Income-tax Officer, V. Gaikwad Vanjari Associates, Pune

ITA 85/PUN/2014

• Counselvise Citation: 8524514 RSA 2014
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 10-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Assessee Lawyers: N O N E
• Keywords: Maximum Marginal Rate; Capital expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 85 / P N/ 20 1 4 ASSESSMENT YEAR : 20 11 - 12 INCOME TAX OFFICER, TDS 1, PUNE VS . GAIKWAD VANJARI ASSOCIATES, S.NO. 18, PLOT NO. 74, KRISHNANAGAR, CHINCHWAD, PUNE - 411019 (APPELLANT) (RESPONDENT) PAN NO. AAGFG8731Q APPELLANT BY: SHRI B.C. MALAKAR RESPONDENT BY: N O N E DATE OF HEARING : 0 4 - 12 - 2014 DATE OF PRONOUNCEMEN T : 15 - 12 - 2014 ORDER PER R.S . PADVEKAR , JM : - IN THIS APPEAL, THE REVENUE HAS CHALLENGED THE IMPUGNED ORDER OF THE LD. CIT(A) - V, PUNE DATED 30 - 10 - 2013 FOR THE A.Y. 20 11 - 12. THE REVENUE HAS TAKEN FOLLOWING GROUND S IN THE APPEAL: 1. THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE DEMAND RAISED OF RS.31,75,625/ - U/S 201(1)/201(1A) OF THE INCOME TAX ACT, 1961 IN RESPECT OF LEASE PREMIUM PAYMENT PAID TO PIMPRI CHINCHWAD NEW TOWSHIP DEVELOPMENT AUTHORITY(PCNTDA). 2. THE LEARNED COMMISSION ER OF INCOME TAX (APPEALS) ERRED IN CONSIDERING THE FACT THAT THE PREMIUM PAID TO PCNTDA IS UPFRONT PAYMENT AS PRE - CONDITION FOR ENTERING IN TO LEASE AGREEMENT. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE DE ED ENTERED INTO BY THE DEDUCTOR WITH PCNTDA WAS NOT A TRANSFER DEED BUT A LEASE DEED AND EXPLANATION TO SECTION 194I CLEARLY STIPULATES THAT ANY PAYMENT BY WHATEVER NAME CALLED UNDER ANY LEASE DEED/AGREEMENT IS TO BE TAKEN AS RENT FOR TDS PURPOSE. 2 ITA NO. 85/PN/2014, GAIKWAD VANJARI ASSOCIATES, PUNE 2. THE F ACTS WHICH ARE R EVEALED FROM THE RECORD AS UNDER. THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF PROMOTERS AND DEVELOPERS OF PROPERTIES. DURING THE COURSE OF TDS VERIFICATION IN THE CASE OF PIMPRI CHINCHWAD NEW TOWN DEVELOPMENT AUTHORITY (PCNTDA) ON 07 - 08 - 2012, IT WAS NOTICED THAT THE ASSESSEE HAD ENTERED INTO LEASE AGREEMENT THROUGH ITS PARTNERS FOR 99 YEARS WITH PCNTDA ON THE TERMS AND CONDITIONS LAID DOWN BY THE LESSOR IN THE LEASE DEED DATED 12 - 07 - 2010 FOR PLOT NO. SDC IN SECTOR 32A AS PER THE TERMS OF LEASE DEED. THE ASSESSING OFFICER REPRODUCED CLAUSE 2 OF THE LEASE DEED AND CAME TO THE CONCLUSION THAT PROVISIONS OF SEC. 194I OF INCOME - TAX ACT ARE APPLICABLE IN RESPECT OF PAYMENT OF RS.2,46,17,250/ - STATED TO HAVE BEEN MADE TO PCNTDA IN RESPECT OF PREMIUM FOR ACQUISITION OF LEASE HOLD RIGHTS FOR 99 YEARS AS THE SAME WAS NOTHING BUT RENT. ACCORDINGLY, HE RAISED DEMAND U/S. 201(1)/201(1A) OF INCOME - TAX ACT AFTER CONFRONTING THE ASSESSEE ON THIS ISSUE. 3. IN SUM AND SUBSTANCE THE ASSESSING OFFICER WAS OF THE OPINION THAT TDS U/S. 194I REQUIRED TO BE DEDUCTED AS WHATEVER WAS PAID BY THE ASSESSEE WAS IN THE NATURE OF THE RENT WITHIN THE MEANING OF SAID SECTION. THE ASSESSEE CHALLENGED THE DEMAND RAISED BY THE ASSESSING OFFICER U/S. 201(1)/201(1A) OF INCOME - TAX ACT BEFORE THE LD. CIT(A) , WHO FOLLOWING THE DECISION OF THE ITAT, MUMBAI IN THE CASE OF M/S. WADHWA & ASSOCIATES REALTORS PVT. LTD. ITA NO. 695/MUM/2012 ORDER DATED 03 - 07 - 2013 AND DECISION IN THE CASE OF SHREE NAMAN HOTELS PVT. LTD., MUMBAI I TA NOS. 686 & 687/MUM/2012 HELD THAT THE PAYMENT MADE BY THE ASSESSEE TOWARDS THE LEASE PREMIUM CANNOT BE SUBJECTED TO THE TDS U/S. 194I OF THE INCOME - TAX ACT. HE, ACCORDINGLY, ALLOWED THE APPEAL FILED BY THE ASSESSEE AND CANCELLED THE DEMAND. NOW, THE R EVENUE IS IN APPEAL BEFORE US. 3 ITA NO. 85/PN/2014, GAIKWAD VANJARI ASSOCIATES, PUNE 4. WE HAVE HEARD THE PARTIES. THERE IS NO DISPUTE ABOUT THE FACT THAT THE ASSESSEE PAID THE LEASE PREMIUM FOR ACQUIRING THE PLOT IN SEC TOR 32A FROM PCMTDA. THIS ISSUE STANDS SQUARELY COVERED BY THE DECISION OF THE ITAT, MUMBAI IN THE CASE OF M/S. WADHWA & ASSOCIATES REALTORS PVT. LTD. (SUPRA). THE OPERATIVE PART OF THE SAID DECISION READS AS UNDER: 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE ORDER OF THE LOWER AUTHORITIES AND THE MATERIAL EVIDENCE BROUGHT O N RECORD IN THE FORM OF PAPER BOOK AND THE JUDICIAL DECISIONS RELIED UPON BY THE RIVAL PARTIES. THE ENTIRE GRIEVANCE REVOLVES AROUND THE PREMIUM PAID BY THE ASSESSEE TO M/S. MMRDA LTD. FOR THE LEASEHOLD RIGHTS ACQUIRED BY THE ASSESSEE THROUGH THE LEASE DEE D DT. 22ND NOVEMBER, 2004. IT IS THE SAY OF THE REVENUE THAT THIS LEASE PREMIUM WAS LIABLE FOR DEDUCTION OF TAX AT SOURCE FAILING WHICH THE ASSESSEE IS TO BE TREATED AS ASSESSEE IN DEFAULT. IT IS THE SAY OF THE ASSESSEE THAT SUCH LEASE PREMIUM IS IN THE NA TURE OF CAPITAL EXPENDITURE AND THEREFORE THERE IS NO QUESTION OF DEDUCTION OF TAX AT SOURCE. FURTHER, THE SAID LEASE PREMIUM DOES NOT COME WITHIN THE PURVIEW OF THE DEFINITION OF RENT AS PROVIDED U/S. 194I OF THE ACT. 10. WE HAVE CAREFULLY PERUSED THE LE ASE DEED AS EXHIBITED FROM PAGE 1 TO 42 OF THE PAPER BOOK. A CAREFUL READING OF THE SAID LEASE DEED TRANSPIRES THAT THE PREMIUM IS NOT PAID UNDER A LEASE BUT IS PAID AS A PRICE FOR OBTAINING THE LEASE, HENCE IT PRECEDES THE GRANT OF LEASE. THEREFORE, BY A NY STRETCH OF IMAGINATION, IT CANNOT BE EQUATED WITH THE RENT WHICH IS PAID PERIODICALLY. A PERUSAL OF THE RECORDS FURTHER SHOW THAT THE PAYMENT TO MMRD IS ALSO FOR ADDITIONAL BUILT UP ARE AND ALSO FOR GRANTING FREE OF FSI AREA, SUCH PAYMENT CANNOT BE EQUA TED TO RENT. IT IS ALSO SEEN THAT THE MMRD IN EXERCISE OF POWER U/S. 43 R.W. SEC. 37(1) OF THE MAHARASHTRA TOWN PLANNING ACT 1966, MRTP ACT AND OTHER POWERS ENABLING THE SAME HAS APPROVED THE PROPOSAL TO MODIFY REGULATION 4A(II) AND THEREBY INCREASED THE FSI OF THE ENTIRE G BLOCK OF BKC. THE DEVELOPMENT CONTROL REGULATIONS FOR BKC SPECIFY THE PERMISSIBLE FSI. PURSUANT TO SUCH PROVISIONS, THE ASSESSEE BECAME ENTITLED FOR ADDITIONAL FSI AND HAS FURTHER ACQUIRED/PURCHASED THE ADDITIONAL BUILT UP AREA FOR CO NSTRUCTION OF ADDITIONAL AREA ON THE AFORESAID PLOT. THUS THE ASSESSEE HAS MADE PAYMENT TO MMRD UNDER DEVELOPMENT CONTROL FOR ACQUIRING LEASEHOLD LAND AND ADDITIONAL BUILT UP AREA. THE 4 ITA NO. 85/PN/2014, GAIKWAD VANJARI ASSOCIATES, PUNE DECISIONS OF THE TRIBUNAL IN THE CASE OF M/S. NATIONAL STOCK EXCHANGE ( SUPRA) AND MUKUND LTD (SUPRA) HAVE BEEN WELL DISCUSSED BY THE LD. CIT(A) IS HIS ORDER. THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF KHIMLINE PUMPS LTD. (SUPRA) SQUARELY AND DIRECTLY APPLY ON THE FACTS OF THE CASE WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT PAYMENT FOR ACQUIRING LEASEHOLD LAND IS A CAPITAL EXPENDITURE. CONSIDERING THE ENTIRE FACTS IN TOTALITY IN THE LIGHT OF THE JUDICIAL DECISIONS VIS - - VIS PROVISIONS OF SEC. 194 - 1, DEFINITION OF RENT AS PROVIDED UNDER THE SAID PROVISION, WE DO NOT FIND ANY REASON TO TAMPER OR INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) WHICH WE CONFIRM. 5. WE, ACCORDINGLY, FOLLOWING THE DECISION IN THE CASE OF M/S. WADHWA & ASSOCIATES REALTORS PVT. LTD. (SUPRA) CONFIRM THE ORDER O F THE LD. CIT(A) AND GROUNDS TAKEN BY THE REVENUE ARE DISMISSED. 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 15 - 12 - 20 1 4 SD/ - SD/ - ( R . K . PAN DA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE , DATED : 15 TH DECEMBER, 20 1 4 RK/PS COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - V, PUNE 4 THE CIT (TDS), PUNE 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER ASSISTA NT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE