) IS RENT WITHIN THE MEANING OF SECTION 194-I OF THE INCOME TAX ACT, 1961 (THE ACT) AND HENCE LIABLE FOR DEDUCTION OF TAX AT SOURCE OR NOT. I.T.A. NOS.738 TO 741/MUM/2012 2 3. THE RELEVANT FACTS ARE THAT ASSESSEE HAS PAID LE ASE PREMIUM OF RS.50 CRORES IN ASSESSMENT YEAR 2006-07, RS.946.06 CRORES IN ASSES SMENT YEAR 2007-08, RS.1033.61 CRORES IN ASSESSMENT YEAR 2008-09 AND RS.146.82 CR ORES IN ASSESSMENT YEAR 2009-10 TO CIDCO IN ORDER TO ACQUIRE VARIOUS LANDS LYING AT NAVI MUMBAI FROM CIDCO ON LEASE BASIS. THE RELEVANT UNDISPUTED FACTS RELATING T O ABOVE LANDS ARE SUMMARISED IN THE ORDERS OF AUTHORITIES BELOW AND WE STATE THE SAME RELATING TO ASSESSMENT YEAR 2006-07 AS UNDER : I) THE GOVERNMENT OF MAHARASHTRA THROUGH RESOLUTION DATED 18.3.1970 DECIDED THAT A SUBSIDIARY COMPANY OF THE STATE IND USTRIAL INVESTMENT CORPORATION OF MAHARASHTRA LTD. SHOULD BE ENTRUSTED THE TASK OF DEVELOPMENT OF TRANS-THANA AND TRANS-HARBOUR AREAS IN URAN, PANVEL AND THANA WITH A VIEW TO DECONGEST AND PROVIDE RELIEF TO MUMBAI CITY AND ALS O TO ENSURE THE INTEGRATED DEVELOPMENT OF THE REGION ALONG WITH ITS INDUSTRIAL DEVELOPMENT. LATER, CITY AND INDUSTRIAL DEVELOPMENT CORPORATION OF MAHARASHTRA L TD (CIDCO) WAS CREATED AND ESTABLISHED UNDER THE COMPANIES ACT, 1956 AND WAS DESIGNATED AS NEW TOWN DEVELOPMENT AUTHORITY FOR THIS TASK. II) THAT GOVERNMENT DECIDED THAT PRIVATELY OWNED L ANDS IN THE PROJECT AREA SHALL BE ACQUIRED BY THE GOVERNMENT AND WILL BE PLA CED AT THE DISPOSAL OF CIDCO. CIDCO WAS REQUIRED TO UNDERTAKE ALL THE DEVE LOPMENT WORK, PROVIDE NECESSARY INFRASTRUCTURE ON BEHALF OF THE GOVERNMEN T AND DISPOSE OFF THE LAND, RESIDENTIAL, COMMERCIAL AND SOCIAL STRUCTURES AND C OLLECT SERVICE CHARGES ETC. TO THE EXTENT REQUIRED. III) LATER FOR PROMOTION OF ABOVE OBJECTIVE, BY A NOTHER RESOLUTION, PASSED BY THE GOVERNMENT OF MAHARASHTRA ON 15.09.2000, CI DCO WAS APPOINTED AS THE NODAL AGENCY FOR SETTING UP A SPECIAL ECONOMIC ZONE AT NAVI MUMBAI I.E. THE NMSEZ. FOR THIS PURPOSE, THE ASSESSEE- COMPANY HAS BEEN JOINTLY PROMOTED AS A SPECIAL PURPOSE VEHICLE (SPV) BY CIDCO AND DRONAGIR I INFRASTRUCTURE PVT LIMITED (DIPL) TO DEVELOP AND OPERATE THE SPECIAL ECONOMIC ZONE AT NAVI MUMBAI. IV) AS PER DEVELOPMENT AGREEMENT BETWEEN THE ASSES SEE AND CIDCO, THE ASSESSEE IS REQUIRED TO MAKE PAYMENT OF LEASE PREM IUM IN RESPECT OF THE LAND WHICH IS BEING ACQUIRED BY CIDCO AND BEING ALLOTTED TO THE ASSESSEE FROM TIME TO TIME. V) AS PER DEVELOPMENT AGREEMENT, THE ASS ESSEE IS AUTHORIZED TO DEVELOP AND MARKET THE NMSEZ. ACCORDINGLY, ASSESSEE-COMPA NY PAID LEASE PREMIUM OF RS.50 CRORES IN ASSESSMENT YEAR 2006-07, RS.94 6.06 CRORES IN ASSESSMENT YEAR 2007-08, RS.1033.61 CRORES IN ASSESSMENT YEAR 2008-09 AND RS.146.82 CRORES IN ASSESSMENT YEAR 2009-10, IN RESPECT OF L AND ALLOTTED TO IT AND THE RELEVANT LEASE DEED(S) EXECUTED. VI) BY VIRTUE OF SAID LEASE DEED(S), ASSESSEE HAS ACQUIRED LEASE HOLD RIGHTS IN THE LAND FOR THE PURPOSE OF DEVELOPING, DESIGNIN G, PLANNING, FINANCING, MARKETING, DEVELOPING NECESSARY INFRASTRUCTURE, PR OVIDING NECESSARY SERVICES, OPERATING AND MAINTAINING INFRASTRUCTURE ADMINISTRA TING AND MANAGING SEZ. ASSESSEE HAS ALSO ACQUIRED THE RIGHTS TO DETERMINE, LEVY, COLLECT, RETAIN, UTILIZE I.T.A. NOS.738 TO 741/MUM/2012 3 USER CHARGES FEE FOR PROVISION OF SERVICES AND /OR TARIFFS IN ACCORDANCE WITH TERMS AND CONDITIONS PROVIDED IN THE DEVELOPMENT AGREEMEN T AND THE LEASE DEED (S) VII) THAT LEASE DEED(S) AS WELL AS DEVELOPMENT AGRE EMENT ASSIGNED TO THE ASSESSEE RIGHTS TO DEVELOP, CONSTRUCT AND DISPOSE O FF RESIDENTIAL AND COMMERCIAL SPACES AS PER TERMS AND CONDITIONS PROVIDED THEREIN . VIII) THAT ASSESSEE IS ALSO ENTITLED TO GRANT SUB-L EASE IN RESPECT OF THE PORTIONS OF THE DEMISED (LEASED ) LAND, IN ACCORDANCE WITH THE APPLICABLE LAW, AND AS PER THE PROVISIONS OF THE LEASE DEED(S) IX) THAT THE LEASE DEED ALSO GRANTS THE ASSESSEE P OWER TO ASSIGN ITS RIGHT, TITLE OR INTEREST OR CREATE A SECURITY INTEREST IN RESPECT OF ITS RIGHT, EITHER FULLY OR IN PARTS THEREOF IN FAVOUR OF THE LENDERS INCLUDIN G GRANTING OF STEP-IN-RIGHTS IN THE EVENT OF DEFAULT UNDER THE FINANCING AGREEMENT FOR THE PURPOSES OF OBTAINING FIANC. X) THAT THE ASSESSEE HAS ALSO ACQUIRED SOLE RIGHTS FOR MARKETING OF THE NMSEZ AND THE INDUSTRIAL/COMMERCIAL PROJECTS TO POT ENTIAL TENANTS 4. IN RESPECT OF ABOVE PAYMENTS MADE BY ASSESSEE TO CIDCO TOWARDS LEASE PREMIUM, THE AO STATED THAT NO DEDUCTION OF TDS HA S BEEN MADE BY ASSESSEE FOR ANY OF SUCH PAYMENTS. THAT PAYMENTS/CREDITING OF LEASE PREMIUM FALLS WITHIN THE AMBIT OF SECTION 194-I OF THE ACT. THE AO ISSUED SHOW CAUSE NOTICE AS TO WHY THE ASSESSEE SHOULD NOT BE TREATED AS AN ASSESSEE IN DEFAULT U/S 201(1) AND 201(1A) OF THE ACT FOR NOT DEDUCTING TAX U/S 194-I OF THE ACT OF LEASE PR EMIUM PAID BY IT TO CIDCO FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION I.E. A.YS.2006 -07 TO 2009-10. 5. ON BEHALF OF THE ASSESSEE IT WAS SUBMITTED THAT PRE- DOMINANT OBJECTIVE FOR THE PAYMENT OF LEASE PREMIUM UNDER LEASE DEED(S) IS ACQ UISITION OF LEASEHOLD RIGHTS IN THE SAID LEASEHOLD LAND AND NOT FOR THE USE OF THE LAND . THAT LEASE PREMIUM ARE CONSIDERATION FOR PURCHASE OF LARGER INTEREST IN TH E SAID LEASEHOLD LAND WHICH COMPRISES OF BUNDLE OF RIGHTS INCLUDING BUT NOT LIMITED TO RI GHT OF POSSESSION, RIGHT OF LONG TERM ENJOYMENT, RIGHT OF DEVELOPMENT BY WAY OF CONSTRUCT ION OF BUILDING THEREON, RIGHT TO SALE CONSTRUCTED PREMISES ON OWNERSHIP BASIS RIGHT TO COLLECT AND APPROPRIATE THE SALE PROCEEDS ETC. THUS BY IMPLICATION LESSOR WOULD FOR EGO ALL SUCH RIGHTS IN FAVOUR OF LESSEE PERMANENTLY. IT WAS ALSO CONTENDED THAT RENT AS DEFINED IN SECTION 194-I OF THE ACT, ENVISAGES SUCH PAYMENTS ONLY FOR USE OF LAND OR BU ILDING, WITHOUT THERE BEING ANY CORRESPONDING ACQUISITION OF LARGER RIGHTS IN THE S AID LEASEHOLD PLOTS. HENCE, THE LEASE PREMIUM PAID TO CIDCO LTD. FOR ACQUISITION OF LEASE HOLD LAND IS CLEARLY DISTINCT FROM RENT. ON BEHALF OF ASSESSEE, A REFERENCE WAS MADE TO SECT ION 105 OF THE TRANSFER OF PROPERTY ACT, 1882 AND SUBMITTED THAT RENT IS DEFINED TO ME AN MONEY PAID PERIODICALLY OR ON I.T.A. NOS.738 TO 741/MUM/2012 4 SPECIFIED OCCASION TO THE TRANSFEROR OF LAND. REL YING ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF A.R.KRISHNAMURTHY V/S CIT (176 ITR 417 ) IT WAS SUBMITTED THAT THERE IS A DIFFERENCE BETWEEN RENT A ND PREMIUM AND IF WHAT IS PAID IS THE COST OF ACQUISITION OF RIGHT IN A PROPERTY KNOWN AS LEASEHOLD RIGHT, IT IS NOT RENT BUT A PREMIUM WHICH IS A CAPITAL FOR THE RECIPIENT. ON BE HALF OF THE ASSESSEE IT WAS ALSO SUBMITTED THAT SECTION 2(14) OF THE ACT ALSO REC OGNIZES LEASEHOLD INTEREST AS A SEPARATE, DISTINCT AND INDEPENDENT RIGHT IN AN IMMO VABLE PROPERTY CAPABLE OF BEING TRANSFERRED FOR A CONSIDERATION. THUS THE PAYMENT M ADE BY THE LESSEE TO THE LESSOR TO BE CONSTRUED AS A CAPITAL PAYMENT FOR ACQUISITION O F LEASEHOLD RIGHTS IN ANY IMMOVABLE PROPERTY. HENCE THE PREMIUM FOR TRANSFER OF LAND UN DER LEASE WILL BE TAXABLE IN THE FORM OF CAPITAL GAIN U/S 45 OF THE ACT IN THE HANDS OF THE LESSOR. THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION OF SPECIAL BENCH MUMBAI OF THE TRIBUNAL IN THE CASE OF JCIT V/S MUKUND LTD (13 SOT 558) (MUM) (106 ITD 231 (SB) AND SUBMITTED THAT THE TRIBUNAL HAS HELD THAT LUMP SUM PAYMENT OF RS.2.0 4 CRORES PAID BY THE ASSESSEE TO MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION (M IDC) ON LEASE FOR 99 YEARS OF LAND BY MIDC FOR THE PURPOSE OF SETTING UP FACTORY/ PL ANT WAS CAPITAL IN NATURE AS THE SAID PAYMENT WAS MADE FOR OBTAINING LEASEHOLD RIGHTS. TH E ASSESSEE ALSO STATED THAT THE BASIC MOTIVE FOR MAKING PAYMENT OF LEASE PAYMENT F OR THE LEASE DEED IS TOWARDS TRANSFER OF LARGER INTEREST/ AND LEASE HOLD RIGHTS BY CIDCO IN THE LEASEHOLD PLOTS AND NOT JUST FOR ITS USE AS ENVISAGED U/S 194-I OF THE ACT. THEREFORE, THERE WAS NO DEFAULT FOR NOT DEDUCTING TDS AS QUESTION OF DEDUCTION OF TDS ON THE SAID PAYMENT DOES NOT ARISE. IT WAS ALSO STATED BEFORE THE AO THAT THE LE ASE PREMIUM PAID ARE CAPITAL RECEIPTS IN THE HANDS OF CIDCO AND ARE COMPLETELY DISTING UISHED FROM RENT. HENCE, APPLICABILITY OF SECTION 194-I IS NOT APPLICABLE. 6. AO DID NOT AGREE WITH THE SUBMISSIONS OF ASSESS EE AND AFTER CONSIDERING THE DEFINITION OF RENT UNDER SECTION 194-I OF THE ACT IN THE LIGHT OF EXPLANATION(I) THEREOF STATED THAT DEFINITION OF RENT CREATES A LEGAL F ICTION , WHEREBY ALMOST ANYTHING AND EVERYTHING PAYMENT IN RELATION TO THE PROPERTY UNDE R LEASE TRANSACTIONS QUALIFY FOR RENT FOR THE PURPOSES OF SECTION 194-I OF THE ACT. H ENCE LEASE PREMIUM PARTAKES OF THE CHARACTER OF RENT. AO HAS FURTHER STATED THAT TH ERE ARE VARIOUS RESTRICTIVE CLAUSES IN THE LEASE AGREEMENT WHICH NEGATES THE ASSESSEES CONTEN TION THAT IT HAS ACQUIRED RIGHTS IN THE LAND AND NOT MERELY THE RIGHTS TO USE THE LAND. AO HAS STATED THAT HAD IT BEING A CASE OF ACQUISITION OF LAND RIGHTS, THERE WAS NO NE ED TO PUT RESTRICTIVE CLAUSES IN THE AGREEMENT. AO AFTER CONSIDERING THE DECISIONS OF T HE HONBLE DELHI HIGH COURT IN THE CASE OF UNITED AIRLINES V/S CIT REPORTED IN 152 TAXMANN 51 6(DELHI), THE CASE I.T.A. NOS.738 TO 741/MUM/2012 5 OF CIT V/S REEBOK CO. REPORTED IN 163 TAXMANN 61 (DEL) , THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V/S HMT LTD 67 TAXMANN 506 (KAR) AND DECISION OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF KRISHNA OBEROI V/S UNION OF INDIA 123 TAXMANN 709 HAS HELD THAT THE LEASE PREMIUM PAID BY THE ASSESSEE IS IN THE CHARACTER OF RENT AS PER EXTENDED DEFINITION CONTAINED UNDER SECTION 194-I OF THE ACT. THEREFORE, THE AS SESSEE HAS COMMITTED DEFAULT WITHIN THE MEANING OF SECTION 201(1) OF THE ACT BY NOT DED UCTING THE TAX AT SOURCE U/S 194-I OF THE ACT ON PAYMENT OF LEASE PREMIUM OF RS.50 CRORE S IN ASSESSMENT YEAR 2006-07, RS.946.06 CRORES IN ASSESSMENT YEAR 2007-08, RS.103 3.61 CRORES IN ASSESSMENT YEAR 2008-09 AND RS.146.82 CRORES IN ASSESSMENT YEAR 2 009-10. AO HAS FURTHER STATED THAT THE ASSESSEE IS ALSO LIABLE TO PAY INTEREST U/S 201 (1A) OF THE ACT. ACCORDINGLY, AO HAS STATED THE TAX AND INTEREST LIABILITY OF THE ASSESS EE FOR THE ASSESSMENT YEARS UNDER CONSIDERATION AS UNDER : ASSESSMENT YEAR SECTION 201(1) SECTION 201(1A) TOTAL 2006 - 07 8 , 49 , 75 ,0 0 0 5,86,32,750 14,36,07,750 2007 - 08 212,29,50,187 1,01,90,16,048 3,14,19,66,235 2008 - 09 2,34,21,65,994 1,00,33,40,347 3,34, 55,06,341 2009 - 10. 33,26,96,202 10,37,80,071 43,64,76,273 7. BEING AGGRIEVED, ASSESSEE FILED APPEALS BEFORE LD. CIT(A) AGAINST AFORESAID ORDERS OF AO PASSED U/S 201(1) AND 201(1A) OF THE A CT ALL DATED 14.3.2011 8. L.D CIT(A) IN THE IMPUGNED ORDER(S) HAS STATED T HAT THE ASSESSEE FILED THE WRITTEN SUBMISSIONS STATING THE NON-APPLICABILITY O F PROVISIONS FOR SECTION 194-I OF THE ACT ON LEASE PREMIUM PAID TO CIDCO IN RESPECT OF LA ND ALLOTTED TO IT. L.D CIT(A) HAS STATED THAT THE ASSESSEE EXECUTED LEASE AGREEMENTS WITH CIDCO. CIDCO HAS ALSO EXECUTED THE DEVELOPMENT AGREEMENT WITH THE ASSESS EE WHICH OUTLINES AND RIGHTS AND OBLIGATIONS OF THE ASSESSEE WITH REGARD TO DESIGNI NG, PLANNING, FINANCING, MARKETING, DEVELOPMENT OF NECESSARY INFRASTRUCTURE PROVISIONS OF NECESSARY SERVICES, OPERATIONS AND MAINTENANCE OF INFRASTRUCTURE ADMINISTRATION AN D MANAGEMENT OF THE NMSEZ ALONG-WITH THE RIGHTS TO DETERMINE, LEVY, COLLECT, RETAIN AND UTILIZE THE USER CHARGES, FEES FOR PROVISION OF SERVICES AND/OR TARIFFS IN ACCORD ANCE WITH THE TERMS THEREIN. ON BEHALF OF THE ASSESSEE IT WAS CONTENDED THAT RENT AS DEFI NED IN SECTION 194-I OF THE ACT IS ESSENTIALLY A PAYMENT ONLY FOR THE USE OF ANY LAND OR BUILDING. HOWEVER, THE PREDOMINANT OBJECTIVE FOR PAYMENT OF LEASE PREMIUM UNDER THE LEASE DEED(S) IS I.T.A. NOS.738 TO 741/MUM/2012 6 ACQUISITION OF LEASEHOLD RIGHTS IN THE SAID LEASEH OLD PLOTS AND NOT FOR THE USE OF THE PLOTS. LEASE PREMIUM ARE CONSIDERATION FOR PURCHASE OF LARGER INTEREST IN THE SAID LEASEHOLD PLOTS WHICH COMPRISES OF BUNDLE OF RIGHTS INCLUDING BUT NOT LIMITED TO RIGHT OF POSSESSION, RIGHT OF LONG TERM ENJOYMENT, RIGHT OF DEVELOPMENT BY WAY OF CONSTRUCTION OF BUILDING THEREON, RIGHT TO SALE CONSTRUCTED PREM ISES ON OWNERSHIP BASIS, RIGHT TO COLLECT AND APPROPRIATE THE SALE PROCEEDS, ETC. TH AT GRANT OF LEASE BY CIDCO IN FAVOUR OF ASSESSEE IS A CAPITAL ASSETS. HENCE THE CONSIDER ATION RECEIVED BY CIDCO IS A CAPITAL RECEIPT AND NOT INCOME BY WAY OF RENT. THE LD. CI T(A) HAS ALSO STATED THAT ASSESSEE FURTHER SUBMITTED BEFORE HIM AS UNDER : RENT AS DEFINED IN SECTION 194-I OF THE INCOME-TA X ACT, 1961 ENVISAGES SUCH PAYMENTS MADE UNDER A LEASE ONLY FOR USE OF LAND , WITHOUT THERE BEING ANY CORRESPONDING ACQUISITION OF LARGER RIGHTS IN THE S AID LEASEHOLD PLOTS. HENCE THE LEASE PREMIUM PAID BY US TO CIDCO ARE CLEARLY DISTI NCT FROM RENT. FURTHER TO THE ABOVE EXPLANATION, SECTION 105 OF TH E TRANSFER OF PROPERTY ACT, 1882 DEFINES A LEASE OF AN IMMOVABLE PROPERTY AS TR ANSFER OF RIGHT TO ENJOY THE PROPERTY, MADE A CERTAIN TIME IN CONSIDERATION OF A PRICE. THE SECTION FURTHER DISTINGUISHES BETWEEN LEASE PREMIUM AND RENT. RENT IS DEFINED U/S 105 OF THE TRANSFER OF PROPERTY ACT, 1882 TO MEAN MONEY PAID P ERIODICALLY OR ON SPECIFIED OCCASION TO THE TRANSFEROR OF LAND. PREMIUM ON THE OTHER HAND MEANS A CONSIDERATION OF A PRICE PAID FOR TRANSFER OF A RIG HT TO ENJOY THE PROPERTY. THUS, THERE IS A DIFFERENCE BETWEEN RENT AND PREMIUM. PRE MIUM IS NOT PAID FOR THE USE OF LAND. WHEN THE INTEREST OF THE LESSOR IS PARTED WITH FOR A PRICE, THE PRICE PAID IS CALLED LEASE PREMIUM. BUT, THE PERIODICAL PAYMENTS MADE FOR THE CONTINUOUS ENJOYMENT OF THE BENEFIT UNDER THE LEASE IS IN THE NATURE OF RENT. THE AFORESAID VIEW HAS ALSO BEEN ENDORSED BY THE SUPREME COURT IN ITS DECISION IN THE CASE OF A.R. KRISHNAMURTHY V/S CIT REPORTED -176 ITR 41 7. THE SUPREME COURT IN THE CASE OF A. R KRISHNAMURTHY V/S OT (SUPRA) HAS HELD THAT IF WHAT IS PAID IS THE COST OF ACQUISITION OF RIGHT IN A PROPERTY KNOWN AS LEASEHOLD RIGHTS IT IS NOT RENT BUT A PREMIUM WHICH IS A CAPITAL RECEIPT FOR THE RECIPIENT. CONSEQUENTLY, SECTION 2(14) OF THE INCOME-TAX ACT, 1961 ALSO RECOGNIZES LEASEHOLD INTEREST AS A SEPARATE, DISTINCT AND INDE PENDENT RIGHT IN AN IMMOVABLE PROPERTY CAPABLE OF BEING TRANSFERRED FOR A CONSIDERATION. BASED ON THE FOREGOING DECISION, THE PAYMENT MADE B Y THE LESSEE TO THE LESSOR WILL ACCORDINGLY BE CONSTRUED AS A CAPITAL P AYMENT FOR ACQUISITION OF LEASEHOLD RIGHTS IN AN IMMOVABLE PROPERTY AND HENCE THE PREMIUM FOR TRANSFER OF LAND UNDER LEASE WILL BE TAXABLE IN THE FORM OF CAPITAL GAINS U/S. 45 OF THE ACT IN THE HANDS OF THE LESSOR. IT IS SUBMITTED THAT UNDER THE PROVISIONS OF THE IN COME TAX ACT, 1961, DIFFERENT TREATMENT CANNOT BE GIVEN TO SAME PAYMENT UNDER DIFFERENT SECTIONS OF THE INCOME- TAX ACT, 1961 I. E. IN THE HANDS OF LESSOR AS CONSIDERATION TAXABLE UNDER THE HEAD CAPITAL GAINS U/S. 45, IN TH E HANDS OF LESSEE AS RENT I.T.A. NOS.738 TO 741/MUM/2012 7 FOR THE PURPOSE OF DEDUCTION OF TAX U/S 194-I THE ABOVE CONTENTION SEEMS VERY ABSURD AND AUTHORIT Y CAN NOT TAKE SEPARATE STAND FOR TREATING A PAYMENT MADE BY APPELLANT. THE BASIC MOTIVE FOR MAKING PAYMENT OF LEASE PREMIU M UNDER THE LEASE DEED IS TOWARDS TRANSFER OF LARGER INTEREST/ RIGHT (LEASEH OLD RIGHT) BY CIDCO TO US IN THE SAID LEASEHOLD PLOTS ARID NOT JUST FOR ITS USE AS ENVISAGED UNDER SECTION 194-I OF THE INCOME-TAX ART. 1961. TAKING INTO ACCOUNT THE ABOVE REFERRED DISCUSSION, PAYMENTS MADE TOWARDS LEASE PREMIUM FOR ACQUISITION OF LAND AND HENCE ARE NOT RENT FOR THE PURPOSE OF TDS U/S 194-I OF THE INCOME TAX ACT. THUS, QUESTI ON OF DEDUCTION OF TDS ON ABOVE PAYMENT WILL NOT ARISE. 8.1 IT IS ALSO OBSERVED ON PERUSAL OF ORDER OF LD. CIT(A) THAT ASSESSEE ALSO REFERRED CLAUSES (V) AND (VI) OF SUB-SECTION (47) OF SECTION 2 AND SECTION 269UA(D) OF THE INCOME TAX ACT AND STATED THAT LEASE OF LAND IS CO NSIDERED AS AN IMMOVABLE PROPERTY AND THE LEASE PREMIUM PAID TO CIDCO IS CONSIDERATIO N FOR TRANSFER OF IMMOVABLE PROPERTY WHICH IS TAXABLE UNDER SECTION 45 AS CAPIT AL GAINS ON SALE OF CAPITAL ASSETS. THEREFORE, IN THE HANDS OF PURCHASER CONSIDERATION PAID BY WAY OF LEASE PREMIUM IS FOR ACQUISITION OF A CAPITAL ASSET. THEREAFTER, ASSESSE E REFERRED THE CASES BEFORE LD. CIT(A) WHICH ARE DISCUSSED BY LD. CIT(A) AT PAGES 20 TO 2 3 OF THE IMPUGNED ORDER(S) WHICH WE CONSIDER RELEVANT TO REPRODUCE HEREINBELOW: 1. WHEN LEASE PREMIUM IS PAID IN RESPECT OF LE ASE HOLD LAND ON LEASE FOR A PERIOD OF 60 YEARS THE APPELLANT CANNOT CLAIM WRIT E-OFF OF THE LEASE PREMIUM ON PROPORTIONATE BASIS. IN THE CASE OF JCIT SPECIAL RA NGE 23 V/S NATIONAL STOCK EXCHANGE OF INDIA, HONBLE ITAT, MUMBAI IN IT A NO. 1955/M/99, 2181/M/99, 4853/M/04, 4485/M/04, 4854/M/04, 356/M/0 1, 5850/M/00 UPHELD THE AOS CONTENTION THAT LEASE PRE MIUM IS CAPITAL IN NATURE AND CANNOT BE ALLOWED ON PROPORTIONATE BASIS OVER THE PERIOD OF LEASE. 2. REVENUES STAND THAT PREMIUM OF RS.62,500 IN ADDITION TO INCREASED RENT FOR CONVERTING TEMPORARY LEASE INTO A LONG TERM ONE , FOR A PERIOD OF 30 YEARS PAYABLE IN INSTALLMENTS WHERE LEASE AGREEMENT PROVI DED FOR LESSOR TO TAKE BACK POSSESSION IN CERTAIN CONTINGENCIES WAS NOT AD VANCE RENT AND WAS CAPITAL EXPENDITURE WHICH WAS CONFIRMED BY THE HONBLE BOMB AY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. PROJECT AUTOMOBILES ( 1983) 15 TAXMAN 227 (BOM.). 3. WHEN THE ASSESSEE CLAIMED THAT COST OF LAND PAID TO THE LIQUIDATOR FOR THE LEASE LAND FROM MIDC SHOULD BE ALLOWED TO BE CONSI DERED FOR 71 YEARS OF LEASE PERIOD ON A PROPORTIONATE BASIS; THE DEPT REJECTED THE CLAIM OF THE ASSESSEE WHICH WAS UPHELD BY THE HONBLE HIGH COURT OF BOMBA Y IN THE CASE OF CIT V/S KHIMLINE PUMPS LTD [258 ITR 459 (BOM)(2002). I.T.A. NOS.738 TO 741/MUM/2012 8 4. ASSESSEE FIRM HAD ACQUIRED A PLOT OF LEASE FO R 30 YEARS AND IT HAD TO PAY PREMIUM IN 12 INSTALLMENTS AND ALSO 5% OF SUCH PREM IUM ANNUALLY AS GROUND RENT. THE ASSESSEE PAID THE INSTALLMENTS OF THE AFORESAID PREMIUM IN THE RELEVANT YEARS AND CLAIMED THE SAME AS DEDUC TABLE REVENUE EXPENDITURE. THE REVENUE TOOK A VIEW THAT THE PAYME NTS MADE BY THE ASSESSEE TOWARDS PREMIUM REPRESENTED CAPITAL EXPENDITURE AND NOT REVENUE EXPENDITURE. THIS VIEW OF THE DEPT. WAS UPHELD BY T HE HON'BLE MADHYAPRADESH HIGH COURT IN THE CASE OF CIT V/S PROJECT AUTOMOBILES LTD [35 TAXMAN 181 (MP) 5. THE REVENUE DISALLOWED THE CLAIM OF THE ASSES SEE THAT EXPENDITURE OF RS.1,25,OOO PAID TO MIDC FOR PREMIUM ON LEASEHOLD L AND IS IN THE NATURE OF ADVANCE RENT. THE PERIOD OF LEASE IN THIS CASE WAS FOR 99 YEARS AND THE LEASE WAS ALSO FROM MIDC AS IN THE CASE OF THE ASSE SSEE. 6. THE PUNE TRIBUNAL UPHELD THE STAND OF THE REVENU E IN THE CASE OF DEVI CONSTRUCTION CO. [IT APPEAL NO. 1769(PUNE)] THAT TH E EXPENDITURE CLAIMED BY THE ASSESSEE-COMPANY WAS CAPITAL IN NATURE. IN THE AFORESAID JUDGMENTS VARIOUS COURTS HAVE CONF IRMED THE DEPT'S VIEW THAT LEASE PREMIUM IS A CAPITAL EXPENDITURE. THEREFORE, WHEN IT COMES TO A DEDUCTIBILITY OF TDS ON SUCH PAYMENT, THE DEPARTME NT CANNOT TAKE A STAND THAT IT IS A REVENUE EXPENDITURE. THEREFORE, TDS IS DEDU CTABLE U/ S.194-I. FURTHER IN THE FOLLOWING CASES LEASE PREMIUM RECEIV ED HAS BEEN HELD AS A CAPITAL RECEIPT AND NOT IN THE NATURE OF ADVANCE RENT. 1. DECISION OF SUPREME COURT IN THE CASE OF COMMISSION ER OF INCOME-TAX V/S PANBARI TEA CO. LTD. OF INDIA (1965 ) 57 ITR 422 (SC) SECTION 4 OF THE INCOME-TAX ACT, 1961 [CORRESPONDI NG TO SECTION 3 OF THE INDIAN INCOME-TAX ACT, 1922J - INCOME - CHARGEABLE AS - AS SESSMENT YEAR 1952-53- ASSESSEE COMPANY LEASED OUT TEA ESTATES ALONG WITH MACHINERY AND BUILDINGS AND RECEIVED PREMIUM -ITO MADE ASSESSMENT TREATING PREMIUM AS A REVENUE RECEIPT - WHETHER SINCE, THERE WAS A TRANSFER OF SU BSTANTIVE INTEREST OF LESSOR IN ESTATES TO LESSEE AND A CONFERMENT OF A RIGHT ON LE SSEE TO USE SAID ESTATES BY EXPLOITING SAME, PREMIUM RECEIVED BY ASSESSEE AND B ALANCE IN SPECIFIED NUMBER OF HALF-YEARLY INSTALLMENTS WAS A CAPITAL RECEIPT - HELD, YES. 2. DECISION OF PATNA HIGH COURT IN THE CASE OF SRI SRI RAJA SHIVA PRASAD SINGH OF JHARIA & RATA JYOTI PRASAD SINGH DE O OF PANCHKOTE V/S CROWN SIR DAWSON MILLER KT, K.C., CJ. AND FOST ER. J. (1924) 1 ITC 384 (PAT). SECTION 4 OF THE INCOME-TAX ACT, 1961 [CORRESPONDIN G TO SECTION 3 OF THE LNDIAN INCOME-TAX ACT, 1922) - INCOME CHARGEABLE AS - AS SESSEE RECEIVED CERTAIN AMOUNT BY WAY OF SALAMI OR PREMIUM FOR GRANT OF LEA SES OF MINERAL RIGHTS OIL PORTION OF HIS ESTATE - BESIDES, CERTAIN RENT AND R OYALTIES WERE ALSO PAID BY LESSEES OF MINING LEASES UPON COAL RAISED - WHETHER IN VIEW OF FACT THAT A LUMP SUM PAID UNDER NAME OF SALAMI FOR GRANT OF LEASE, W AS MORE IN NATURE OF AN OUT AND OUT SALE OF PROPERTY, SUM SO RECEIVED BY ASSESS EE WAS IN NO I.T.A. NOS.738 TO 741/MUM/2012 9 SENSE INCOME WITHIN MEANING OF ACT - HELD, YES - WH ETHER, HOWEVER, ANNUAL RENT AND ROYALTY RECEIVED FROM LESSEES ON QUANTITY OF COAL EXTRACTED WAS INCOME CHARGEABLE TO TAX - HELD, YES. 3. DECISION OF CALCUTTA HIGH COURT IN THE CASE OF COMM ISSIONER OF INCOME-TAX V. PURNENDU MULLICK [1979] 116 ITR 591 ( CAL.) SECTION 4 OF INCOME-TAX ACT; 1961 - INCOME - CHARGE ABLE AS - ASSESSMENT YEAR 1964-65 - ASSESSEE, ON EXECUTING A LEASE DEED IN RE SPECT OF CERTAIN PREMISES IN FAVOUR OF A COMPANY, RECEIVED A LUMP SU M AMOUNT BESIDES MONTHLY RENT - ASSESSEE CLAIMED THAT SAID SUM RECEI VED AS SALAMI OR PREMIUM CONSTITUTED CAPITAL RECEIPT AND THEREFORE,WAS NOT T AXABLE AS INCOME - TRIBUNAL ACCEPTED ASSESSEE'S CLAIM - ON INSTANT REFERENCE, I T WAS SEEN THAT LUMP SUM AMOUNT PAID WAS DESCRIBED AS SALAMI OR PRE MIUM AND NOT RENT - THERE WAS NO CLAUSE FOR REPAYMENT OF SAID AMOUNT OR ADJUSTMENT OF SAID AMOUNT AGAINST RENT - THERE WAS NOTHING ON RECORD T O SHOW THAT PREMIUM OR SALAMI PAID HAD ANY CHARACTERISTIC OF RENT - WHETHE R IN AFORESAID CIRCUMSTANCES, IT COULD BE CONCLUDED THAT AMOUNT RE CEIVED BY ASSESSEE AS SALAMI WAS A CAPITAL RECEIPT, AND NOT LIABLE TO TAX - HELD, YES IN VIEW OF THE ABOVE SUBMISSION THE APPELLANT WAS N OT LIABLE TO DEDUCT TAX AT SOURCE U/S 194-1 FROM THE AFORESAID PAYMENTS MADE T O MMRDA SINCE THE PAYMENT WAS TOWARDS PURCHASE OF THE LEASEHOLD RIGHT IN THE LAND AND FOR THE PURCHASE OFTHE ADDITIONAL BUILT-UP AREA. THEREFORE, THE SAME CANNOT BE CONSTRUED AS INCOME BY WAY OF RENT FOR THE PURPOSES OF S.194-I. IF AT ALL, IT IS INCOME BY WAY OF CAPITAL GAINS IN THE HANDS OF MMR DA AND ACCORDINGLY IT IS NOT LIABLE TO DEDUCTION OF TAX AT SOURCE 8.2 L.D CIT(A) FORWARDED THE WRITTEN SUBMISSION S OF THE ASSESSEE TO THE AO FOR HIS COMMENTS. LD. CIT(A) HAS STATED THAT THE AO SUBMIT TED HIS DETAILED PARAWISE COMMENTS ON THE SUBMISSIONS OF THE ASSESSEE VIDE L ETTER DATED 19.10.2011. THAT AO IN HIS SUBMISSION REITERATED THE STAND THAT THE AMENDE D DEFINITION OF RENT CONTAINED IN SECTION 194-I OF THE ACT W.E.F. 13.7.2007 IS VERY WIDE AND COMPREHENSIVE AND COVERS ANY PAYMENT BY WHATEVER NAME CALLED UNDER ANY LEAS E, SUB-LEASE, TENANCY OR OTHER AGREEMENT OR ARRANGEMENT AND LEAVES NO SCOPE FOR A NY INTERPRETATION. THAT ALL THE PAYMENTS UNDER THE LEASE BY WHATEVER NAME CALLED A RE RENT WITHIN THE MEANING OF SECTION 194-I OF THE ACT. AO HAS STATED THAT ONE HAS TO LOOK AT SUBSTANCE AND NOT THE FORM OF THE TRANSACTION WHILE CONSIDERING THE PROVI SION OF LAW. THE AO ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF BRAITHWAITE AND CO. INDIA LTD, 111 ITR 542 AND KARNATAKA HIGH COURT JUDGMENT IN THE CASE OF CIT V/S HMT LTD (SUPRA). LD.CIT(A) HAS ALSO STATED THAT LD.ADDL. CIT ALSO CONTENDED IN THE PERSONAL HEARING THAT TDS PR OVISIONS ARE A SEPARATE CODE IN THEMSELVES. THAT WHILE APPLYING THESE PROVISIONS, ONE HAS TO LOOK INTO THE LIABILITY OF THE DEDUCTOR ONLY, IRRESPECTIVE OF THE TAX LIABIL ITY OF THE DEDUCTEE. IT WAS SUBMITTED I.T.A. NOS.738 TO 741/MUM/2012 10 THAT IT IS NOT NECESSARY THAT CAPITAL EXPENDITURE IN THE HANDS OF ONE PARTY IS ALSO A CAPITAL RECEIPT IN THE HANDS OF OTHER PARTY. AO IN THE WRITTEN SUBMISSIONS ALSO SUBMITTED THAT THE LEASE AGREEMENT SIGNED BY CIDC O WITH THE ASSESSEE CONTAINS VARIOUS RESTRICTIVE COVENANTS WHICH DO NOT GIVE AN Y ABSOLUTE RIGHT TO THE LAND BUT REDUCED IT TO A RENTAL ARRANGEMENT FOR USE OF THE L AND. LD. CIT(A) HAS STATED THAT THE AO ALSO CITED THE CASES, THE DETAILS OF WHICH HE HA S MENTIONED IN PARA 5.9 OF THE IMPUGNED ORDER (S) 8.3 LD. CIT(A) HAS FURTHER STATED THAT AO VIDE LETT ER DATED 2.11.2011 FURNISHED SUPPLEMENTARY ARGUMENTS FOR ALL THE ASSESSMENT YEA RS UNDER CONSIDERATION AND STATED THAT AS THE PREMIUM IS NOTHING BUT ADVANCE LEASE RE NT AND REFERRED THE DECISION OF HONBLE APEX COURT IN THE CASE OF AGARWAL CHAMBERS OF COMMERCE V/S GANPAT RAI HIRALAL, REPORTED IN 33 ITR 245 WHEREIN IT HAS BEEN HELD THAT PERSONS WHO ARE RESPONSIBLE FOR DEDUCTION OF TAX AT SOURCE ARE NO T CONCERNED WITH THE ULTIMATE RESULT OF THE ASSESSMENT. 8.4 LD. CIT(A) HAS STATED IN PARA 5.11 OF THE IMPU GNED ORDER (S) THAT A COPY OF WRITTEN SUBMISSION FILED BY AO WAS PROVIDED TO THE ASSESSEE FOR THEIR COMMENTS AND THE ASSESSEE FILED ITS REJOINDER COMMON FOR ALL THE ASS ESSMENT YEARS UNDER CONSIDERATION ON 25.10.2011, REITERATING ITS STAND THAT THE LEASE P REMIUM PAID CONSTITUTES CAPITAL PAYMENT FOR ACQUIRING LEASEHOLD RIGHT IN THE PROPER TY AND DOES NOT REPRESENT RENT FOR USE OF LAND AS CONTEMPLATED U/S 194-I OF THE ACT. LD. CIT(A) HAS STATED THAT ASSESSEE RELIED UPON THE LEASE DEED(S) AND RELATED DOCUMENTS WHICH REFERRED TO THE PAYMENT AS PREMIUM FOR ACQUIRING RIGHT IN LEASEHOLD LAND. T HE ASSESSEE ALSO STATED THAT VARIOUS CLAUSES IN THE LEASE DEED(S) REFERRED BY AO AS RES TRICTIVE COVENANTS, ARE IN FACT REGULATORY CLAUSES OF PLANNED DEVELOPMENT OF THE AR EA AND FOR PROVIDING COMMON AMENITIES AND CO-EXISTENCE OF THE OCCUPANTS. THAT THESE REGULATORY CLAUSES ARE APPLICABLE EVEN TO FREEHOLD LAND WHEN THE CORPORATI ON OR DEVELOPMENT AUTHORITIES UNDERTAKES TO IMPLEMENT PLANNED DEVELOPMENT. THOUG H THESE CLAUSES IN LEASE DEED(S) DO NOT IN ANY MANNER CONVERT A PREMIUM FOR LEASEHOLD RIGHT INTO AN ADVANCE RENT FOR USE OF LAND. LD. CIT(A) HAS STATED THAT THE ASSESSEE SUMMARISES THE SUBMISSIONS AND THE SAME HAVE BEEN STATED AT PAGES 28 TO 30 OF THE IMPUGNED ORDER(S) OF LD.CIT(A) AS UNDER : TO SUMMARIES THE SUBMISSIONS, THE APPELLANT RESPE CTFULLY SUBMITS THAT : I) THE PAYMENT MADE BY THE APPELLANT (LESSEE) TO THE CIDCO LESSER IS FOR I.T.A. NOS.738 TO 741/MUM/2012 11 ACQUIRING THE RIGHT IN THE LEASE PREMISES AND NOT A N ADVANCE RENT FOR USE OF THE LEASE PREMISES OVER A PERIOD OF 60 YEARS; II) THE LEASE PREMIUM HAS BEEN PAID FOR GETTING POSSES SION OF THE LEASE PROPERTY BEFORE THE LEASE AGREEMENT IS ENTERED INTO . III) THE APPELLANT (LESSEE) HAS A RIGHT TO OWN AND TRANS FER THE LEASE PROPERTY FOR A CONSIDERATION SUBJECT TO COMPLIANCE OF CONDITIONS STIPULATED IN THE LEASE AGREEMENT. IV) THE LEASE PROPERTY UNDER THE AGREEMENT CAN BE INHE RITED OR SUCCEEDED BY THE LEGAL HEIR OR SUCCESSOR; V) THE CLAUSES IN THE LEASE AGREEMENT REFER TO THE PAY MENT MADE BY THE APPELLANT (LESSEE) AS A PREMIUM BEING CONSIDERATION FOR ACQUIRING THE LEASE HOLD PROPERTY. NONE OF THE CLAUSES IN THE LEA SE AGREEMENT REFERS TO THE PREMIUM PAID BY THE APPELLANT (LESSEE) AS ADVAN CE RENT; VI) THE APPELLANT(LESSEE) WILL HAVE NO RIGHT TO GET ANY REFUND OF PREMIUM PAID FOR ACQUIRING THE LEASE HOLD RIGHT ON ITS SURR ENDER BEFORE THE EXPIRY DATE. VII) THE VARIOUS CLAUSES OF THE LEASE AGREEMENT WHICH A RE REFERRED BY THE AO IN ITS SUBMISSION BEFORE YOUR HONOUR AS RESTRICTIVE CLAUSES, ARE IN FACT REGULATORY CLAUSES INCORPORATED IN THE LEASE AGREEM ENT FOR DESIRED DEVELOPMENT OF THE LEASED AREA IN A PARTICULAR MANN ER AND A PARTICULAR PURPOSE AS REGULATORY AUTHORITY PROVIDES COMPLETE I NFRASTRUCTURE AND GIVE EFFECT TO THE INTENTION OF THE GOVERNMENT TO DEVELO P THE AREA. VIII) KARNATAKA HIGH COURT JUDGEMENT IN THE CASE OF HMT L TD. HAS BEEN DECIDED BY THE HON'BLE COURT ON A FINDING OF FACT B Y THE ITAT THAT THE PAYMENT MADE BY THE LESSEE CONSTITUTES AN ADVANCE R ENT AND HENCE THE SAME SHALL BE ALLOWED AS DEDUCTION U/S 37( 1) OF TH E 1. T. ACT. MOREOVER THE VARIOUS DECISIONS OF THE BOMBAY HIGH COURT AND THE 1TAT HAVE CLEARLY DISTINGUISHED THE HMT'S CASE AND ITS APPLIC ABILITY TO THE PREMIUM PAID FOR ACQUIRING LEASE HOLD RIGHT. THE HON'BLE IT AT MUMBAI SPECIAL BENCH IN THE CASE OF MUKUND LTD. HAS DISCUSSED IN D ETAIL THE JUDGEMENT OF HMT LTD. AND HELD THAT PREMIUM PAID FOR ACQUIRI NG THE LEASEHOLD RIGHT DOES NOT CONSTITUTE AN ADVANCE RENT. HON'BLE ITAT MUMBAI, SPECIAL BENCH HAS FOLLOWED THE JURISDICTIONAL HIGH COURT'S VIEW IN THE CASE OF KHIMLIN PIPES LTD. WHEREIN THE JURISDICTIONAL HIGH COURT HAS HELD THAT PREMIUM PAID FOR ACQUIRING THE LEASE HOLD RIGHT CO NSTITUTES A CAPITAL EXPENDITURE AND NOT ANADVANCE PAYMENT OF RENT FOR T HE LEASE PERIOD. IX) SECTION 194-I OF THE IT ACT CLEARLY PROVIDES THAT PAYMENT MADE BY A PERSON SHOULD BE IN THE NATURE OF 'AN INCOME BY WAY OF RENT'. THIS EXPRESSION EXPRESSLY REQUIRES THAT THE RECEIPT IN T HE HANDS OF THE LESSER/ OWNER MUST CONSTITUTE THE INCOME BY WAY OF RENT IN THE HANDS OF THE RECIPIENT. X) THE DEFINITION OF RENT CONTAINED IN EXPLAN ATION TO SECTION 194-I ALSO CLEARLY PROVIDE THAT THE PAYMENT MADE MUST BE 'FOR THE USE OF . LAND' I.T.A. NOS.738 TO 741/MUM/2012 12 NO WHERE THE DEFINITION OF RENT ROPES IN THE CONSID ERATION PAID FOR ACQUIRING LEASEHOLD RIGHT. THE APPELLANT (LESSEE) REITERATES ITS CONTENTION THAT THE PREMIUM PAID FOR ACQUIRING LEASEHOLD RIGHT IS NOT 'AN INCOME BY WAY OF RENT' OF THE RECIPIENT FOR USE OF LAND. XI) THE VARIOUS JUDGMENTS RELIED UPON BY THE APPELLANT(LESSEE) IN SUPPORT OF ITS CONTENTION CLEARLY CONFIRMS THE VIEW THAT TH E PREMIUM PAID FOR ACQUIRING LEASEHOLD RIGHTS IN LAND CONSTITUTES A CO NSIDERATION OF CAPITAL NATURE AND NOT AN ADVANCE RENT FOR USE OF THE LAND OVER THE LEASE PERIOD. ON THE PLAIN READING OF THE LEASE AGREEMENT THE PRE VAILING FACTS OF THE CASE AND TAKING A WHOLISTIC VIEW OF FACTS AND CIRCU MSTANCES OF THE CASE AND THE POSITION IN LAW, SUCH LEASE PREMIUM PAID CA N NOT BE CONSIDERED TO BE A RENT WITHIN THE MEANING OF SECTION 194-I. T HE APPELLANT ONCE AGAIN SUBMITS THAT ITS SUBMISSION CONCERNING LEASE PREMIUM PAID IS FULLY SUPPORTED BY VARIOUS JUDICIAL PRONOUNCEMENTS WHICH ARE DISCUSSED IN DETAIL BY THE HONBLE ITAT SPECIAL BENCH, MUMBAI IN THE CASE OF MUKUND LTD ... XII) RECENTLY THE HONBLE ITAT, MUMBAI HAD AN OCCASION TO CONSIDER SIMILAR ISSUE WHEREIN THE LEASE PREMIUM PAID BY NATIONAL ST OCK EXCHANGE OF INDIA LTD. TO MMRDA FOR ACQUIRING LEASEHOLD RIGHT I N LAND AT BANDRA KURLA COMPLEX WAS CLAIMED TO BE A DEDUCTIBLE ADVANCE RENT OVER THE LEASE PERIOD. THE HONBLE ITAT FOLLOWING MUKUND LTDS CASE AND CLEARLY HELD THAT SUCH PAYMENT OF LEASE PREMIUM CONSTITUTES A CA PITAL EXPENDITURE FOR ACQUIRING LEASE HOLD RIGHT AND NOT AN ADVANCE RENT FOR A LEASE PERIOD. IN VIEW OF THE ABOVE SUBMISSIONS IT IS RESPECTFULLY SUBMITTED THAT THE LEASE PREMIUM PAID BY THE APPELLANT (LESSEE) CAN NOT BE C ONSIDERED TO BE AN ADVANCE RENT WITHIN THE MEANING OF SECTION 194-I OF THE I. T. ACT AND THE ORDER PASSED BY THE AO U/S 201/201(1A) SHALL BE VACATED 9. LD. CIT(A) HAS STATED THAT HE HAS CONSIDER ED AOS ORDER, SUBMISSIONS AS WELL AS THE ASSESSEES SUBMISSIONS AND REJOINDER. HE HAS STATED THAT HE HAS STUDIED THE DEVELOPMENT AGREEMENT AND THE LEASE DEED(S) EXECUTE D BETWEEN THE ASSESSEE AND THE CIDCO AS WELL. LD. CIT(A) HAS STATED IN PARA 5.17 OF THE IMPUGNED ORDER THAT FROM THE ANALYSIS OF DEVELOPMENT AGREEMENT AND LEA SE DEED(S) ENTERED INTO BETWEEN THE ASSESSEE AND CIDCO, WRITTEN SUBMISSIONS OF THE ASSESSEE AND THE ASSESSING OFFICER AND THE ASSESSMENT ORDER AND VARIOUS OTHER RELATED DOCUMENTS FOLLOWING FACTS EMERGE: I. THE GOVERNMENT OF MAHARASHTRA THROUGH A RESO LUTION DATED 18.03.1970 DECIDED THAT A SUBSIDIARY COMPANY OF THE STATE INDU STRIAL INVESTMENT CORPORATION OF MAHARASHTRA LTD. SHOULD BE ENTRUSTED THE TASK OF DEVELOPMENT OF TRANS-THANA AND TRANS-HARBOUR AREAS IN URAN, PANVE L AND THANA WITH A VIEW TO DECONGEST AND PROVIDE RELIEF TO MUMBAI CITY AND ALS O TO ENSURE THE INTEGRATED DEVELOPMENT OF THE REGION ALONQ WITH ITS INDUSTRIA L DEVELOPMENT LATER, CITY AND INDUSTRIAL DEVELOPMENT CORPORATION OF MAHARASHTRA LTD (CIDCO) WHICH WAS CREATED AND ESTABLISHED UNDER THE COMPANIES ACT, 19 56, WAS DESIGNATED AS I.T.A. NOS.738 TO 741/MUM/2012 13 NEW TOWN DEVELOPMENT AUTHORITY FOR THIS TASK II. IT WAS DECIDED BY THE GOVERNMENT THAT PRIVATELY OWNED LANDS IN THE PROJECT AREA SHALL BE ACQUIRED BY THE GOVERNMENT AN D WILL BE PLACED AT THE DISPOSAL OF CIDCO. CIDCO WAS REQUIRED TO UNDERTAKE ALL THE DEVELOPMENT WORK, PROVIDE NECESSARY INFRASTRUCTURE ON BEHALF OF THE GOVERNMENT AND DISPOSE-OFF THE LAND, RESIDENTIAL, COMMERCIAL ARID SOCIAL STRUC TURES AND COLLECT SERVICE CHARGES ETC TO THE EXTENT REQUIRED. III. LATER, FOR PROMOTION OF THE ABOVE OBJECTIVE. A NOTHER RESOLUTION WAS PASSED BY GOVERNMENT OF MAHARASHTRA ON 15.09.2000, WHEREIN CIDCO WAS APPOINTED THE NODAL AGENCY FOR SETTING UP A SPECIAL ECONOMIC ZONE AT NAVI MUMBAI I.E THE NMSEZ. FOR THIS PURPOSE. THE APPELLA NT COMPANY HAS BEEN JOINTLY PROMOTED AS A SPECIAL PURPOSE VEHICLE (SPV) BY CIDC O AND DRONAQIRI 'INFRASTRUCTURE PVT LIMITED (DIPL) TO DEVELOP AND O PERATE THE SPECIAL ECONOMIC ZONE AT NAVI MUMBAI. IV. AS PER DEVELOPMENT AGREEMENT BETWEEN THE APPELL ANT AND CIDCO, THE APPELLANT IS REQUIRED TO MAKE PAYMENT OF LEASE PRE MIUM IN RESPECT OF THE LAND WHICH IS BEING ACQUIRED BY CIDCO AND BEING ALLOTTE D TO THE APPELLANT FROM TIME TO TIME. V. AS PER THIS DEVELOPMENT AGREEMENT, THE APPELLANT IS AUTHORIZED TO DEVELOP AND MARKET THE NMSEZ. VI. DURING THE CURRENT YEAR, THE APPELLANT WAS ALL OTTED 450 HECTARES OF LAND AS DESCRIBED IN PARA 5.2 ABOVE FOR AN AGGREGATE AMO UNT OF LEASE PREMIUM OF RS.285.87 CRORES, VIDE LEASE DEED DATED 16.3.2006. OUT OF THIS AMOUNT, AN AMOUNT OF RS.50 CRORES HAS BEEN PAID BY THE APPELL ANT IN THE CURRENT YEAR. VII. BY VIRTUE OF THE SAID LEASE DEED(S), THE APPEL LANT HAS ACQUIRED LEASEHOLD RIGHT IN THE LAND FOR THE PURPOSE OF DEVELOPING, DE SIGNING, PLANNING, FINANCING, MARKETING, DEVELOPING NECESSARY INFRASTRUCTURE, PRO VIDING NECESSARY SERVICES, OPERATING AND MAINTAINING THE INFRASTRUCTURE, ADMIN ISTERING AND MANAGING THE SEZ. THE APPELLANT ALSO HAS ACQUIRED THE RIGHTS TO DETERMINE, LEVY, COLLECT. RETAIN AND UTILIZE THE USER CHARGES, FEES FOR PRO VISION OF SERVICES AND / OR TARIFFS IN ACCORDANCE WITH THE TERMS LAND CONDITIONS PROVID ED IN THE DEVELOPMENT AGREEMENT AND THE LEASE DEED(S). VIII. THE LEASE DEED(S) AS WELL AS THE DEVELOPMENT AGREEMENT, ASSIGNED TO THE APPELLANT RIGHTS TO DEVELOP, CONSTRUCT AND DISP OSE OFF RESIDENTIAL AND COMMERCIAL SPACES AS PER TERMS AND CONDITIONS PROVI DED THEREIN. IX. THE APPELLANT IS ALSO ENTITLED TO GRANT SUB-LEA SES IN RESPECT OF THE PORTIONS OF THE DEMISED (LEASED) LAND, IN ACCORDANC E WITH THE APPLICABLE LAW, AND AS PER THE PROVISIONS OF THE LEASE DEED. X. SIMILARLY, THE LEASE DEED(S) ALSO GRANT THE APPE LLANT POWER TO ASSIGN ITS RIGHTS, TITLE OR INTEREST OR CREATE A SECURITY INTE REST IN RESPECT OF ITS RIGHTS, EITHER FULLY OR IN PARTS THEREOF IN FAVOUR OF THE LENDERS INCLUDING GRANTING OF STEP-IN RIGHTS IN THE EVENT OF DEFAULT UNDER THE FINANCING AGREEMENT FOR THE PURPOSE OF I.T.A. NOS.738 TO 741/MUM/2012 14 OBTAINING FINANCE. XI. THE APPELLANT HAS ALSO ACQUIRED SOLE RIGHTS FOR MARKETING OF THE NMSEZ AND THE INDUSTRIAL/ COMMERCIAL PROJECTS TO POTENTIA L TENANTS. 10. IN VIEW OF ABOVE, LD. CIT(A) HAS STATED THAT T HE ASSESSEE HAS BEEN ALLOTTED LAND FOR A PERIOD OF 60 YEARS ON THE PAYMENT OF LEASE PR EMIUM. THAT THE LEASE DEED(S) AND THE DEVELOPMENT AGREEMENT, ASSIGNS TO THE ASSESSEE LEASE HOLD RIGHTS WHICH INCLUDES A BUNDLE OF RIGHTS, SOME OF WHICH ARE OUTLINED ABOV E. ASSESSEE MADE PAYMENT OF LEASE PREMIUM TO CIDCO WITHOUT DEDUCTING TDS AND TH E AO HAS HELD THAT THE PAYMENT OF LEASE PREMIUM IS NOTHING BUT RENT COVERED UNDER THE DEFINITION OF RENT PROVIDED U/S 194-I OF THE ACT AND HENCE THE DEDUCTION OF TAX AT SOURCE WAS REQUIRED. LD. CIT(A) HAS THEREAFTER REPRODUCED SECTION 194-I OF THE ACT WHICH IS AS UNDER : RENT. 194-I. ANY PERSON, NOT BEING AN INDIVIDUAL OR A HIN DU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO [A RESIDENT] ANY INCOME B Y WAY OF RENT, SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THERE ON AT THE RATE OF (A) TWO PER CENT FOR THE USE OF ANY MACHINERY OR PLANT OR EQUIPMENT; AND (B) TEN PER CENT FOR THE USE OF ANY LAND OR BUILD ING (INCLUDING FACTORY BUILDING) OR LAND APPURTENANT TO A BUILDING (INCLUD ING FACTORY BUILDING) OR FURNITURE OR FITTINGS: PROVIDED THAT NO DEDUCTION SHALL BE MADE UNDER THIS SECTION WHERE THE AMOUNT OF SUCH INCOME OR, AS THE CASE MAY BE, THE AGGREGAT E OF THE AMOUNTS OF SUCH INCOME CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE FINANCIAL YEAR BY THE AFORESAID PERSON TO THE ACCOUNT OF, OR TO, T HE PAYEE, DOES NOT EXCEED [ONE HUNDRED AND EIGHTY THOUSAND RUPEES] : [PROVIDED FURTHER THAT AN INDIVIDUAL OR A HINDU UND IVIDED FAMILY, WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LIMITS SPECIFIED UNDER CLAU SE (A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH INCOME BY WAY OF RENT IS CREDITED OR PAI D, SHALL BE LIABLE TO DEDUCT INCOME-TAX UNDER THIS SECTION.] EXPLANATION.FOR THE PURPOSES OF THIS SECTION, [(I) RENT MEANS ANY PAYMENT, BY WHATEVER NAME C ALLED, UNDER ANY LEASE, SUB-LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANG EMENT 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 FAC TORY BUILDING); OR (D) MACHINERY; OR (E) PLANT; OR I.T.A. NOS.738 TO 741/MUM/2012 15 (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, W HETHER CALLED SUSPENSE ACCOUNT OR BY ANY OTHER NAME, IN THE BOO KS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH INCOME, SUCH CREDITIN G SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE P AYEE AND THE PROVISIONS OF THIS SECTION SHALL APPLY ACCORDINGLY. 11. LD.CIT(A) VIDE PARAS 5.20 TO 5.28 HAS HELD TH AT LEASE PREMIUM PAID BY THE ASSESSEE UNDER LEASE IS PAID FOR OBTAINING THE LEAS E AND IT CANNOT BE EQUATED WITH THE RENT. WE CONSIDER IT NECESSARY TO REPRODUCE PAR AS 5.20 TO 5.28 OF THE IMPUGNED ORDER(S) OF LD. CIT(A) WHICH ARE AS UNDER : 5.20 THIS SECTION THUS REQUIRES THAT A PERSON WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT COME BY WAY OF RENT' 'FOR THE USE OF' L AND ETC. SHALL AT THE TIME OF CREDIT OR PAYMENT OF SUCH INCOME DEDUCT TAX AT SOU RCE AT REQUIRED RATE. ALTHOUGH THIS MEANING IS VERY WIDE SO AS TO INCLUDE ALL TYPES OF TRANSACTIONS WHICH FALL IN THIS CATEGORY, STILL THE LEGISLATURE HAS INTENTIONALLY INCLUDED THE WORDS 'FOR THE USE OF' SO THAT THE MEANING OF THE R ENT' IS NOT INTERPRETED BEYOND ITS MEANING IN COMMON PARLANCE. IN COMMON PARLANCE, RENT IS A CONSIDERATION PAID BY A TENANT TO THE LAND LORD IN RESPECT OF A PROPERTY OR ASSET TAKEN ON RENT. THE RENT IS PAID OBVIOUSLY FOR THE USE OF THE SAID PROPERTY AS OTHERWISE, IF THE PROPERTY IS NOT USED, THERE WOULD BE NO NEED TO TAK E THE PROPERTY ON RENT. THE WORD 'USE' HERE IS THEREFORE OF UTMOST IMPORTANCE IN ANY TRANSACTION WHERE THE CONSIDERATION PAID FOR THE PROPERTY WOULD BE TERME D AS 'RENT'. HOWEVER, THE MEANING OF WORD 'USE' HERE HAS TO BE INTERPRETED IN THE MOST SIMPLE AND COMMON MANNER, KEEPING IN VIEW THE RELATIONSHIP BET WEEN A LANDLORD AND A TENANT. 5.21 THIS IS SO BECAUSE, IF THE WORD 'USE' WAS ALSO MEANT TO INCLUDE EXPLOITATION OF PROPERTY BY CHANGING ITS IDENTITY/ SHAPE AND THEN SELLING IT OFF, THERE WOULD BE NO DIFFERENCE BETWEEN A SALE TRANSA CTION AND A TRANSACTION AKIN TO THE TRANSACTION BETWEEN A LANDLORD AND A TENANT SO FAR AS ABOVE TDS PROVISIONS OF SECTION 194-I, ARE CONCERNED. A TRANS ACTION OF LEASE MAY HAVE STIPULATIONS WHICH MAKE IT A TRANSACTION IDENTICAL TO THE TRANSACTION BETWEEN A LANDLORD AND A TENANT ( REFER TO THE DECISION OF CA LCUTTA HIGH COURT IN THE CASE OF BRAITHWAITE & CO INDIA LTD, 111 ITR 542). AND THAT IS WHY VARIOUS TERMS LIKE SUB-LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANG EMENT HAVE BEEN USED IN THE SECTION SO AS TO COVER ALL SUCH CASES, WHERE A CONSIDERATION IS PAID FOR THE USE OF BUILDING, MACHINERY, ETC. UNDER AN ARRANGEME NT WHICH IS SIMILAR TO A TRANSACTION BETWEEN A LANDLORD AND A TENANT. HOWEVE R IN MANY CASES, A LEASE TRANSACTION MAY NOT NECESSARILY BE SIMILAR OR IDENT ICAL TO THE TRANSACTION BETWEEN A LANDLORD AND A TENANT; AND INSTEAD IT MA Y INDICATE A SALE TRANSACTION IN THE SENSE THAT CERTAIN MORE VALUABLE RIGHTS IN T HE PROOPERTY ARE TRANSFERRED. AS PER LEGAL UNDERSTANDING OF THE TERMS, THE TRANSA CTION IN WHICH LICENCE ' IS GRANTED TO THE TRANSFEREE FOR USE OF THE PROPERTY IS MORE OFTEN LIKELY TO BE TO THE TRANSACTION BETWEEN A LANDLORD AND A TENANT WHE REAS IN A 'LEASE' TRANSACTION PERTAINING TO AN IMMOVABLE PROPERTY, IT MAY NOT BE SO VERY OFTEN. THEREFORE, IN MY OPINION, ALTHOUGH THE MEANING OF TERM 'RENT' US ED IN THE ABOVE SECTION IS I.T.A. NOS.738 TO 741/MUM/2012 16 VERY WIDE, STILL CANNOT BE APPLIED TO ALL AND ANY O F THE TRANSACTIONS OUT OF CONTEXT INDISCRIMINATELY. 5.22 THEREFORE, IF THE TENANT/ LESSEE/ LICENSEE OF THE PROPERTY USES THE PROPERTY FOR HIS OWN PURPOSE OR EMPLOYS IT FOR HIS OWN BENEFIT, THE CONSIDERATION PAID WOULD BE 'RENT'. HOWEVER, IF THE PROPERTY IS E XPLOITED IN A MANNER THAT ITS IDENTITY DOES NOT REMAIN THE SAME AND THEREAFTER IT IS SOLD FOR A PROFIT, I'M AFRAID, IT WOULD NOT BE CALLED 'USE' OF PROPERTY BY THE TENANT; RATHER IT WOULD BE EXPLOITATION OF THE PROPERTY BY VIRTUE OF CERTAIN R IGHTS, WHICH WOULD BE OVER AND ABOVE THE RIGHTS OF A TENANT (WHICH ARE FOR MERE US E OF THE PROPERTY MAY BE WITH CERTAIN MODIFICATIONS). IN THE CASE OF THE AP PELLANT, THE RIGHTS ARE NOT MERE USE OF THE PROPERTY (LAND) BY THE APPELLANT ITSELF; RATHER THE RIGHTS ARE FOR EXPLOITATION OF THE PROPERTY BY DEVELOPING AND CONS TRUCTING RESIDENTIAL/ COMMERCIAL SPACES AS WELL AS INDUSTRIAL PROJECTS AN D/OR PROVIDE INFRASTRUCTURE FOR SUCH PROJECTS AND SELLING SUCH SPACES AT A PROFIT . THIS TRANSACTION THEREFORE CANNOT BE STRETCHED BEYOND ITS MEANING AND IT CANN OT BE CATEGORIZED AS A TRANSACTION WHICH IS IN-BETWEEN A LANDLORD AND A TE NANT. THIS IS SO BECAUSE THE APPELLANT IS NOT BOUND TO USE THE PROPERTY ITSELF A ND HENCE CONSIDERATION PAID IS NOT RENT WITHIN THE MEANING OF EXPLANATION BELOW SE CTION 194-I. THE APPELLANT HAS THUS ACQUIRED A CAPITAL RIGHT TO DEVELOP THE LA ND AND EXPLOIT THE SAME. 5.23 IT IS ALSO SEEN THAT THE AMOUNT CHARGED BY THE CIDCO AS LEASE PREMIUM HAS NO CONNECTION WITH THE RENTAL VALUE OF LAND. T HUS, THE WHOLE TRANSACTION TOWARDS GRANT OF LEASEHOLD RIGHTS TO THE APPELLANT IS NOTHING BUT A TRANSACTION OF TRANSFER OF PROPERTY AND THE LEASE PREMIUM IS THE CONSIDERATION FOR THE PURCHASE OF THE SAID LEASEHOLD RIGHTS, WHICH COMPRI SES OF A BUNDLE OF RIGHTS, INCLUDING RIGHT OF POSSESSION, RIGHT OF EXPLOITATIO N OF PROPERTY AND ITS LONG-TERM ENJOYMENT. 5.24 IN THIS CONTEXT, THE DECISION OF HONBLE SUPRE ME COURT IN THE CASEOF A.R.KRISHNAMURTHY (SUPRA) IS VERY MUCH RELEVANT WHE RE THE ASSESSEE, AFTER PURCHASING TWO PIECES OF LAND, HAD GRANTED A MINING LEASE IN FAVOUR OF A COMPANY. WHEN THE AO ASSESSED THE INCOME FROM THE S AID TRANSACTION UNDER THE HEAD 'CAPITAL GAINS' TREATING THE TRANSACTION OF L EASE AS TRANSFER OF A CAPITAL ASSET IN THE FORM OF A VALUABLE RIGHT, THE ASSESSEE CHALL ENGED THE SAME UP TO THE SUPREME COURT. HONOURABLE SUPREME COURT HELD THAT W HEN THE ASSESSEE PURCHASED THE LAND, HE HAD NOT ONLY ACQUIRED THE LA ND, BUT ALSO HAD ACQUIRED A BUNDLE OF RIGHTS IN THE SAID LAND INCLUDING THE RIG HT TO GRANT LEASE. HENCE THE AO WAS RIGHT IN CHARGING TO CAPITAL GAINS TAX UNDER S ECTION 45 OF THE ACT, THE PROFITS ARISING OUT OF THE SAID TRANSACTION OF LEASE. IN TH E CASE OF THE APPELLANT ALSO, THE MMRDA BEING THE OWNER OF THE LAND, HAS TRANSFERRED ITS RIGHT OF DEVELOPMENT AND EXPLOITATION OF LAND TO THE APPELLANT AND THESE RIGHTS ARE THEREFORE CAPITAL IN NATURE. 5.25 I DO AGREE WITH THE LD. ADDL CIT AND THE AO T HAT THE TDS PROVISIONS ARE A SEPARATE CODE IN THEMSELVES. I ALSO AGREE THAT IT I S NOT DESIRABLE OR PERMISSIBLE TO PICK OUT A WORD OR SENTENCE FROM THE JUDGEMENT OF A COURT DIVORCED FROM THE CONTEXT OF THE QUESTION UNDER CONSIDERATION AND TRE AT IT TO BE THE COMPLETE LAW DECLARED BY THE COURT (REFER CIT VS. SUN ENGINEERI NG (SUPRA)]. HOWEVER, EVERYTHING WOULD DEPEND UPON THE FACTS OF EACH CASE AND THE FACTS OF THE CASES CITED AS WELL AS THE CONTEXT IN WHICH THE CITED DEC ISIONS HAVE BEEN DELIVERED. - 198 ITR 297(SC) I.T.A. NOS.738 TO 741/MUM/2012 17 5.26 ALTHOUGH THE TERM 'RENT' HAS BEEN DEFINED IN THE ABOVE SECTION OF THE ACT. OTHER TERMS LIKE 'LEASE', 'LEASE PREMIUM', 'LESSOR' AND 'LESSEE' ETC. HAVE NOT BEEN DEFINED IN THE ACT. IT MAY BE USEFUL TO REFER TO TH E MEANING OF THESE TERMS AS PROVIDED IN THE TRANSFER OF PROPERTY ACT, 1882. SEC TION 105 OF THE TRANSFER OF PROPERTY ACT DEFINES THE TERM LEASE AS 'A LEASE OF IMMOVEABLE PROPERTY IS A TRANSFER OF A RIGHT TO ENJOY SUCH PROPERTY, MADE FO R A CERTAIN TIME, EXPRESS OR IMPLIED, OR IN PERPETUITY, IN CONSIDERATION OF A PR ICE PAID OR PROMISED, OR OF MONEY, A SHARE OF CROPS, SERVICE OR ANY OTHER THING OF VALUE, TO BE RENDERED PERIODICALLY OR ON SPECIFIED OCCASIONS TO THE TRANSFEROR BY THE TRANSFEREE, WHO , ACCEPTS THE TRANSFER ON SUCH TERM S. IN THE CASE OF LEASE, PRICE IS CALLED THE PREMIU M, AND THE MONEY, SHARE, SERVICE OR OTHER THING TO BE RENDERED IS CALLED THE RENT; THE TRANSFERORS IS CALLED THE LESSOR AND THE TRANSFEREE IS CALLED THE LESSEE . 5.27 THE SECTION THEREFORE BRINGS OUT THE DISTINCTI ON BETWEEN A PRICE PAID FOR A TRANSFER OF RIGHT TO ENJOY THE PROPERTY AND THE REN T TO BE PAID PERIODICALLY TO THE LESSOR WHEN THE INTEREST OF THE LESSOR IS PARTED WI TH FOR A PRICE, THE PRICE PAID IS PREMIUM OR SALAMI. BUT THE PERIODICAL PAYMENTS MADE FOR THE CONTINUOUS ENJOYMENT OF THE BENEFITS UNDER THE LEASE ARE IN TH E NATURE OF RENT. IT WOULD, THEREFORE TRANSPIRE THAT A PREMIUM IS NOT PAID UNDE R A LEASE, BUT IS PAID AS A PRICE FOR OBTAINING THE LEASE; HENCE, IT PRECEDES T HE GRANT OF LEASE THEREFORE, IT CANNOT BE EQUATED WITH THE RENT. WHIC H IS PAID PERIODICALLY. 5.28 FURTHERMORE, IF THE LEASE PREMIUM WAS IN THE N ATURE OF ADVANCE RENT, THEN, IF FOR ANY REASON THE LEASE IS TERMINATED EAR LIER THAN THE PRESCRIBED PERIOD, THE ADVANCE RENT WOULD HAVE TO BLE REFUNDED. HOWEV ER, IN THE CASE OF APPELLANT, THE LEASE DEED DOES NOT PROVE FOR ANY REFUND OF LEA SE PREMIUM. IT IS THUS SEEN THAT THERE IS NO PROVISION IN THE LEASE FOR TERMINA TION OF LEASE AT THE INSTANCE OF THE LESSEE AND HENCE FOR REFUND OF THE LEASE PREMIU M. 12. LD. CIT(A) HAS THEREAFTER DISCUSSED IN PARAS 5 .30 TO 5.45 OF IMPUGNED ORDER(S) THE CASE LAWS AS REFERRED BY AO AS WELL AS BY THE ASSESSEE IN THEIR WRITTEN SUBMISSIONS AND ALSO POINTED OUT AT THE TIME OF HEARING. WE C ONSIDER IT PRUDENT TO REPRODUCE SAID PARAS WHICH ARE AS UNDER : 5.30 WHILE CONSIDERING THE TREATMENT OF RENT AND L EASE PREMIUM UNDER THE INCOME TAX ACT, IT IS NOTED THAT THE DISTINCTION BE TWEEN THE LEASE PREMIUM AND RENT WAS FIRST BROUGHT OUT BY THE JUDICIAL COMMITTE E IN THE CASE OF RAJA BAHADUR KAMAKHYA NARAIN SINGH OF RAMGARH VS. COMMIS SIONER OF INCOME TAX, 11 ITR 513 (PC) WHEREIN IT HAS BEEN HELD THAT: THE PAYMENTS WHICH UNDER THE LEASE WERE EXIGIBLE BY THE LESSOR MAY BE CLASSED UNDER THREE CATEGORIES: (I) T HE SALAMI OR PREMIUM ; (II) THE MINIMUM ROYALTY ; (III) THE ROYA LTIES PER TON. THE SALAMI HAS BEEN RIGHTLY TREATED AS A CAPITAL RE CEIPT. IT WAS A SINGLE PAYMENT MADE FOR THE ACQUISITION OF THE RIGH T OF THE LESSEES TO ENJOY THE BENEFITS GRANTED TO THEM BY TH E LEASE. THAT GENERAL RIGHT MAY PROPERLY BE REGARDED AS A CAPITAL ASSET, AND THE MONEY PAID TO PURCHASE IT MAY PROPERLY BE HELD TO BE A PAYMENT ON CAPITAL ACCOUNT. BUT THE ROYALTIES WERE ON A DIFFERENT FOOTING. I.T.A. NOS.738 TO 741/MUM/2012 18 5.31 IN THE MEMBER FOR THE BOARD OF AGRICULTURAL INCOME TAX ASSAM V/S SINDHURANI CHAUDHRANI AND ORS, 32 ITR 169 , THE HONBLE SUPREME CHARACTERIZED A LEASE PREMIUM (SALAMI) AS A LUMPSUM NON-RECURRING PAYMENT. IT HAS BEEN HELD : WHERE SALAMI IS IN THE FORM OF A LUMPSUM-NON- REC URRING PAYMENT MADE BY A PROSPECTIVE TENANT TO THE LANDLOR D AS A CONSIDERATION FOR THE SETTLEMENT OF AGRICULTURAL LA ND AND PARTING WITH CERTAIN RIGHTS OF THE LAND IN THE LAND IN FAVO UR OF THE PROSPECTIVE TENANTS, AND IS PAID ANTERIOR TO THE CO NSTITUTION OF RELATIONSHIP OF LANDLORD AND TENANT, IT IS NOT REN T WITHIN THE MEANING OF THE WORD USED IN THE DEFINITION OF AGRI CULTURAL INCOME IN SECTION 2(1)(A) OF THE ASSAM AGRICULTURA L INCOME TAX ACT, 1939. IT HAS ALL THE CHARACTERISTICS OF A CAP ITAL PAYMENT AND IT IS NOT REVENUE. IT IS, THEREFORE, NOT AGRIC ULTURAL INCOME WITHIN THE MEANING OF THAT ACT. 5.32 SIMILARLY IN THE CASE OF CHINTAMANI SARAN NATH SAH DEO V/S COMMISSIONER OF INCOME-TAX [1961] 41 ITR 506 (SC) THE SUPREME COURT HELD THAT : HELD, ON THE FACTS, THAT THE LICENCE WAS NOT MEREL Y A GRANT FOR THE USE OF THE CAPITAL OF THE ASSESSEE BUT IT WAS R EALLY A GRANT OF A RIGHT TO A PORTION OF THE CAPITAL IN THE SHAPE OF A GENERAL RIGHT TO THE CAPITAL ASSET. THE AMOUNTS RECEIVED BY THE ASSESSEE WERE CAPITAL RECEIPTS AND WERE NOT ASSESSABLE TO INCOME- TAX 5.33 THE MATTER WAS AGAIN CONSIDERED BY THE HONBLE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V/S PANBARI TEA CO. LTD.(1965) 57 ITR 422 (SC). IN THIS JUDGMENT, THE SUPREME COURT HAS CO NSIDERED VARIOUS DECISIONS AVAILABLE ON THE ISSUE AND HELD THAT SINCE THERE WA S A TRANSFER OF SUBSTANTIVE INTEREST OF LESSOR IN ESTATES IN FAVOUR OF THE LE SSEE AND THERE WAS A CONFERMENT OF A RIGHT ON THE LESSEE TO USE THE SAID ESTATES BY EXPLOITING THEM, PREMIUM RECEIVED BY THE ASSESSEE WAS A CAPITAL RECEIPT IN T HE HANDS OF THE LESSOR. IT WOULD BE USEFUL TO CONSIDER THE RATIO OF THE SAID D ECISION, WHICH IS AS UNDER : THE REAL TEST OF A SALAMI OR PREMIUM IS WHETHER THE AMOUNT PAID, IN A LUMPSUM OR IN INSTALMENTS IS THE CONSI DERATION PAID BY THE TENANT FOR BEING LET INTO POSSESSION. 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 ENJOYMENT OF THE BENEFITS UNDER THE LEASE ARE IN TH E NATURE OF RENT. THE FORMER IS A CAPITAL RECEIPT, AND THE LA TTER ARE REVENUE RECEIPTS. THERE MAY BE CIRCUMSTANCES WHERE THE PART IES MAY CAMOUFLAGE THE REAL NATURE OF THE TRANSACTION BY US ING CLEVER PHRASEOLOGY. 5.34. WHILE DECIDING THE ISSUE THE HON'BLE SUPREME COURT OBSERVED THAT : 'UNDER SECTION 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 I.T.A. NOS.738 TO 741/MUM/2012 19 OF CROPS, SERVICE OR ANY OTHER THING OF VALUE, TO B E RENDERED 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 MONEY, SHA RE, SERVICE OR OTHER THING TO BE SO RENDERED IS CALLED THE RENT . THIS SECTION, THEREFORE, BRINGS OUT THE DISTINCTION BETWEEN A PRI CE PAID FOR A TRANSFER OF A RIGHT TO ENJOY THE PROPERTY AND THE R ENT TO BE PAID PERIODICALLY TO THE LESSOR. WHEN THE INTEREST OF TH E LESSOR IS PARTED WITH FOR A PRICE, THE PRICE PAID IS PREMIUM OR SALAMI. BUT THE PERIODICAL PAYMENTS MADE FOR THE CONTINUOUS ENJ OYMENT OF THE BENEFITS UNDER THE LEASE ARE IN THE NATURE OF R ENT. THE FORMER IS A CAPITAL INCOME AND THE LATTER A REVENUE RECEIPT. 5.35 THE COURT FURTHER OBSERVED THAT : 'IN SOME CASES, THE SO-CALLED PREMIUM IS IN FACT A DVANCE RENT AND IN OTHERS RENT IS DEFERRED PRICE. IT IS NOT THE FORM BUT THE SUBSTANCE OF THE TRANSACTION THAT MATTERS. THE NOME NCLATURE USED MAY NOT BE DECISIVE OR CONCLUSIVE BUT IT HELPS THE COURT, HAVING REGARD TO THE OTHER CIRCUMSTANCES, TO ASCERT AIN THE INTENTION OF THE PARTIES. AFTER CONSIDERING VARIOUS FACTS AND PROVISIONS OF LAW, THE SUPREME COURT, WHILE APPROVING THE ORDER OF HIGH COUT HELD THAT THE RECE IPT OF PREMIUM IS CAPITAL RECEIPT AND NOT REVENUE RECEIPT. 5.36 HON'BLE BOMBAY HIGH COURT IN THE CASE OF KHIML INE PUMPS LTD., 258 ITR 459 HAVE ON THE BASIS OF IDENTICAL FACTS AND CI RCUMSTANCES HELD THAT, AN AMOUNT OF RS.45 LAKHS PAID BY THE ASSESSEE TO M/S APVE LTD (WHICH WAS BEING WOUND UP) FOR ACQUISITION OF LEASEHOLD LAND WAS A C APITAL EXPENDITURE AND HENCE THE SAME WAS NOT DEDUCTIBLE. THE APPELLATE TR IBUNAL COULD NOT HAVE DIRECTED THE DEPARTMENT TO APPORTION THE AMOUNT OVE R A PERIOD OF 71 YEARS. IN THIS CASE, A PLOT OF LAND MEASURING 20,300 SQUARE M ETRES IN DISTRICT THANE WAS LEASED OUT BY MIDC TO A COMPANY KNOWN AS APV EQUIPM ENTS LTD FOR A PERIOD OF 95 YEARS, COMMENCING FROM AUGUST 1965 ON A PAYME NT OF RENT OF RS.1 (PER YEAR) AND IN CONSIDERATION OF PAYMENT OF RS.1,62,40 0/- AS PREMIUM. AT THE END OF THE LEASE, THE LESSEE WAS TO QUIETLY DELIVER TO THE LESSOR THE LAND. THE LESSEE WAS ALSO ENTITLED TO REMOVE ANY BUILDINGS, ERECTION S OR STRUCTURES PUT UP BY THE LESSEE ON THE LAND. UNDER THE LEASE, IT WAS FURTHER PROVIDED THAT WITHOUT THE PERMISSION OF THE LESSOR, THE LESSEE SHALL NOT ASSI GN, UNDER LET OR PART WITH THE POSSESSION OF THE PREMISES. LATER, SINCE THE SAID C OMPANY M/S APVE LTD WENT INTO LIQUIDATION, THE ASSETS OF THE COMPANY WERE SO LD TO THE ASSESSEE ON A PRICE OF RS.75 LAKHS OUT OF WHICH RS. 45 LAKHS RELATED TO ACQUISITION OF LEASEHOLD LAND. THE ASSESSEE CONTEND ED BEFORE THE AO THAT RS.45 LAKHS WAS PAID AS ADVANCE RENT TOWARDS THE LEASEHOL D LAND AND HENCE THE SAME WAS DEDUCTIBLE. IN THE LIGHT OF ABOVE FACTS AND CIR CUMSTANCES, HON'BLE BOMBAY HIGH COURT AS ALREADY STATED ABOVE, HELD THAT THE P AYMENT OF RS.45 LAKHS BY THE ASSESSEE WAS A CAPITAL EXPENDITURE AND HENCE TH E SAME WAS NOT DEDUCTIBLE. 5.37 THE SPECIAL BENCH OF MUMBAI TRIBUNAL IN THE CA SE OF JCIT VS. MUKUND LTD., (106 ITR 231] ALSO HAD AN OCCASION TO CONSID ER THE SIMILAR ISSUE I.E. 'WHETHER THE PREMIUM PAID FOR ACQUIRING LEASEHOLD R IGHT IN LAND IS REVENUE OR CAPITAL'. THE SPECIAL BENCH OF THE JURISDICTIONAL T RIBUNAL HAS SIMILARLY HELD AS I.T.A. NOS.738 TO 741/MUM/2012 20 UNDER: 21. IN THE CASE BEFORE US THE LEASE IS FOR A PERIO D OF 99 YEARS, WHICH IS AS GOOD AS A PERPETUAL LEASE IN FAVOUR OF THE ASSESSEE. THERE IS NO MATERIAL ON RECORD TO SUGGEST THAT THE AMOUNT OF RS. 2.04 CRORES PAID TO THE GOVERNMENT CONCERN MIDC WAS AN ADVANCE PAYMENT OF RENT FOR THE PERIOD OF LEASE PAI D IN LUMP SUM BY THE ASSESSEE-COMPANY. THE TERMS OF AGREEMENT DATED 5- 3-1992 ENTERED INTO BETWEEN ASSESSEE-COMPANY AND TH E GOVERNMENT BODY M/S. MIDC CLEARLY MENTIONS THAT A S UM OF RS. 2.04 CRORES IS THE AMOUNT OF DEPOSIT TO BE ADJUSTED TOWARDS 'PREMIUM' PAYABLE BY THE LICENSEE FOR THE ALLOTMENT OF 50 ACRES OF LAND IN KALVA INDUSTRIAL AREA. THE PLEA OF THE A SSESSEE THAT THE LEASE AGREEMENT WAS NOT ENTERED INTO TILL DATE AND HENCE, THE STATUS OF THE ASSESSEE IS THAT OF A LICENSEE ON LY, MAKES NO DIFFERENCE, SINCE ON PAGE-2 OF THE AGREEMENT OF THE ASSESSEE- COMPANY WITH MIDC DATED 5-3-1992, IT IS SPECIFICALL Y MENTIONED THAT THE LICENSEE SHALL BE DEEMED TO BE BARE LICENS EE ONLY OF THE PREMISES AT THE SAME RENT AND SUBJECT TO SAME TERMS AS IF THE LEASE HAD BEEN ACTUALLY EXECUTED. A READING OF THE AGREEMENT DATED 5-3-1992 ENTERED INTO WITH MIDC CLEARLY SHOWS THAT THE AMOUNT OF RS. 2.04 CRORES WERE PAID BY THE ASSESSEE -COMPANY TO MIDC AS 'PREMIUM' OR 'SALAMI' FOR THE ACQUISITION O F THE PREMISES OF LEASE FOR A PERIOD OF 99 YEARS. IN REPL Y TO A SPECIFIC QUERY FROM THE BENCH, THE LD. COUNSEL FOR THE ASSES SEE SUBMITTED THAT THE COST OF BOUNDARY WALLS ON THIS 5 0 ACRES OF LAND WAS CAPITALIZED IN THE ACCOUNT BOOKS OF THE AS SESSEE AND DEPRECIATION WAS CLAIMED BY THE ASSESSEE. THE ACTIO N OF THE ASSESSING OFFICER IN ALLOWING PROPORTIONATE RENT IN THE SUBSEQUENT ASSESSMENT YEARS 1995-96 AND 1996-97, SH ALL NOT ALTER THE CHARACTER OF THE AMOUNT PAID BY THE ASSES SEE TO MIDC FOR ACQUISITION OF THE PREMISES. WE ARE AWARE THAT MERE USE OF THE WORD 'PREMIUM' IN THE AGREEMENT DATED 5-3-1992 SHALL NOT MAKE THE CHARACTER OF THE AMOUNT OF RS. 2.04 CRORES PAID TO MIDC AS 'PREMIUM', IF THE COMBINE READING OF THE AG REEMENT LEADS TO SOME OTHER CONCLUSION. IN THIS CASE, NOT O NLY THE WORD 'PREMIUM' HAS BEEN USED IN ALL RELEVANT TERMS OF TH E AGREEMENT DATED 5-3-1992 WITH GOVERNMENT CONCERN MIDC, BUT AL SO CONSIDERING THE TERMS OF THE AGREEMENT DATED 5-3-19 92 AS A WHOLE IT IS CLEAR THAT THE AMOUNT OF RS. 2.04 CRORE S WAS PAID AS 'PREMIUM' FOR ACQUISITION OF LEASEHOLD RIGHTS IN TH E PREMISES. THE CLAUSE 5(B)( I) OF THE SAID AGREEMENT DATED 5-3 -1992 PROVIDES THAT IN CASE OF TERMINATION OF LEASE, THE 'PREMIUM' IS NON-REFUNDABLE. IT PROVIDES THAT IN CASE THE LICENS EE FAILS TO COMPLETE THE SAID FACTORY BUILDING WITHIN THE TIME AFORESAID AND IN ACCORDANCE WITH THE STIPULATIONS PROVIDED THEREI N, THE MIDC WITHOUT MAKING ANY COMPENSATION OR ALLOWANCE TO LIC ENSEE FOR THE SAME AND WITHOUT MAKING ANY PAYMENT TO THE LICE NSEE FOR I.T.A. NOS.738 TO 741/MUM/2012 21 REFUND OR REPAYMENT OF THE PREMIUM AFORESAID OR ANY PART THEREOF, CAN RESUME THE LAND IN QUESTION. THUS, IN CASE OF TERMINATION OF LEASE, THE 'PREMIUM' IS NON-REFUNDAB LE AND THEREFORE, THE SAME CANNOT BE CONSIDERED AS ADVANCE PAYMENT OF RENT. THERE IS NO CLAUSE IN THIS AGREEMENT TO SH OW THAT THE AMOUNT OF RS. 2.04 CRORES WAS PAID BY THE ASSESSEE AS ADVANCE RENT FOR ALL FUTURE YEARS AND THE LUMP SUM PAYMENT OF FUTURE YEARS RENT HAS BEEN PAID TO AVAIL SOME CONCESSION FOR ADVANCE PAYMENT OF RENT OR FOR SOME OTHER BUSINESS CONSIDER ATION. THE LAND IN QUESTION IS INHERITABLE ALSO AS PER THE TER MS AND CONDITIONS OF THE AGREEMENT WITH MIDC. THEREFORE, C ONSIDERING THE TERMS OF AGREEMENT DATED 5-3-1992 AS A WHOLE, W E HOLD THAT THE CONSIDERATION OF RS. 2.04 CRORES WAS PAID TO MI DC AS A PRICE FOR OBTAINING THE LEASEHOLD RIGHTS FOR A PERIOD OF 99 YEARS FROM MIDC IN FAVOUR OF THE ASSESSEE. 5.38 IN THE ABOVE DECISION, THE SPECIAL BENCH HAS CLEARLY HELD THAT THE AMOUNT OF RS.2.04 CRORES PAID BY THE ASSESSEE COMP ANY TO THE GOVT. CONCERN MIDC CANNOT BE CONSIDERED AS ADVANCE PAYMENT OF REN T FOR THE PERIOD OF LEASE THE SPECIAL BENCH STRONGLY RELIED UPON AND FOLLOWED THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN THE CASE OF PANBARI TEA CO. LTD (SUPRA) AND BY THE BOMBAY HIGH COURT IN THE CASE OF KHIMLINE PUMPS LTD (SUPRA). SIMILARLY, IN THE CASE OF R.K.PALSHIKAR, 172 ITR 311 HONBLE SUPREM E COURT HELD THAT THE PREMIUM RECEIVED FOR GRANT OF LEASE OF A PLOT OF LA ND FOR 99 YEARS IS CHARGEABLE AS CAPITAL GAINS AS THE ASSESSEE HAD TRANSFERRED AN ASSET OF ENDURING NATURE VIZ RIGHT OF POSSESSION AND ENJOYMENT OF THE PROPER TY. THUS VARIOUS JUDGMENTS DELIVERED BY THE COURTS AND TRIBUNALS BRINGS OUT A DISTINCTION BETWEEN THE LEASE PREMIUM AND RENT UNDER THE INCOME TAX LAWS WHICH AR E ALSO IN LINE WITH THE PRINCIPLES OF GENERAL LAW LAID DOWN UNDER TRANSFER OF PROPERTY ACT. 5.39 THE AO HAS CITED CASES WHERE THE TERM RENT W AS GIVEN WIDE MEANING AS ENVISAGED IN SECTION 194-I OF THE ACT AND IN VIE W OF THE FACTS AND THE CIRCUMSTANCES OF THE CASE. IN ALL THESE CASES, THE DECISION GIVEN IS NOT AT ALL IN CONFLICT WITH THE DISCUSSION AND THE FINDING ARRIVE D AT PARAS 5.20 TO 5.22 ABOVE. IN THE CASE OF KRISHNA OBEROI V/S UNION OF INDIA (SUPRA), THE AMOUNT PAID FOR USE AND OCCUPATION OF HOTEL ROOMS WAS CONSIDERED AS RENT WITHIN THE MEANING OF SECTION 194-I OF THE ACT. IT WAS HELD THAT TH ERE WAS NO WEIGHTY OR SOUND REASON TO LIMIT THE MEANING OF WORK RENT OCCURRIN G IN EXPLANATION TO SECTION 194-I ONLY TO THE PAYMENT MADE BY A TENANT OR LESSE E FOR THE USE OF LAND OR BUILDINGS DEMISED TO HIM. FURTHER IN THE CASE OF UN ITED AIRLINES V/S CIT (SUPRA), IT WAS HELD THAT THE TERM RENT HAS A WIDER MEANIN G AND IT INCLUDES AGREEMENT OR ARRANGEMENT FOR USE OF LAND. THE AO HAS ALSO RE FERRED TO THE DECISION IN THE CASE OF CIT V/S REEBOK INDIA CO.(SUPRA), WHEREIN T HE SECURITY DEPOSIT WAS CONSIDERED AS RENT IN THE FACTS OF THE GIVEN CASE. SIMILAR IS THE CASE OF SMT. BISAKHA SARKAR (SUPRA), WHERE ALSO, A BANK (NAMELY BANK OF INDIA) WAS THE TENANT OF A PROPERTY, WHICH WAS JOINTLY OWNED BY 4 PERSONS, THE LANDLORDS MADE A CLAIM THAT NO TAX IS DEDUCTIBLE BECAUSE THEIR IN DIVIDUAL SHARE OF RENT IS BELONG THE DEDUCTIBLE LIMIT. HONBLE HIGH COURT HELD THA T IT WAS A JOINTLY OWNED PROPERTY AND HENCE THE LANDLORDS WERE AN AMALGAM OF 4 PERSONS. THEREFORE, THE TAX UNDER SECTION 194-I WAS TO BE DEDUCTED @20% . IN NONE OF THESE CASE, THE ISSUE OF LEASE PREMIUM AS IN THE CASE OF THE APPELLANT VIS--VIS RENT HAS BEEN CONSIDERED. I.T.A. NOS.738 TO 741/MUM/2012 22 5.40 LD. ADDL. CIT, IN SUPPORT OF HIS ARGUMENTS HAS ALSO FURNISHED A COPY OF THE DECISION DATED 02.02.2010 OF LD. CIT(A)-IV, CHE NNAI IN THE CASE OF FOXCONN INDIA DEVELOPERS PVT.LTD WHEREIN SIMILAR ISSUE WAS INVOLVED AND THE DECISION OF AO (TDS OFFICER) HAS BEEN UPHELD. I HAVE CONSIDERE D THIS DECISION OF LD.CIT(A)- IV, CHENNAI. HOWEVER, I RESPECTFULLY DO NOT AGREE WITH THE SAME. FIRSTLY, IT IS SEEN THAT MOST OF THE DECISIONS DISCUSSED ABOVE WER E NEITHER CITED BY THE AO/ ASSESSEE IN THAT CASE, NOR CONSIDERED BY THE LD. CI T(A). FURTHERMORE, IT IS NOT KNOWN AS TO WHETHER OR NOT IN THAT CASE, THE ASSESS EE WAS GRANTED DEDUCTION TOWARDS LEASE RENT IN ASSESSMENT PROCEEDINGS. THE A O HAS ALSO STATED THAT FOR DEDUCTION OF TAX AT SOURCE, IT IS NOT NECESSARY THA T THE PAYMENT SHOULD BE OF THE REVENUE NATURE ONLY. FOR THIS PURPOSE, HE HAS P OINTED OUT THAT IN SECTION 194-LA, ALTHOUGH THE PAYMENT OF COMPENSATION FOR AC QUISITION OF IMMOVABLE PROPERTY IS OF CAPITAL NATURE, STILL THE TAX IS LIA BLE TO BE DEDUCTED. I DO NOT THINK THAT THIS ARGUMENT HAS ANY RELEVANCE HERE BECAUSE T HE PROVISION UNDER CONSIDERATION IS THAT OF SECTION 194-I, WHICH IS FO R THE PURPOSE OF TAX DEDUCTION AT SOURCE IN RESPECT OF PAYMENT OF RENT. THE 'RENT ' IS OBVIOUSLY IN THE NATURE OF A REVENUE EXPENDITURE. 5.41 I HAVE ALSO CONSIDERED THE OTHER CASES RELIED UPON BY THE AO. THESE CASES LAY DOWN GENERAL PRINCIPLES OF INTERPRETATION OF LAW. I FIND THAT IN NONE OF THE ABOVE CASES THE COURT HAS HELD THAT THE LEASE P REMIUM IN SIMILAR CIRCUMSTANCES IS IN THE NATURE OF ADVANCE RENT AND HENCE LIABLE FOR DEDUCTION OF TDS U/S 194-I OF THE ACT. THE CASES RELIED UPON BY THE AO ARE THUS DISTINGUISHABLE ON FACTS AND IN LAW AND THE SAME CA NNOT BE MADE APPLICABLE TO THE FACTS OF THE PRESENT CASE WHERE THE ISSUE RAISE D IS COMPLETELY DIFFERENT. I THEREFORE DO NOT FIND ANY MERIT IN THE SUBMISSION OF THE AO SO FAR AS THE CASE LAWS CITED BY HIM ARE CONCERNED. 5.42 THE AO HAS CITED THE DECISION OF CALCUTTA H IGH COURT IN THE CASE OF BRAITHWAITE & CO INDIA LTD, 111 ITR 542 WHERE THE A SSESSEE HAD TAKEN ON LEASE, A WHOLE UNDERTAKING FOR 99 YEARS ON PAYMENT OF RE NT OF RS.4 LAKHS PER ANNUM FROM ANGUS CO LTD THE ASSESSEE CLAIMED THE SAME AS THE REVENUE EXPENDITURE IN ITS INCOME TAX RETURN WHICH WAS NOT ACCEPTED BY THE AO, WHO HELD THAT THE ABOVE ARRANGEMENT WAS IN EFFECT A SALE OF THE UNDER TAKING TO THE ASSESSEE. ON THESE FACTS, HON'BLE HIGH COURT HELD THAT THE ASSES SEE IS ENTITLED FOR DEDUCTION OF RENT, WHICH WAS HELD TO BE REVENUE EXPENDITURE I T IS EVIDENT FROM THE FACTS OF THIS CASE THAT WHAT WAS TAKEN ON LEASE BY THE ASSESSEE WAS NOT THE LAND OR LEASEHOLD RIGHT IN LAND. THE LEASE WAS FOR THE WHO LE UNDERTAKING WHICH WAS TO BE USED BY THE ASSESSEE ITSELF. THE FACTS OF THIS CASE DO NOT SUGGEST THAT THE ASSESSEE WAS ALSO ENTITLED TO EXPLOIT THE LAND THRO UGH RECONSTRUCTION AND SALE OF THE PROPERTY THEREAFTER. HENCE THE FACTS IN THIS CA SE ARE TOTALLY DIFFERENT FROM THE FACTS OF THE CASE OF THE APPELLANT WHERE THE LEASE IS IN RESPECT OF THE LAND FOR EXPLOITATION OF (HE SAME THROUGH CONSTRUCTION OF BU ILDINGS AND SALE THEREOF. HENCE, THIS DECISION DOES NOT SUPPORT THE FINDING O F THE AO IN THE CASE OF THE APPELLANT. 5.43 THE AO HAS FURTHER RELIED UPON KARNATAKA HI GH COURT JUDGEMENT IN THE CASE OF CIT VS. HMT L.TD. 203 ITR 820 WHEREIN THE SAID HON'BLE HIGH COURT HAS HELD THAT THE AMOUNT PAID BY THE LESSEE TO THE LESSOR FOR GRANTING THE LEASE IS DEDUCTIBLE REVENUE EXPENDITURE. ON CLOSE SCRUTI NY OF THIS CASE OF KARNATAKA I.T.A. NOS.738 TO 741/MUM/2012 23 HIGH COURT RELIED UPON BY THE AO AND OTHER JUDGEMEN TS RELIED UPON BY THE APPELLANT, I AM OF THE CONSIDERED OPINION THAT HMT S CASE IS DISTINGUISHABLE ON FACTS AND IN LAW. THE HON'BLE HIGH COURT HAS PROCEE DED ON THE FINDING OF THE FACT RECORDED BY THE TRIBUNAL THAT THE PAYMENT MADE BY THE ASSESSEE IS A RENT AND HENCE SHALL BE ALLOWED AS BUSINESS EXPENDITURE. MOREOVER WITH DUE RESPECT THE KARNATAKA HIGH COURT JUDGEMENT IN THE HMTS CASE IS INCONSISTENT WITH THE EARLIER DECISIONS OF THE HIGH COURTS AND THE SUPREM E COURT. IN THIS JUDGEMENT HONBLE HIGH COURT HAS NOT CONSIDERED THESE OTHER D ECISIONS OF HIGH COURTS AND THE SUPREME COURT WHICH RENDERS IT 'PER-INCURIAM' AS IT IS DELIVERED IN IGNORANCE OF THE DECISION OF OTHER HIGH COURTS AND SUPREME CO URT [THIS PRINCIPLE OF 'PER- INCURIAM' HAS BEEN ILLUSTRATED BY HON'BLE SUPREME C OURT IN THE CASE OF PUNJAB LAND DEVELOPMENT AND RECLAMATION CORPORATION LTD. V/S PRESIDING OFFICER (LABOUR COURT), 3 SCC 682 . IT HAS TO BE UNDERSTOOD THAT SUBSEQUENT JUDGEMENTS OF VARIOUS HIGN COURTS INCLUDING THE JUD GEMENT OF THE JURISDICTIONAL HIGH COURT ARE OF A BINDING NATURE AND HAVE TO BE FOLLOWED. ALSO. THIS DECISION IS CONTRARY TO AT LEAST 6 SUPREME COURT DECISIONS AND 5 HIGH COURT DECISIONS, AS POINTED OUT BY LD.AR OF THE APPELLANT (REFER TO PAG E-22 OF THIS ORDER WHERE THE APPELLANTS SUBMISSIONS HAVE BEEN QUOTED). ALSO IT HAS TO BE KEPT IN MIND THAT THE APPELLATE AUTHORITIES ARE BOUND TO FOLLOW THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT WHERE AS THE DECISION OF NON-JURISDICTIO NAL HIGH COURTS IS NOT BINDING. 5.44 SINCE THE PRINCIPLES LAID DOWN IN ALL THE CASE S ARE SIMILAR, I HAVE NOT DISCUSSED ALL THE DECISIONS CITED BY THE TWO SIDES AND HAVE QUOTED ONLY A FEW LANDMARK JUDGMENTS SO AS TO AVOID REPETITION (IT M AY BE NOTED THAT THE DECISION OF CALCUTTA HIGH COURT IN THE CASE OF PURNENDU MULICK 116 ITR 591 AND PATNA HIGH COURT IN THE CASE OF SRI SRI RAJA SHIVA PRASAD SINGH OF JHARIA & RAJA JYOTI PRASAD SINGH DEO OF 1 ITC 384 (ALL SUPRA) ARE ALSO NOTEWORTHY]. HOWEVER, IT IS WORTHWHILE TO NOTE THAT SIMILAR ISSUE CAME UP VERY RECENTLY BEFORE THE HONBLE ITAT, MUMBAI IN THE CASE OF M/S NATIONAL STOCK EXCHANGE OF INDIA LIMITED IN ITA NOS. 1955/M/99, 2181/M/99, 4853/M/04 , 4485/M/04, 4854/M/04, 356/M/01, 5850/M/00. THE FACTS OF THIS CASE ARE THAT THE BOMBAY METROPOLITAN REGION DEVELOPMENT AUTHORITY (B MRDA) [NOW KNOWN AS MUMBAI REGIONAL DEVELOPMENT AUTHORITY I.E MMRDA] HA D GIVEN ON LEASE A PLOT OF LAND IN G-BLOCK OF THE BANDRA KURLA COMPLEX TO N ATIONAL STOCK EXCHANGE FOR A TOTAL LEASE PREMIUM OF RS.90.60 CRORES FOR A PERI OD OF 80 YEARS. THE ASSESSEE IN ITS COMPUTATION OF TOTAL INCOME HAD GIVEN A NOTE EXPLAINING THAT A CLAIM FOR WRITE OFF OF LEASE HOLD LAND OF RS.7,75,736/- IS M ADE ON ACCOUNT OF LEASE PREMIUM PAID IN RESPECT OF LEASE HOLD LAND ACQUIRED FROM BMRDA AMOUNTING TO RS.90.60 CRORES WHICH IS AMORTIZED OVER A LEASE PER IOD OF 80 YEARS WITH EFFECT FROM 07.03 1995. THE CLAIM FOR WRITE OFF WAS FOR T HE PERIOD FROM 7.3.1995 TO 31.3.1995 ON PROPORTIONATE BASIS. THUS, THE ASSESS EE IN IS COMPUTATION OF TOTAL INCOME CLAIMED THE LEASE PREMIUM PAID TO BMRDA AS R EVENUE EXPENDITURE I.E. RENT. HOWEVER THE AO IN THAT CASE DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND DISALLOWED RS.7,75,736/- TREATING THE PAYMENT OF LEASE PREMIUM AS CAPITAL EXPENDITURE. ON APPEAL BY THE ASSESSEE THE CIT(A) CONFIRMED THE STAND TAKEN BY THE AO. ON FURTHER APPEAL OF THE AS SESSEE THE HONBLE MUMBAI TRIBUNAL DISMISSED THE APPEAL OF THE ASSESSEE RELY ING UPON THE JUDGEMENT OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M UKUND LTD (SUPRA) AND DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF KHIMLINE PUMPS LTD(SUPRA). 5.45 IN THE PRESENT CASE THE ASSESSEE HAS CAPITALIZ ED THE LEASE PREMIUM IN ITS I.T.A. NOS.738 TO 741/MUM/2012 24 BOOKS OF ACCOUNTS AND TREATED THE SAME AS CAPITAL E XPENDITURE FOR TAX PURPOSES AND THE SAME WAS ACCEPTED BY THE DEPARTMENT IN ITS REGULAR INCOME TAX ASSESSMENT. HOWEVER, THE AO (DURING TDS PROCEEDI NGS) CAME-UP WITH THE ARGUMENT THAT LEASE PREMIUM PAID TO CIDCO IS IN THE NATURE OF RENT LIABLE FOR TDS U/S 194-I OF THE ACT. THIS STAND TAKEN BY THE A O CANNOT BE ACCEPTED AS IT IS CONTRARY TO THE DECISION OF VARIOUS HIGH COURTS, SU PREME COURT AND THE TRIBUNAL AND IS AGAINST THE BASIC PRINCIPLES OF LAW 13. THUS, LD. CIT(A) HAS STATED THAT VARIOUS CLAUSE S OF LEASE AGREEMENT ARE STANDARD REGULATORY CLAUSES WHICH DO NOT AFFECT LEASEHOLD RI GHT OF THE ASSESSEE IN ANY MANNER. THEY ARE ONLY REGULATORY IN NATURE AND ARE MEANT FO R THE PURPOSE OF PROPER DEVELOPMENT OF THE AREA. SUCH RESTRICTION WOULD BE IMPOSED BY THE LOCAL AUTHORITY WHILE GRANTING PERMISSION FOR CONSTRUCTION OF BUIL DING EVEN IN THE CASE OF FREEHOLD OWNERSHIP. HENCE THE AMOUNT PAID BY THE ASSESSEE IS LEASE PREMIUM FOR ACQUIRING LEASEHOLD RIGHTS IN RESPECT OF LEASE LAND AND THE S AME IS NOT IN THE NATURE OF RENT AS CONTEMPLATED U/S 194-I OF THE ACT. LD. CIT(A) HAS H ELD THAT ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE U/S 194-I OF THE ACT. THUS , DEMAND RAISED BY THE AO BY INVOKING THE PROVISIONS OF SECTIONS 201(1) /201(1A) OF THE ACT IN RESPECT OF ALL THE ASSESSMENT YEARS UNDER CONSIDERATION ARE DELETED BY HIM. HENCE THESE APPEALS BY THE DEPARTMENT BEFORE THE TRIBUNAL. 14. LD. DR WHILE SUPPORTING THE ORDER(S) OF THE AO SUBMITTED THAT ASSESSEE ACQUIRED RIGHT TO USE LAND FOR A PERIOD OF 60 YEARS UNDER LE ASE DEED(S) ENTERED INTO BETWEEN THE ASSESSEE AND THE CIDCO. THAT THE ASSESSEE HAS NOT ACQUIRED THE OWNERSHIP RIGHT FOR THE LAND. THUS, THE AO HAD RIGHTLY TREATED SO CALL ED LEASE PREMIUM AS RENT. HENCE THE SAID LEASE PREMIUM PAID BY THE ASSESSEE TO CIDCO I S COVERED WITHIN THE MEANING OF RENT AS PER SECTION 194-I OF THE ACT. HE SUBMITT ED THAT THE DEFINITION OF RENT PROVIDED U/S 194-I OF THE ACT IS EXTENSIVE AND THE WORD ANY PAYMENT IMPLIES THAT IT WOULD INCLUDE ALL SORTS OF PAYMENTS MADE UNDER ANY AGREE MENT/ARRANGEMENT. HE SUBMITTED THAT THE ASSESSEE MADE THE LUMP SUM PAYMENT FOR USE OF LAND FOR A PERIOD OF 60 YEARS AND THEREFORE, IT IS A RENT UNDER SECTION 194-I OF THE ACT. HE SUBMITTED THAT SUCH LUMPSUM PREMIUM PAID BY THE ASSESSEE IS AN ADVANCE RENT AND THEREFORE, THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE U/S 194-I OF T HE ACT. LD. DR SUBMITTED THAT A SIMILAR ISSUE WAS CONSIDERED BY THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF FOXCONN INDIA DEVELOPER (P) LTD V/S ITO (2012)53 SO T 213( CHENNAI) WHEREIN IT IS HELD THAT UPFRONT CHARGES PAID BY THE ASSESSE E FOR LEASE OF LAND FOR A PERIOD OF 99 YEARS TO CIDCO LTD. UNDER THE LEASE AGREEMENT WAS C OVERED U/S 194-I OF THE ACT. HENCE, ASSESSEE WAS OBLIGED TO DEDUCT TAX AT SOURCE . SINCE ASSESSEE HAVING NOT I.T.A. NOS.738 TO 741/MUM/2012 25 DEDUCTED SUCH TAX AT SOURCE, IT WAS HELD THAT RIGOR S OF SECTION 201(1) AND 201(1A) ARE ATTRACTED. 15. ON THE OTHER HAND, LD. AR STRONGLY SUPPORTED TH E ORDER(S) OF LD. CIT(A). LD. AR SUBMITTED THAT THE PREMIUM IS PAID FOR OBTAINING T HE LEASE OF LAND. THEREFORE, THE SAID PREMIUM WAS PAID FOR ACQUIRING LEASEHOLD RIGHTS AN D NOT FOR USE OF LAND. THAT SAID PREMIUM PAID DOES NOT FALL UNDER THE DEFINITION OF RENT U/S 194-I OF THE ACT. LD. AR SUBMITTED THAT DELHI BENCH OF THE TRIBUNAL WHILE CONSIDERING THE SIMILAR ISSUE IN THE CASE OF ITO V/S THE INDIAN NEWS PAPERS SOCIETY IN ITS ORDE R DATED 20.6.2013 IN ITA NO.5207/DEL/2012 (AY-2007-08) CONFIRMED THE ORDER OF THE LD. CIT(A) THAT LEASE PREMIUM PAID BY ASSESSEE TO MMRDA CANNOT BE SUBJECTED TO TAX DEDUCTION AT SOURCE U/S 194-I OF THE ACT. HE FILED A COPY OF TH E SAID ORDER OF THE TRIBUNAL AND SUBMITTED THAT THE TRIBUNAL AFTER CONSIDERING THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF A.R.KRISHNAMURTHY (SUPRA) AND THE DEC ISION OF SPECIAL BENCH OF THE TRIBUNAL IN MUKUND LTD (SUPRA) HAS HELD THAT THE PREMIUM PAID ON ACQUISITION OF LEASEHOLD RIGHTS IN LAND CONSTITUTES CAPITAL EXPEND ITURE AND IT DOES NOT CONSTITUTES ADVANCE RENT. LD. AR FURTHER SUBMITTED THAT SIMILA R ISSUE HAS AGAIN COME UP BEFORE THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ITO V/S M/S WADHWA AND ASSOCIATES REALTORS PVT LTD. IN ITA NO.695/MUM/201 2 (AY-2008-09)DATED 3.7.2013 IN WHICH IT HAS BEEN HELD THAT THE LEASE PREMIUM P AID BY THE ASSESSEE TO MMRDA FOR GRANT OF LEASEHOLD RIGHTS IS NOTHING BUT A TRANSACTION OF TRANSFER OF PROPERTY AND THE LEASE PREMIUM IS THE CONSIDERATION FOR THE PURCHASE OF THE SAID LEASEHOLD RIGHT, AFTER CONSIDERING THE DECISION OF THE HONBLE JURI SDICTIONAL HIGH COURT IN THE CASE OF KHIMLINE PUMPS LTD (SUPRA) AND THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MUKUND LTD (SUPRA). LD. AR SUBMITTED THAT T RIBUNAL IN THE CASE OF M/S NATIONAL STOCK EXCHANGE OF INDIA, HONBLE ITAT, MUM BAI IN ITA NO. 1955/M/99, 2181/M/99, 4853/M/04, 4485/M/04, 4854/M/ 04, 356/M/01, 5850/M/00 ALSO CONSIDERED THE SIMILAR ISSUE ON IDENTICAL FAC TS AND HELD THAT CONSIDERATION PAID FOR ACQUIRING LEASEHOLD RIGHTS I N LAND IS A CAPITAL EXPENDITURE AND NOT RENT. LD. AR SUBMITTED THAT THE SAID DECISION OF M /S NATIONAL STOCK EXCHANGE OF INDIA (SUPRA) AND OF MUMBAI BENCH OF THE TRIBUNAL ARE CO NSIDERED BY LD. CIT(A) IN PARAGRAPH 5.44 OF THE IMPUGNED ORDER(S) AND ALSO BY THE TRIBU NAL IN ITS DECISION IN THE CASE OF M/S WADHWA AND ASSOCIATES REALTORS PVT LTD. (SUPRA) TO HOLD THAT PROVISIONS OF SECTION 194-I DO NOT APPLY TO THE PAYMENT FOR ACQUIRING LEA SEHOLD LAND AS IT IS A CAPITAL EXPENDITURE. LD. AR SUBMITTED THAT ISSUE IS SQUAREL Y COVERED IN FAVOUR OF THE ASSESSEE BY AFORESAID DECISIONS OF THE TRIBUNAL WHICH HAVE BEEN DECIDED BY FOLLOWING THE I.T.A. NOS.738 TO 741/MUM/2012 26 DECISIONS OF THE HONBLE APEX COURT AND THE DECISIO NS OF JURISDICTIONAL HIGH COURT AS WELL AS OTHER HIGH COURTS(SUPRA). THEREFORE, THE DECISION OF THE LD. CIT(A) IS RIGHT AND THE SAME MAY BE CONFIRMED. 16. LD. DR IN HIS REJOINDER SUBMITTED THAT THE SAID DECISIONS RELIED UPON BY THE LD. AR (SUPRA) ARE DISTINGUISHABLE AS THE SAME HAVE BEE N DECIDED ON THE ISSUE AS TO WHETHER PAYMENT MADE BY THE ASSESSEE UNDER LEASE AG REEMENT IS A CAPITAL EXPENDITURE OR NOT. THEREFORE, THE SAID DECISIONS ARE NOT APPL ICABLE TO CONSIDER THE QUESTION AS TO WHETHER LEASE PREMIUM PAID BY THE ASSESSEE TO ACQUI RE LEASE LAND COULD BE CONSIDERED AS RENT U/S 194-I OF THE ACT OR NOT. 17. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES, ORDERS OF THE AUTHORITIES BELOW AND THE CA SES RELIED UPON (SUPRA). WE HAVE ALSO CAREFULLY CONSIDERED THE PROVISIONS OF SECTION 194-I WHICH DEAL WITH THE PROVISIONS FOR DEDUCTION OF INCOME TAX AT SOURCE FROM INCOME B Y WAY OF RENT. THE EXPLANATION (I) TO SECTION 194-I OF THE ACT DEFINES THE EXPRESSION RENT. IT IS WORTHWHILE AND RELEVANT TO STATE SECTION 194-I WHICH IS A SUBJECT MATTER OF DISPUTE. IT READS AS UNDER : [RENT. 194-I. ANY PERSON, NOT BEING AN INDIVIDUAL OR A HIN DU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO [A RESIDENT] ANY I NCOME BY WAY OF RENT, SHALL, AT THE TIME OF CREDIT OF SUCH INCOME T O THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, [DEDUCT INCOME-TAX THEREON AT THE RATE OF [(A) TWO PER CENT FOR THE USE OF ANY MACHINERY OR PLANT OR EQUIPMENT; AND (B) TEN PER CENT FOR THE USE OF ANY LAND OR BUILDI NG (INCLUDING FACTORY BUILDING) OR LAND APPURTENANT TO A BUILDING (INCLUD ING FACTORY BUILDING) OR FURNITURE OR FITTINGS:]] PROVIDED THAT NO DEDUCTION SHALL BE MADE UNDER THIS SECTION WHERE THE AMOUNT OF SUCH INCOME OR, AS THE CASE MAY BE, THE A GGREGATE OF THE AMOUNTS OF SUCH INCOME CREDITED OR PAID OR LIKELY T O BE CREDITED OR PAID DURING THE FINANCIAL YEAR BY THE AFORESAID PERSON T O THE ACCOUNT OF, OR TO, THE PAYEE, DOES NOT EXCEED [ONE HUNDRED AND EIG HTY THOUSAND RUPEES] : [PROVIDED FURTHER THAT AN INDIVIDUAL OR A HINDU UN DIVIDED FAMILY, WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LI MITS SPECIFIED UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURI NG THE FINANCIAL YEAR I.T.A. NOS.738 TO 741/MUM/2012 27 IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH S UCH INCOME BY WAY OF RENT IS CREDITED OR PAID, SHALL BE LIABLE TO DED UCT INCOME-TAX UNDER THIS SECTION.] EXPLANATION.FOR THE PURPOSES OF THIS SECTION, [(I) 'RENT' MEANS ANY PAYMENT, BY WHATEVER NAME C ALLED, 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 FACT ORY BUILDING); OR (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, WHETHER CALLED 'SUSPENSE ACCOUNT' OR BY ANY OTHER NAME, IN THE BOO KS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH INCOME, SUCH CREDITIN G SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYE E AND THE PROVISIONS OF THIS SECTION SHALL APPLY ACCORDINGLY.] 18. ON PERUSAL OF THE EXPLANATION, WE AGREE WITH TH E LD. DR THAT THE WORD RENT AS DEFINED U/S 194-I HAS A WIDE MEANING THAN THE RENT IN COMMON PARLANCE. 19. IN THE CASE BEFORE US, THE ASSESSEE HAS ENTERED IN TO LEASE AGREEMENTS WITH CIDCO FOR ACQUISITION OF LEASEHOLD RIGHTS IN THE L AND TO DEVELOP AND OPERATE THE SPECIAL ECONOMIC ZONE AT NAVI MUMBAI. ASSESSEE HAS PAID P REMIUM FOR DEMISED LEASE LAND. THE QUESTION BEFORE US IS AS TO WHETHER THE SAID LE ASE PREMIUM PAID BY THE ASSESSEE TO CIDCO TO ACQUIRE LEASEHOLD RIGHTS FOR 60 YEARS UNDE R THE LEASE DEED(S) IS LIABLE FOR DEDUCTION OF TAX AT SOURCE BEING RENT WITHIN THE M EANING OF SECTION 194-I OF THE ACT OR NOT. AO HAS STATED THAT THE SAID PAYMENT MADE BY ASSESSEE UNDER LEASE AGREEMENTS QUALIFIES FOR RENT FOR THE PURPOSE OF SECTION 194-I OF THE ACT AS IT PARTAKES ALL THE CHARACTERISTICS OF RENT AND WHEREAS THE ASSESSEE H AS CONTENDED THAT THE ASSESSEE HAS OBTAINED LEASEHOLD RIGHTS IN THE SAID LEASEHOLD LAN DS ON PAYMENT OF LEASE PREMIUM AND THE SAID LEASE PREMIUM IS NOT PAID UNDER A LEASE. HENCE, IT IS A CAPITAL EXPENDITURE AND NOT AN ADVANCE RENT. WE OBSERVE THAT THE MAIN THRUST OF THE AO TO HOLD THE PREMIUM PAID BY ASSESSEE TO HOLD IT AS RENT IS ON THE DEFINITION OF RENT UNDER SECTION 194-I OF THE ACT THAT IT CREATES A LEGAL FICTION AND THE LEASE DEED(S) ENTERED INTO CONTAIN VARIOUS RESTRICTIVE COVENANTS. THAT THE SA ID PAYMENTS IN SUBSTANCE ARE FOR I.T.A. NOS.738 TO 741/MUM/2012 28 CONSIDERATION FOR USE OF LAND UNDER THE LEASE DEED( S), HENCE PROVISIONS OF SECTION 194-I OF THE ACT IS ATTRACTED. 20. ON THE OTHER HAND, WE OBSERVE THAT GOVERNMENT OF MAHARASHTRA APPOINTED CIDCO AS THE NODAL AGENCY FOR SETTING UP OF SPECIA L ECONOMIC ZONE AT NAVI MUMBAI NMSEZ. THAT THE ASSESSEE HAS BEEN JOINTLY PROMOT ED AS A SPECIAL PURPOSE 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 CIDCO ENTERED INTO DEVELOPMENT AGREEMENT AND THE ASSESSE E IS REQUIRED TO MAKE PAYMENT OF LEASE PREMIUM IN RESPECT OF THE LAND WHICH WAS BEIN G ACQUIRED BY CIDCO AND BEING ALLOTTED TO ASSESSEE FROM TIME TO TIME. AS PER DE VELOPMENT AGREEMENT, THE ASSESSEE IS TO DEVELOP AND MARKET NMSEZ. THERE IS NO DISP UTE TO THE FACT THAT THE ASSESSEE HAS ACQUIRED LEASEHOLD RIGHT IN THE LAND FOR THE PU RPOSE OF DEVELOPING, DESIGNING, PLANNING, FINANCING, MARKETING, DEVELOPING NECESSAR Y INFRASTRUCTURE, PROVIDING NECESSARY SERVICES, OPERATING AND MAINTAINING INFRA STRUCTURE ADMINISTRATING AND MANAGING SEZ. BY VIRTUE OF SAID LEASE DEED(S), THE ASSESSEE HAS ACQUIRED THE RIGHTS TO DETERMINE, LEVY, COLLECT, RETAIN, UTILIZE USER C HARGES FEE FOR PROVISION OF SERVICES AND /OR TARIFFS IN ACCORDANCE WITH TERMS AND CONDITIONS PROVIDED IN THE DEVELOPMENT AGREEMENT AND THE LEASE DEED (S) ENTERED INTO. THE REFORE, WE AGREE WITH LD. CIT(A) THAT LEASE DEED(S) AND THE DEVELOPMENT AGREEMENT H AVE ASSIGNED TO THE ASSESSEE LEASEHOLD RIGHT WHICH INCLUDES BUNDLE OF RIGHTS. T HE ASSESSEE HAS PAID THE PREMIUM FOR LEASE DEED(S) FOR THE DEMISED LAND TO ACQUIRE ENTI RE RIGHTS OF THE LAND FOR A PERIOD OF 60 YEARS. THEREFORE, WE ARE OF THE CONSIDERED VIE W THAT THE SAID PAYMENT OF LEASE PREMIUM IS A PAYMENT FOR ACQUISITION OF LEASEHOLD LAND AND NOT MERELY FOR USE OF LAND. THE ASSESSEE HAS MADE PAYMENT FOR ENTERING INTO LEASE AGREEMENTS TO ACQUIRE LEASE HOLD RIGHTS IN THE LAND FOR A PERIOD OF 60 YE ARS AND NOT UNDER A LEASE. SIMILAR ISSUE CAME UP BEFORE THE SPECIAL BENCH ITAT MUM BAI IN THE CASE OF MUKUND LTD. (SUPRA). THE ASSESSEE ACQUIRED A LAND ON LEASE FO R A PERIOD OF 99 YEARS FROM THE MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION (MI DC) AND PAID RS.2.04 CRORES AS PREMIUM OF LEASEHOLD LAND AND APART FROM FIXING AN NUAL RENT AT RS.1 PER ANNUM. THE ASSESSEE CLAIMED THAT THE SAID PREMIUM ON LEASEHOLD LAND IS A REVENUE EXPENDITURE, WHICH WAS DISALLOWED BY THE AO HOLDING IT AS A CAPI TAL IN NATURE. LD. CIT(A) HELD THAT THE PREMIUM CANNOT BE TREATED AS CAPITAL EXPENDITUR E AS THE ASSESSEE DID NOT ACQUIRE OWNERSHIP OF LAND. IT WAS HELD THAT IT WAS AN EXPE NDITURE RELATABLE TO 99 YEARS AND SHOULD BE ALLOWED ON PROPORTIONATE BASIS. HOWEVER, ON FURTHER APPEAL TO THE TRIBUNAL, THE TRIBUNAL HELD THAT THE BENEFIT CONFERRED ON TH E ASSESSEE ON LEASE HOLD RIGHTS IN 99 I.T.A. NOS.738 TO 741/MUM/2012 29 YEARS AGAINST LUMP SUM PAYMENT OF THE PREMIUM WAS O F AN ENDURING NATURE. IT WAS HELD THAT THERE WAS NO MATERIAL ON RECORD TO SUGGES T THAT THE SUM OF RS.2.04 CRORES HAD BEEN PAID BY WAY OF ADVANCE RENT NOR THERE WAS ANY PROVISION FOR ITS ADJUSTMENT TOWARDS RENT OR FOR ITS RE-PAYMENT TO THE ASSESSEE. IT WAS HELD THAT THE CONSIDERATION PAID BY THE ASSESSEE WAS CAPITAL EXPENDITURE AND AC CORDINGLY THE ISSUE WAS DECIDED AGAINST THE ASSESSEE. 21. IN THE CASE BEFORE US ALSO THE ASSESSEE HAS PAI D LEASE PREMIUM TO ACQUIRE THE DEMISED LEASEHOLD LAND AND THERE IS NO MATERIAL ON RECORD THAT THE SAID LEASE PREMIUM PAID BY THE ASSESSEE IS REFUNDABLE TO THE ASSESSEE AND/OR IS IN THE NATURE OF ADVANCE RENT OR MERELY FOR USE OF LAND. WE OBSERVE THAT T HE TERM RENT THOUGH HAS BEEN DEFINED IN SECTION 194-I OF THE ACT, BUT OTHER TER MS LIKE, LEASE, LEASE PREMIUM, LESSOR AND LESSEE ETC HAVE NOT BEEN DEFINED UNDER THE INCO ME TAX ACT. THE LD. CIT(A) HAS RIGHTLY STATED IN THE IMPUGNED ORDER THAT THE MEANI NG OF THESE TERMS AS PROVIDED IN THE TRANSFER OF PROPERTY ACT, 1882 HAVE TO BE CONS IDERED. THE TERM LEASE IS DEFINED UNDER SECTION 105 OF TRANSFER OF PROPERTY ACT, 188 2 AS 'A LEASE OF IMMOVEABLE PROPERTY IS A TRANSFER OF A RIGHT TO ENJOY SUCH PRO PERTY, MADE FOR A CERTAIN TIME, EXPRESS OR IMPLIED, OR IN PERPETUITY, IN CONSIDERATION OF A PRICE PAID OR PROMISED, OR OF MONEY, A SHARE OF CROPS, SERVICE OR ANY OTHER THING OF VALUE , TO BE RENDERED PERIODICALLY OR ON SPECIFIED OCCASIONS TO THE TRANSFEROR BY THE TRANSF EREE, WHO , ACCEPTS THE TRANSFER ON SUCH TERMS. IN THE CASE OF LEASE PRICE IS CALLED THE PREMIUM, AND THE MONEY, SHARE, SERVICE OR ANY OTHER THING TO BE RENDERED IS CAL LED THE RENT; THE TRANSFEROR IS CALLED LESSOR AND THE TRANSFEREE IS CALLED LESSEE. 21.1 THEREFORE, THE ABOVE SECTION BRINGS OUT THE DI STINCTION BETWEEN PRICE PAID FOR A TRANSFER OF RIGHT TO ENJOY THE PROPERTY AND THE REN T TO BE PAID PERIODICALLY TO THE LESSOR. WHEN THE INTEREST OF THE LESSOR IS PARTED WITH FOR A PRICE, THE PRICE PAID IS CALLED LEASE PREMIUM OR SALAMI. BUT THE PERIODICAL PAYMENTS MAD E FOR THE CONTINUOUS ENJOYMENT OF THE BENEFIT UNDER THE LEASE ARE IN THE NATURE OF R ENT. THE HONBLE APEX COURT HAS HELD IN THE CASE OF A.R. KRISHNAMURTHY (SUPRA) THAT LEAS E OF LAND IS TRANSFERRED OF INTEREST IN THE LAND AND CREATES A RIGHT IN REM : AND THERE IS A TRANSFER OF TITLE IN FAVOUR OF THE LESSEE THOUGH THE LESSOR HAS THE RIGHT OF REVERSION AFTER THE PERIOD OF LEASE TERMINATES. IT WAS HELD THAT GRANT OF MINING LEASE AT A PREMIUM IS A CAPITAL ASSET. THE HONBLE DELHI HIGH COURT ALSO BROUGHT OUT THE DIFFERENCE B ETWEEN THE AMOUNT PAYABLE FOR I.T.A. NOS.738 TO 741/MUM/2012 30 ACQUIRING LEASE HOLD RIGHTS AS PREMIUM AND THE AMOU NT WHICH WOULD BE PAYABLE FOR USE OF ASSETS AS RENT IN BHARAT STEEL TUBES LTD V/S CIT (2001) 252 ITR 622( DEL). THEIR LORDSHIPS HAVE HELD THAT WHEN THE PREMIUM I S PAID AT THE BEGINNING OF THE MINING LEASE FOR A LONG PERIOD, ORDINARILY REPRES ENTS THE PURCHASE OF AN OUT AND OUT SALE OF THE PROPERTY AND THE SUM RECEIVED IS CAPITA L AND NOT INCOME, BUT RENT OR ROYALTY PAID PERIODICALLY IS INCOME. IT WAS HELD THAT T HE PRINCIPLE IS THE SAME, WHETHER THE PREMIUM IS FOR A SIMPLE LEASE OF LAND OR FOR A LE ASE OF MINERAL RIGHTS. THEREFORE, WHEN THE INTEREST OF THE LESSEE IS PARTED WITH FOR A PR ICE, THE PRICE PAID IS PREMIUM OR SALAMI. BUT THE PERIODICAL PAYMENTS MADE FOR THE CONTINUOUS ENJOYMENT OF THE BENEFITS UNDER THE LEASE ARE IN THE NATURE OF RENT. THAT THE FOR MER IS CAPITAL AND THE LATER IS REVENUE IN NATURE. THEIR LORDSHIPS OF THE HONBLE DELHI HI GH COURT STATED THAT RENT IS ALLOWABLE AS DEDUCTION U/S 30 OF THE ACT. IT IS STATED THA T SECTION 105 OF THE TRANSFER OF PROPERTY ACT, 1882 ALSO MAKE A DISTINCTION BETWEEN THE RENT AND PREMIUM PAYABLE UNDER LEASE. WHEN THE INTEREST OF THE LESSOR IS CHARGED WITH FOR A PRICE, THE PRICE PAID IS PREMIUM OR SALAMI BUT THE PERIODICAL PAYMENT MADE F OR THE CONTINUOUS ENJOYMENT OF THE BENEFITS UNDER LEASE ARE IN THE NATURE OF RENT. THEIR LORDSHIPS HELD THAT FORMAL IS CAPITAL AND LATER IS REVENUE IN NATURE. A SIMILAR ISSUE ALSO CAME UP BEFORE THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF KHIMLINE PUMPS LTD (SUPRA). IN THE SAID CASE OPEN PLOT OF LAND WAS LEASED OUT TO APVE LTD, A CO MPANY FOR A PERIOD OF 95 YEARS ON PAYMENT OF A PREMIUM OF RS.1,62,400/- AND YEARLY R ENT OF RS.1. IN THE LEASE, THE COMPANY HAD, AT THE END OF 95 YEARS TO DELIVER A VACANT POSSESSION OF THE LAND. THE COMPANY WAS ENTITLED TO REMOVE ANY BUILDING, ERECTI ONS OR STRUCTURES PUT UP BY IT ON THE LAND. THE COMPANY HAD ERECTED BUILDING, PLANT AND MACHINERY THEREON. APVE LTD. WERE TO BE WOUND UP AND ITS ASSETS WERE SOLD UNDE R DIRECTION OF HONBLE HIGH COURT. THE ASSESSEE COMPANY OFFERED RS. 75 LAKHS OF WHICH THE AO HELD THAT RS.45 LAKHS RELATED TO ACQUISITION OF LEASE HOLD LAND. BUT THAT AMOUNT COULD NOT BE DEDUCTED AS IT WAS CAPITAL EXPENDITURE. THE TRIBUNAL HELD IT WAS CAPITAL EXPENDITURE, BUT WITHOUT GIVING REASONS, HELD THAT SINCE BENEFIT OF THE EXP ENDITURE WOULD BE EXISTED IN 71 YEARS, A PROPORTIONATE AMOUNT RELATABLE TO EACH YEAR VIZ R S.63,380/- MIGHT BE ALLOWED AS DEDUCTION ON ACCOUNT OF PAYMENT OF RENT. ON APPEAL TO THE HONBLE HIGH COURT THE HONBLE JURISDICTIONAL HIGH COURT AGREED WITH THE AO THAT RS.45 LAKHS WAS A CAPITAL EXPENDITURE. THEREFORE THE TRIBUNAL COULD NOT DIR ECT THE DEPARTMENT TO APPORTION THE AMOUNT OVER A PERIOD OF 71 YEARS. THEIR LORDSHIPS HELD THAT IN ORDER TO ASCERTAIN TRUE CHARACTER AND PURPORT OF THE PAYMENT THE COURT HAS TO GO BY THE SUBSTANCE OF TRANSACTION AND NOT BY MANNER IN WHICH THE ASSESSEE ALLOCATES THE ITEMS FOR ACCOUNTING PURPOSES. I.T.A. NOS.738 TO 741/MUM/2012 31 21.2 WE OBSERVE THAT IN THE CASE BEFORE US, THERE IS A TRANSFER OF SUBSTANTIVE INTEREST OF LESSOR FOR THE LEASEHOLD LAND IN FAVOUR OF THE ASSESSEE. THAT THERE IS A CONFERMENT OF RIGHT ON THE LESSEE BY ACQUIRING LEAS EHOLD LAND AND THE PREMIUM HAS BEEN PAID IN LIEU THEREOF AND NOT FOR THE PURPOSE OF USE OF LAND. THE CASE CITED BY THE LD. CIT(A) OF RAJA BAHADUR KAMAKHYA NARAIN SINGH OF RAM GARH (SUPRA) AND THE CASE OF THE HONBLE APEX COURT IN THE CASE OF PANBARI TEA CO. LTD. OF INDIA (SUPRA) SQUARELY APPLY TO THE FACTS OF THE CASE BEFORE US THAT THE L EASE PREMIUM PAID BY THE ASSESSEE TO CIDCO FOR ACQUIRING LEASEHOLD LAND IS CAPITAL E XPENDITURE TO ACQUIRE CAPITAL ASSET AND NOT FOR THE USE OF LAND. THEREFORE, WE AGREE WITH LD. AR THAT THE LEASE PREMIUM PAID BY THE ASSESSEE FOR ACQUIRING LEASEHOLD LAND WITH A RIGHT TO DEVELOP AND MARKET, NMSEZ, CANNOT BE SAID TO BE AN ADVANCE PAYMENT OF RENT. ACCORDINGLY, PREMIUM PAID BY THE ASSESSEE FOR ACQUIRING LEASEHOLD LAND UNDER THE LEA SE DEED(S) ENTERED INTO, ALTHOUGH WITH RESTRICTIVE COVENANTS IS A CAPITAL EXPENDITURE , AND IT DOES NOT FALL WITHIN THE AMBIT OF RENT UNDER SECTION 194-I OF THE ACT. 21.3 WE OBSERVE THAT SIMILAR ISSUE HAS ALSO BEEN C ONSIDERED RECENTLY BY THE MUMBAI BENCH OF TRIBUNAL VIDE ORDER DATED 3.7.2013 (SUPRA) IN THE CASE OF M/S WADHWA AND ASSOCIATES REALTORS PVT LTD.(SUPRA) AND THE TRIBUN AL VIDE PARA 5 OF THE SAID ORDER HAS HELD THAT THE LD. CIT(A) IS JUSTIFIED TO HOLD THAT THE WHOLE TRANSACTION TOWARDS GRANT OF LEASEHOLD TRANSACTION RIGHT TO THE ASSESSEE IS NOT HING BUT A TRANSACTION OF TRANSFER OF PROPERTY AND THE LEASE PREMIUM IS THE CONSIDERATION FOR THE PURCHASE OF SAID LEASEHOLD RIGHTS. IT IS RELEVANT TO STATE THAT THE TRIBUNAL IN THE ABOVE ORDER HAS ALSO CONSIDERED THE DECISION OF THE HONBLE CALCUTTA HIGH COURT, A ND THE DECISION OF KARNATAKA HIGH COURT (SUPRA) ON WHICH THE AO HAS PLACED RELIANCE . WE CONSIDER IT PRUDENT TO STATE PARA 5 OF THE SAID ORDER OF THE TRIBUNAL WHICH REA DS AS UNDER : 5. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS AND THE NATURE OF TRANSACTION, THE LD. CIT(A) OBSERVED THAT THE AMOUNT CHARGED BY MMRD AS LEASE PREMIUM IS EQUAL TO THE R ATE PREVALENT AS PER STAMP DUTY RECOVERY FOR ACQUISITIO N OF THE COMMERCIAL PREMISES. THESE RATES ARE PRESCRIBED FO R TRANSFER OF PROPERTY AND NOT FOR THE USE AS LET OUT TENANTED P ROPERTY. THE LD. CIT(A) FURTHER OBSERVED THAT EVEN THE ADDITIONA L FSI GIVEN FOR ADDITIONAL CHARGES AS PER READY RECKONER RATES ONLY. IT IS THE FINDING OF THE LD. CIT(A) THAT THE WHOLE TRANSA CTION TOWARDS GRANT OF LEASEHOLD TRANSACTION RIGHTS TO THE ASSESS EE IS NOTHING BUT A TRANSACTION OF TRANSFER OF PROPERTY AND THE L EASE PREMIUM IS THE CONSIDERATION FOR THE PURCHASE OF THE SAID L EASEHOLD RIGHTS. THE LD. CIT(A) WENT ON TO DISCUSS THE JUDICIAL DECI SIONS RELIED UPON BY THE AO OF HONBLE CALCUTTA AND KARNATAKA HI GH COURT AND OBSERVED THAT BOTH THE DECISIONS PERTAIN TO THE SAME ISSUE I.T.A. NOS.738 TO 741/MUM/2012 32 I.E. WHETHER LEASE PREMIUM WAS A REVENUE OR A CAPIT AL EXPENDITURE. THE LD. CIT(A) ALSO DISCUSSED THE DECI SION IN THE CASE OF RAJA BAHADUR KAMAKSHYA NARAIN SINGH OF RAMG ARH V. COMMISSIONER OF INCOME-TAX 11 ITR 513 PC WHEREIN IT HAS BEEN HELD THAT THE PAYMENT WHICH UNDER THE LEASE IS EXIG IBLE BY THE LESSER MAY BE CLASSED UNDER 3 CATEGORIES (1) PREMI UM OR SALARY (2) THE MINIMUM ROYALTY AND (3) THE ROYALTY PER TON . THE SALAMI HAVE BEEN RIGHTLY TREATED AS CAPITAL RECEIPT. IT I S A SINGLE PAYMENT MADE FOR THE ACQUISITION OF THE RIGHT OF TH E LESSEES TO ENJOY THE BENEFITS GRANTED BOTH BY THE LEASE. THE LD. CIT(A) HAS ALSO CONSIDERED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MEMBER FOR THE BOARD OF AGRICULTURAL INCOME TAX, ASSAM VS SINDHURANI CHAUDHRANI & ORS 32 ITR 169 WHEREIN I T HAS BEEN HELD THAT SALAMI IS IN THE FORM OF A LUMP SUM NON R ECURRING PAYMENT MADE BY A PROSPECTIVE TENANT TO THE LANDLOR D AS A CONSIDERATION AND IS PAID ANTERIOR TO THE CONSTITUT ION OF RELATIONSHIP OF LANDLORD AND TENANT, IT IS NOT REN T WITHIN THE MEANING OF THE WORD USED IN THE DEFINITION OF AGRI CULTURAL INCOME IN SECTION 2(1)(A) OF THE I.T. ACT. IT HAS ALL THE CHARACTERISTICS OF A CAPITAL PAYMENT AND IT IS NOT REVENUE. THE LD. CIT(A) FURTHER DISCUSSED CERTAIN OTHER JUDICIA L DECISIONS AND IN PARTICULAR THE DECISION OF THE HONBLE JURISDICT IONAL HIGH COURT IN THE CASE OF CIT VS KHIMLINE PUMPS LTD., 258 I TR 459 WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT AN AMOUNT OF RS. 45 LAKHS PAID BY THE ASSESSEE TO M /S. APVE LTD., FOR ACQUISITION OF LEASEHOLD LAND WAS A CAPITAL EXP ENDITURE AND HENCE THE SAME WAS NOT DEDUCTIBLE. THE LD. CIT(A) HAS FURTHER CONSIDERED THE DECISION OF THE SPECIAL BENCH OF MUM BAI TRIBUNAL IN THE CASE OF JCIT VS MUKUND LTD. 106 ITD 231 WHE REIN THE ISSUE WAS WHETHER THE PREMIUM PAID FOR ACQUIRING LE ASEHOLD RIGHT IN LAND IS REVENUE OR CAPITAL . THE SPECIAL BENCH HAS HELD THAT THE SAME IS CAPITAL EXPENDITURE. 5.2. THE LD. CIT(A) HAS DISTINGUISHED THE FACTS OF THE CASES RELIED UPON BY THE AO AT PAGE-53 PARA 5.39 OF HIS O RDER AND AFTER DISTINGUISHING THE CASES CAME TO THE CONCLUSION THA T IN NONE OF THESE CASES, THE ISSUE OF LEASE PREMIUM AS IN THE CASE OF THE ASSESSEE VIS--VIS RENT HAS BEEN CONSIDERED. AT PARA 5.41 OF HIS ORDER AT PAGE-54, THE LD. CIT(A) SAYS THAT I HAVE ALSO CONSIDERED THE OTHER CASES RELIED UPON THE AO. THE SE CASES LAY DOWN GENERAL PRINCIPLES OF INTERPRETATION OF LAW. I FIND THAT NONE OF THE ABOVE CASES THE COURT HAS HELD THAT THE LEASE PREMIUM IN SIMILAR CIRCUMSTANCES IS IN THE NATURE OF ADVANCE RENT AND HENCE LIABLE FOR DEDUCTION OF TDS U/S. 194 -I OF THE ACT. THE CASES RELIED UPON BY THE AO ARE THUS DISTINGUIS HABLE ON FACTS AND IN LAW AND THE SAME CANNOT BE MADE APPLICABLE T O THE FACTS OF THE PRESENT CASE WHERE THE ISSUE RAISED IS COMPL ETELY DIFFERENT. 5.3. THE LD. CIT(A) FINALLY CONSIDERED THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. NATIONAL STOCK EXCHAN GE OF INDIA LTD. IN ITA NOS. 1955/M/99, 2181/M/99, 4853/M/04, 4485/M/04, 4854/M/04, 356/M/01AND 5850/M/00. AT P ARA 5.45 OF HIS ORDER ON PAGE 57, THE LD. CIT(A) HAS GI VEN A I.T.A. NOS.738 TO 741/MUM/2012 33 COMPARATIVE CHART OF THE FACTS IN THE CASE OF THE A SSESSEE AND THAT IN THE CASE OF NSE AND AFTER COMPARING THE FAC TS FINALLY CONCLUDED THAT THE FACTS OF THE CASE OF THE NSE ARE IDENTICAL TO THE FACTS OF THE CASE OF THE ASSESSEE AND OBSERVED THAT IN THE CASE OF NSE, THE STAND OF THE DEPARTMENT AS WELL AS THE DECISION OF THE TRIBUNAL WAS THAT THE CONSIDERATION PAID FO R ACQUIRING LEASEHOLD RIGHTS IN LAND IS A CAPITAL EXPENDITURE A ND NOT RENT. 5.4. THE LD. CIT(A) FINALLY CONCLUDED THAT THE AMOU NT PAID BY THE ASSESSEE IS LEASE PREMIUM FOR ACQUIRING LEASEHO LD RIGHTS AND ADDITIONAL FSI IN RESPECT OF THE LEASED PLOT AND TH E SAME IS NOT IN THE NATURE OF RENT AS CONTEMPLATED U/S. 194-1 OF TH E ACT. ACCORDINGLY, THE ASSESSEE WAS NOT REQUIRED TO DEDUC T TAX AT SOURCE U/S. 194-1 OF THE ACT AND DELETED THE DEMAN D RAISED BY THE ASSESSEE. 21.4 SIMILAR ISSUE HAS COME UP BEFORE THE DELHI B ENCH OF THE TRIBUNAL IN THE CASE OF THE INDIAN NEWS PAPERS SOCIETY (SUPRA) AND THE TRI BUNAL HAS HELD THAT THE LEASE PREMIUM PAID BY THE ASSESSEE TO MMRDA DOES NOT FAL L UNDER SECTION 194-I OF THE ACT AND THEREFORE THE PROVISIONS OF SECTION 201(1) OF T HE ACT DOES NOT APPLY BECAUSE THE SAID LEASE PREMIUM WAS CAPITAL EXPENDITURE TO ACQUI RE LAND ON LEASE WITH SUBSTANTIAL RIGHT TO CONSTRUCT AND COVER THE BUILDING COMPLEX. 22. DURING THE COURSE OF HEARING LD. DR SUBMITTED THAT THE ABOVE DECISIONS OF ITAT, DELHI BENCH AND ITAT MUMBAI BENCH (SUPRA) ARE DISTI NGUISHABLE. WHEREAS THE DECISION OF ITAT, CHENNAI BENCH IN THE CASE OF FOXCONN IND IA DEVELOPERS PVT.LTD (SUPRA) SHOULD BE CONSIDERED AND BE FOLLOWED . WE OBSERVE THAT THE SAID DECISION OF ITAT HAS BEEN CONSIDERED BY THE LD. CIT(A) IN PARA 5.40 OF THE IM PUGNED ORDER. ON PERUSAL OF THE SAID ORDER OF ITAT, CHENNAI BENCH, WE OBSERVE THAT IN THE SAID ORDER OF CHENNAI BENCH ONLY THE PROVISIONS OF SECTION 194-I HAS BEEN CONSI DERED IN RESPECT OF UPFRONT CHARGES PAID IN RESPECT OF LEASE OF LAND FOR A PERIOD O F 99 YEARS. ON PERUSAL OF THE FACTS OF THE CASE, IT IS OBSERVED THAT THE ASSESSEE HAD ALRE ADY ENTERED INTO LEASE AGREEMENTS AND THE SAID PAYMENT WAS MADE TO SIPCOT LTD UNDER L EASE AGREEMENT. THEREFORE, THE SAID PAYMENT IS FOR LEASE OR USE OF LAND AND ACCORD INGLY THE PAYMENT COULD NOT BE SAID TO HAVE BEEN MADE FOR ACQUIRING LEASEHOLD LAND AND HENCE, IT IS OBSERVED THAT THE CHENNAI BENCH HAS HELD THAT THE PAYMENT BY THE ASSE SSEE COMPANY TO CIDCO IS RENT U/S 194-I OF THE ACT. THEREFORE, WE ARE OF THE CON SIDERED VIEW THAT THE ABOVE DECISION OF ITAT CHENNAI BENCH (SUPRA) RELIED UPON BY LD. 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 BEEN HELD THAT THE PREMIUM PAID FOR ACQUIRING LEASE HOLD RIGHT IN LAND IS A CA PITAL EXPENDITURE. THE SPECIAL BENCH I.T.A. NOS.738 TO 741/MUM/2012 34 DECIDED THE ISSUE AFTER CONSIDERING THE VARIOUS JUD GMENTS OF THE HONBLE JURISDICTIONAL HIGH COURT, HONBLE APEX COURT, VARIOUS DECISIONS O F THE TRIBUNAL AS DISCUSSED HEREINABOVE WHICH HAVE DISTINGUISHED BETWEEN THE LE ASE PREMIUM AND RENT UNDER THE INCOME TAX ACT. THE HONBLE APEX COURT HAS HELD IN THE CASE OF ENTERPRISING ENTERPRISES V/S DCIT (2007) 293 ITR 437 (SC) THAT THE ASSESSEE WHICH HAD TAKEN A QUARRY ON LEASE, THE LEASE RENT PAID WAS CAPITAL E XPENDITURE AND THE HONBLE HIGH COURT ALSO AFFIRMED THE DECISION OF THE TRIBUNAL. THE H ONBLE APEX COURT WHILE CONFIRMING THE DECISION OF THE HONBLE HIGH COURT HELD THAT P REMIUM FOR LEASE OR ANY LUMPSUM PAYMENT FOR OBTAINING A LEASE FOR A LONG PERIOD IS A PAYMENT FOR ENDURING ADVANTAGE, SO THAT IT IS A CAPITAL EXPENDITURE WHICH IS NOT D EDUCTIBLE . THE HONBLE APEX COURT ALSO CONFIRMED THE DECISION OF HONBLE MADRAS HIGH COUR T THAT EVEN THE ALTERNATE CLAIM FOR PROPORTIONATE DEDUCTION OF THE AMOUNT, PAID DURING THE PERIOD OF LEASE IS NOT ADMISSIBLE. THEREFORE, CONSIDERING THE REASONS AS MENTIONED HER EINABOVE AND THE DECISIONS OF ITAT, MUMBAI BENCH (SUPRA) WHEREIN IT HAS BEEN HELD THAT SINGLE PAYMENT MADE FOR ACQUISITION OF RIGHT OF LEASE TO ENJOY LEASEHOLD RIGHTS IN THE LAND GRANTED TO THE ASSESSEE IS A CAPITAL EXPENDITURE. SIMILARLY, ITAT DELHI BENCH (SUPRA) HAS HELD THAT THE LEASE PREMIUM PAID BY ASSESSEE TO CIDCO IS NOT IN T HE NATURE OF RENT AS CONTEMPLATED U/S 194-I OF THE ACT. HENCE, WE AGREE WITH LD. C IT(A) THAT THE PROVISIONS OF SECTION 194-I OF THE ACT TO DEDUCT TDS ON THE LEASE PREMIUM PAID BY THE ASSESSEE IS NOT ATTRACTED. IN VIEW OF ABOVE, WE UPHOLD THE ORDER (S) OF LD. CIT(A) TO DELETE THE DEMAND RAISED BY THE AO U/S 201(1) AND 201(1A) OF THE ACT BY REJECTING THE GROUNDS OF APPEAL TAKEN BY THE DEPARTMENT. HENCE, THE GROUNDS OF APP EAL TAKEN BY THE DEPARTMENT ARE REJECTED IN ALL THE APPEALS FOR THE ASSESSMENT YEAR S UNDER CONSIDERATION. 23. IN THE RESULT, APPEALS OF THE DEPARTMENT FOR A SSESSMENT YEARS 2006-07 TO 2009- 10 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16TH AUGUST , 2013 ' ) * 16TH AUGUST, 2013 SD /- SD/- ( /SANJAY ARORA) ( . . / /B.R.MITTAL) / ACCOUNTANT MEMBER ' / JUDICIAL MEMBER MUMBAI; * DATED 16/ 08/2013 . . ./ SRL , SR. PS I.T.A. NOS.738 TO 741/MUM/2012 35 * +, -, / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 0 ( ) / THE CIT(A)- 4. 0 / CIT 5. 1 3 , ' 3 , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , / ITAT, MUMBAI
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