Income-tax Officer, V. Dnyanvardhini Pratihthan, Pune

ITA 86/PUN/2014

• Counselvise Citation: 8624514 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: 2012-2013
• Appeal Filed On: 10-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Maximum Marginal Rate; Capital expenditure
• Section: 37(1); 201(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. 8 6 / P N/ 20 1 4 ASSESSMENT YEAR : 20 1 2 - 13 INCOME TAX OFFICER, TDS 1, PUNE VS . DNYANVARDHINI PRATISHTHAN, S. NO. 61/1/15, KATE VASTI, PIMPLE SAUDAGAR, PUNE - 4110 27 (APPELLANT) (RESPONDENT) PAN NO. AAATD9297L APPELLANT BY: SHRI B.C. MALAKAR RESPONDENT BY: SHRI C.H. NANIWADEKAR DATE OF HEARING : 0 4 - 12 - 2014 DATE OF PR ONOUNCEMENT : 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 09 - 10 - 2013 FOR THE A.Y. 20 1 2 - 13. THE REVENUE HAS TAKEN FOLLOWING EFFECTIVE GROUND S IN THE APPEAL: 1. (5). THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE DEMAND RAISED OF RS. 12,17,124/ - 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 COMMISSIONER 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 APPRECIA TING THE FACT THAT THE DEED 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. 8 6 /PN/2014, DNYANVARDHINI P RATISHTHAN, PUNE 2. THE FACTS WHICH ARE R EVEALED FROM THE RECORD AS UNDER. THE ASSESSEE , DNYANVARDHINI PRATISHTHAN IS A TRUST REGISTERED AS EDUCATIONAL TRUST UNDER BOMBAY PUBLIC TRUST ACT AND PIMPRI CHINCHWAD NEW TOWN DEVELOPMENT AUTHORITY (PCNTDA) IS A S TATUTORY BODY ESTABLISHED UNDER THE PROVISIONS OF SEC. 113(2) OF MAHARASHTRA REGIONAL & TOWN PLANNING ACT, 1966 FOR THE PURPOSE OF ESTABLISHING NEW TOWN AROUND PIMPRI CHINCHWAD INDUSTRIAL COMPLEX. DURING THE COURSE OF TDS VERIFICATION IN THE CASE OF PIMPR I CHINCHWAD NEW TOWN DEVELOPMENT AUTHORITY (PCNTDA) ON 07 - 08 - 2012, IT WAS NOTICED THAT THE ASSESSEE HAD ENTERED INTO LEASE AGREEMENT THROUGH ITS SECRETARY FOR 99 YEARS WITH PCNTDA ON THE TERMS AND CONDITIONS LAID DOWN BY THE LESSOR IN THE LEASE DEED DATED 1 6 - 03 - 2012 FOR PLOT NO. PS3 IN SECTOR 18 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. 1,12 ,69,665/ - STATED TO HAVE BEEN MADE IN RESPECT OF PREMIUM FOR ACQUISITION OF LEASE HOLD RIGHTS FOR 99 YEARS AS THE SAME WAS NOTHING BUT RENT. THE ASSESSING OFFICER RAISED DEMAND U/S. 201(1)/201(1A) OF INCOME - TAX ACT . IN SUM AND SUBSTANCE THE ASSESSING OF FICER WAS OF THE OPINION THAT AS PER THE TERMS OF THE LEASE DEED ENTERED INTO BETWEEN THE ASSESSEE AND PIMPRI CHINCHWAD NEW TOWN DEVELOPMENT AUTHORITY (PCNTDA) WAS COVERED BY THE DEFINITION OF RENT AS PER THE PROVISO OF SEC. 194I OF THE INCOME - TAX ACT. IN THE OPINION OF THE ASSESSING OFFICER THE ASSESSEE WAS REQUIRED TO DEDUCT THE TDS U/S. 194I OF THE ACT. THE ASSESSEE CONTENDED BEFORE THE ASSESSING OFFICER THAT THE LEASE AGREEMENT WITH PCNTDA WAS NOTHING BUT A SALE TRANSACTION AND PAYMENT MADE BY THE ASS ESSEE TO THE PCNTDA CANNOT BE THE RENT AS CONTEMPLATED U/S. 194I OF THE ACT. THE CONTENTION OF THE ASSESSEE DID NOT FIND FAVOUR WITH ASSESSING OFFICER. 3 ITA NO. 8 6 /PN/2014, DNYANVARDHINI P RATISHTHAN, PUNE 3. THE ASSESSEE CHALLENGED THE ORDER PASSED BY THE ASSESSING OFFICER U/S. 201(1)/201(1A) OF INCOME - T AX ACT BEFORE THE LD. CIT(A) , WHO CANCELLED THE ORDER PASSED BY THE ASSESSING OFFICER. THE REASONS GIVEN BY THE LD. CIT(A) ARE AS UNDER: 9. THUS, THE PRELIMINARY CLAUSES OF THE LEASE DEED CLEARLY SPELLS THAT THE PAYMENT OF LEASE PREMIUM OF RS.1,12,69,665/ - WAS A PRE - CONDITION FOR ENTERING INTO LEASE DEED AND THE SAME WAS NOT UNDER THE LEASE DEED THEREFORE, THIS PAYMENT OF LEASE PREMIUM FALLS OUTSIDE THE PURVIEW OF DEFINITION OF RENT AS SPECIFIED IN SEC. 194 - 1 OF INCOME - TAX ACT. THE ITO (TDS) - 1, PUNE HAS HE AVILY RELIED UPON HON'BLE CHENNAI TRIBUNAL'S DECISION IN THE CASE OF FOX CONN INDIA DEVELOPER(P) LTD(SUPRA) BUT THE SAME IS DISTINGUISHABLE ON THE FACT THAT IN THAT CASE ISSUE IN QUESTION WAS UPFRONT PAYMENT AND NOT LEASE PREMIUM. FURTHER, UPFRONT PAYMENT WAS PART OF CONSIDERATION FOR ACQUIRING LEASEHOLD RIGHTS UNLIKE THE PRESENT CASE WHERE PAYMENT OF LEASE PREMIUM WAS PRE - CONDITION FOR ENTERING INTO LEASE AGREEMENT AND THEREFORE THE FACTS OF THE CASE ARE CLEARLY DISTINGUISHABLE. 10. IT IS ALSO SEEN THAT SI MILAR ISSUE CAME UP BEFORE HON'BLE MUMBAI BENCH IN THE CASE OF NAVI MUMBAI SEZ(P) LTD IN ITA NO. 738 TO 7741/MUM/2012 FOR A.Y. 2006 - 07 TO 2009 - 10 WHEREIN HON'BLE MUMBAI TRIBUNAL IN IT'S ORDER DATED 12.08.2013 HELD THAT LEASE PREMIUM PAID BY THE ASSESSEE TO THE CITY AND INDUSTRIAL DEVELOPMENT CORPORATION OF MAHARASHTRA LTD.(CIDCO) FOR ACQUIRING DEVELOPMENT AND LEASEHOLD RIGHTS FOR A PERIOD OF 60 YEARS, WAS NOT REQUIRED TO BE SUBJECT TO DEDUCTION AT SOURCE U/S. 1941 OF INCOME - TAX ACT. 11. SIMILAR VIEW HAS BEE N TAKEN BY ANOTHER BENCH OF MUMBAI TRIBUNAL IN THE CASE OF M/S. WADHWA ASSOCIATES IN ITA NO. 695/MUM/2012 IN ORDER DATED 03.07.2013 WHEREIN IT WAS HELD THAT TDS WAS NOT REQUIRED I TO BE DEDUCTED U/S. 1941 OF INCOME - TAX ACT IN RESPECT OF PAYMENT OF LEASE PR EMIUM TO M/S. MMRD LTD. 12. IN YET ANOTHER CASE OF SHRI NAMAN HOTEL PVT. LTD. VS. DEPARTMENT OF INCOME - TAX IN ITA NO. 686 & 687/MUM/2012 ; MUMBAI TRIBUNAL 'E' BENCH HELD THAT TDS WAS NOT REQUIRED TO BE 4 ITA NO. 8 6 /PN/2014, DNYANVARDHINI P RATISHTHAN, PUNE DEDUCTED U/S. 201(1) OF INCOME - TAX ACT IN RESPECT OF LE ASE PREMIUM PAID TO MMRD LTD. 13. THUS, AFTER ANALYZING THE FACTS OF THE CASE AS WELL AS AVAILABLE JUDICIAL PRECEDENTS, IT IS SEEN THAT PAYMENT OF LEASE PREMIUM TO PCNTDA WAS A PRECONDITION FOR ENTERING INTO LEASE AGREEMENT AND THEREFORE IT CANNOT BE SAID THAT THE SAME WAS PAID UNDER THE TERMS OF LEASE AGREEMENT. FURTHER, IT IS SEEN THAT STAMP DUTY HAS BEEN PAID ON THE MARKET VALUE OF THE PLOT REPRESENTED BY LEASE PREMIUM. THEREFORE, ON THE FACTS OF THE CASE AS WELL AS RELYING UPON ABOVE MENTIONED THREE DECISIONS OF HON'BLE MUMBAI TRIBUNAL, IT IS HELD THAT ITO (TDS) - 1, PUNE WAS NOT JUSTIFIED IN RAISING DEMAND U/S. 201(1)/201(1A) OF INCOME - TAX ACT IN RESPECT OF LEASE PREMIUM PAID TO PCNTDA. ACCORDINGLY, HE IS DIRECTED TO DELETE THE DEMAND. THUS, GROUND N O. 1 TO 3 ARE ALLOWED. 4. WE HAVE HEARD THE PARTIES. WE FIND THAT THIS ISSUE STANDS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT, MUMBAI IN THE CASE OF M/S. WADHWA & ASSOCIATES REALTORS PVT. LTD. ITA NO. 695/MUM/2012 ORDER DAT ED 03 - 07 - 2013. 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 ON RECORD IN THE FORM OF PAPER BOOK AND THE JUDICIAL DECISION S 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 DEED 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 NATURE OF CAPITAL EXPENDITURE AND THEREFORE THERE IS NO QUESTI ON 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 LEASE 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 5 ITA NO. 8 6 /PN/2014, DNYANVARDHINI P RATISHTHAN, PUNE PAID AS A PRICE FOR OBTAINING THE LEASE, HENCE IT PRECEDES THE GRANT OF LEASE. THEREFORE, BY ANY STRETCH OF IMAGINATION, IT CANNOT BE EQUATED WITH THE REN T 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 EQUATED TO RENT. IT IS ALSO SEEN THAT THE MMRD IN EXERCISE OF P OWER 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 CONSTRUCTION OF ADDITIONAL AREA ON THE AFORESAID PLOT. THUS TH E ASSESSEE HAS MADE PAYMENT TO MMRD UNDER DEVELOPMENT CONTROL FOR ACQUIRING LEASEHOLD LAND AND ADDITIONAL BUILT UP AREA. THE DECISIONS OF THE TRIBUNAL IN THE CASE OF M/S. NATIONAL STOCK EXCHANGE (SUPRA) AND MUKUND LTD (SUPRA) HAVE BEEN WELL DISCUSSED BY TH E 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 ACQUIRI NG 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 FURTHER FIND THAT IN THE CASE OF SHREE NAMAN HOTELS PVT. LTD., MUMBAI ITA NOS. 686 & 687/MUM/2012 , AN IDENTICAL ISSUE HAS COME FOR THE CONSIDERATION BEFORE THE ITAT, MUMBAI IN RESPECT OF LEASE PREMIUM PAID TO MMRD A AND THE TRIBUNAL HAS 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. 6. SO FAR AS THE PRESENT CASE IS CONCERNED THE PAYMENT OF LEASE PRE MIUM TO THE PCNTDA CANNOT BE SAID TO BE THE RENT. MOREOVER, THE LEASE PREMIUM PAID TO PCNTDA IS ANALOGOUS TO THE LEASE PREMIUM PAID 6 ITA NO. 8 6 /PN/2014, DNYANVARDHINI P RATISHTHAN, PUNE TO MMRD A. WE, THEREFORE, FOLLOWING THE DECISIONS OF THE CO - ORDINATE BENCH IN THE CASE OF M/S. WADHWA & ASSOCIATES REALTORS PVT. LTD. (SUPRA) AND SHREE NAMAN HOTELS PVT. LTD., MUMBAI (SUPRA) CONFIRM THE ORDER OF THE LD. CIT(A) AND GROUNDS TAKEN BY THE REVENUE ARE DISMISSED. 7. 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 ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE