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2016 (4) TMI 314 - HC - Income TaxTDS u/s 194I - upfront payment made by an assessee for the acquisition of leasehold rights over an immovable property for a long duration of time say 99 years - whether constitute rental income at the hands of the lessor, obliging the lessee to deduct tax at source under Section 194-I of the Act? - assessee in default - Held that:- It is crystal clear that the One Time Non-refundable Upfront Charges paid by the assessee was not (i) under the agreement of lease and (ii) merely for the use of the land. The payment made for a variety of purposes such as (i) becoming a co-developer (ii) developing a Product Specific Special Economic Zone in the Sriperumbudur Hi-Tech Special Economic Zone (iii) for putting up an industry in the land. The lessor as well as the lessee intended to treat the lease virtually as a deemed sale giving no scope for any confusion. In such circumstances, we are of the considered view that the upfront payment made by the assessee for the acquisition of leasehold rights over an immovable property for a long duration of time say 99 years could not be taken to constitute rental income at the hands of the lessor, obliging the lessor to deduct tax at source under Section 194-I. Hence, the first substantial question of law is answered in favour of the appellant/assessee. Once the first substantial question of law is answered in favour of the appellant/assessee, by holding that the assessee was not under an obligation to deduct tax at source, it follows as a corollary that the appellant cannot be termed as an assessee in default - Decided in favour of assessee
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