TMI Blog2014 (4) TMI 885X X X X Extracts X X X X X X X X Extracts X X X X ..... evel underground car park with ground above - Lease was offered for a periods of 80 years - the transaction has to be held a lease and that provisions of section 201(1) and 201(1A) are not attracted for non-deduction of tax at source – thus, the order of the FAA set aside – Decided in favour of Assessee. - ITA No.1910/Mum/2012, ITA No. 1998/Mum/2012 - - - Dated:- 12-3-2014 - S/Sh. Rajendra Sanjay Garg, JJ. For the Appellant : Shri Girija Dayal For the Respondent : Shri J. D. Mistry ORDER Per: Bench: Challenging the orders dated 24.01.2012 of the CIT(A)-24,Mumbai Assessing Officer(AO) and the assessee have filed cross appeals.AO has raised following grounds of appeal : 1. The Ld. CIT(A) has erred in law and on facts in holding that the amount paid by M/s Reliance Industries Ltd. to City Industrial Development Corporation (MMRDA) as premium for acquiring leasehold rights and additional FSI in respect of the leased plot is not in the nature of rent as defined u/s. 194I of the Act. 2. The Ld. CIT(A) has erred in law and on facts in holding that M/s Reliance Industries Ltd. was not required to deduct tax at source u/s.194I of the I. T. Act, 1961. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on facts in holding that the word use in definition of rent in section 194I would only include payments for the use of land, building, etc. in the sense of payment by landlord to tenant and cannot include transactions involving exploitation of property by changing its identity and shape. ii. The Ld. CIT(A) has erred in law and on facts in giving restrictive meaning to the word use whereas the judicial pronouncements clearly hold that the definition of the rent as given in Explanation (i) to sec. 194I is of wide import and has to be given wide meaning. iii. The Ld. CIT(A) has erred in law and on facts in holding that the assessee has right to sell the Property because it is settled principle of law that a buyer cannot pass a title better than what it has and since assessee itself is a lessee it can only sub-lease the property and not effect its sale. iv. The Ld. CIT(A) has erred in law and on facts by holding that ordinary meaning is to be assigned to the word use as contained in the definition of rent in Explanation to section 194I so that there could be difference between sale and tenancy. v. The Ld. CIT(A) has erred in law and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of the established legal principles that in case of statute, the definition given in such statute/section requires to be given effect. v. The Ld. CIT(A) has erred in law and on facts in laying too much emphasis on stamp duty valuation and in not appreciating the fact that the use of market rates under stamp duty valuation is only a method to quantify the rent for the period of lease and has no bearing on the nature of the transaction which is clearly within the ambit of section 194I being on account of use of the property and the definition of rent as contained in Explanation to this section. 7. The Ld. CIT(A) has erred in law and on facts in relying on the definition of lease in section 105 of the Transfer of Property Act, 1882 for drawing distinction between premium and rent. In this regard: i. The Ld. CIT(A) has erred in law and on facts in ignoring the established principles of jurisprudence that reference to the other Act is required only in case of doubt for deciding the issue pertaining to interpretation and not when the definition of the rent is specifically enshrined in the Act in clear expression of legislative intendment to preclude such exer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licable to the facts of the assessee s case. 10. The Ld. CIT(A) has erred in law and on facts by relying on judicial decisions rendered in a context other than the determination of liability to deduct TDS u/s.194I of the Act. In this regard: i. The judicial pronouncements relied upon by the Ld. CIT(A) are all rendered in the context of allowability of expenditure u/s. 37(1) of the Act in the hands of payee and have no bearing on the liability to deduct TDS by the payer. ii. The Ld. CIT(A) has erroneously relied on decisions where premium under a lease is held to be a capital receipt without appreciating the fact that the definition of rent u/s. 194I is all encompassing and covers any payment , by whatever name called , under a lease or sub-lease, tenancy or any other agreement or arrangement . 11. The Ld. CIT(A) has erred in law and on facts in applying the maxim of Approbate and Reprobate to hold that a decision taken by the revenue authorities in assessment proceedings cannot be ignored for the purpose of TDS provision. In this regard: i. The Ld. CIT(A) has failed to appreciate that the proceedings for assessment of income of the payee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer (TDS) (LTU), Mumbai {hereinafter referred to as AO} for passing an order u/s. 201(1) and 201(1A) of the Income-tax Act, 1961 for Assessment Year 2008-09 to the extent of Rs. 11,00,001/- being lease premium paid by the appellant to M/s. Mumbai Metropolitan Regional Development Authority (MMRDA). The appellant submits that the order passed by the AO and confirmed by CIT(A) is ultra virus, illegal and contrary to the provisions of law. 2. The CIT(A) erred in confirming the action of the AO in levying tax 201(1) of the Act on the lease premium paid of Rs. 11,00,001/- by treating the appellant company as assessee in default and charging interest under section 201(1)A of the Act. The Appellant submits that the tax levied u/s. 201(1) and interest levied u/s.201(1A) of the Act by the AO is not warranted on the facts and circumstances of the case and the same ought to be deleted. 3. The CIT erred in confirming the action of the AO and holding that the Appellant has failed to comply with the provisions of Section 194I of the Act since it has not deducted TDS on lease premium of Rs. 11,00,001/-, paid by the appellant to M/s. Mumbai Metropolitan Regional Dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts and accordingly TDS should have been deducted,that payments made by the assessee were in nature of Rent. AO,as per orders passed u/s 201(1) / 201 (1A) of the Act, raised demands of Rs. 6,66,18,99,054/- under the head Interest u/s. 201(1A) of the Act. 3. Aggrieved by the order of the AO, assessee filed an appeal before the FAA. After considering the submission of the assessee and the order of the AO passed u/s. 201/201(1A) of the Act,he held that assessee was granted lease of plot of land for total lease premium of Rs. 9,18,03,05,550/-, that as per the lease-deed, dated 15.07.2008 assessee had to pay premium in two installments of Rs. 4,49,01,52,775/- and Rs. 4,59,01,52,775/-, that assessee had paid lease premium to MMRDA, that the right of the assessee in the land allotted to it was not only to use the land but it required all the rights belonging to owner of the land 4 a period of 80 years other than the right to the mineral and ores,that by virtue of payment of lease premium a large bundle of right attached to the land acquired by the assessee, that another premium of Rs. 6.96 Crores was paid by the assessee to MMRDA in pursuance of the supplementary lease-deed dated 13. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 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 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. 194-1 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 paid as a price for obtaining the lease, hence it proceeds the grant of lease. Therefore, by any stretch of imagination, it cannot be equated with the rent which is paid periodically. A perusal of the records further show that the payment to MMRD is also for additional built up are and also for grating free of FSI area, such payment cannot be equated to rent. It is also seen that the MMRD in exercise of power u/s. 43 r.w. Sec. 37(1) of the Maharashtra Town Planning Act 1966, MRTP Act and other powers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akhs had been paid by the assessee;showed that it had been granted the license and permission only to enter upon the land leased to it, that the agreement categorically stated that assessee had merely been granted a license, that the assessee was only a licencee in respect of plot of land, that it had not acquired any legal rights in the plot of land,that it had not shown by way of any document that it had acquired any lease hold right in the land or any capital asset, that payment of Rs.11 lacs was in nature of payment by way of rent, that assessee was required to deduct TDS on the above payment, that provisions of section 201 and 201(1A) would be applicable in respect of the payment of Rs. 11 lacs for the block No. RG-1-A in the G Block of BKC. He upheld the order of the AO. 8. Before us, AR submitted that FAA had differentiated the cases of plot C64 C-66 and plot no. RG-1A on the basis of signing of lease deed,that because of certain technical problems lease agreement was signed later on,that for purpose of section 201 and 201(1A) of the Act there could not any difference on the basis of date of signing of lease deed, that the payment was not in nature of rent. DR supported t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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