2018 (8) TMI 1358 - AT - Income Tax

TDS u/s 194I on payment of annual lease rent paid to UPSIDC - assessee in default - it was contended that the lease rent was paid as onetime payment for lease of land for long period of 99 years on a lump sum basis; and only 1% of the plot premium was treated as lease rent for the period of 1st ten years. Held that - It has been brought on record that UPSIDC had submitted its account where it has duly confirmed that the amount paid by the assessee has been credited in the statement of P&L account and income tax has been paid thereon on the taxable profit. The entire account has been credited to the head Lease Rent Received Account . Once that is so then in view of the proviso to Section 201 which came into effect from 01.07.2012 then assessee cannot be held as assessee-in-default . In view of the CBDT Circular and also the fact that the deductee has shown the amount paid as income and also paid taxes thereon therefore the assessee cannot be treated as assessee-indefault and consequently no interest u/s.201(1A) can be charged. Accordingly Revenue s appeal is dismissed. - Decided against the revenue.

Summary

Issues:
Assessment of TDS liability on lease rent payment for land acquisition under section 194-I for the Assessment Year 2012-13.

Analysis:
The appellant, engaged in real estate development, filed cross-appeals against the order passed by CIT (Appeals) regarding TDS on payment made to UPSIDC for annual lease rent. The Assessing Officer held the appellant liable for TDS under section 194-I for not deducting tax on the lease rent paid. The appellant contended that only 1% of the land cost should be treated as lease rent, reducing the TDS default amount. The CIT (A) considered the nature of the transaction and held that the payment was not entirely in the nature of rent, limiting the TDS liability. The appellant argued that the proviso to Section 201 should apply retrospectively, relieving them from being treated as 'assessee in default'.

The appellant further relied on judicial precedents and a CBDT Circular to support their argument that TDS should not be applicable on one-time lease premium for long-term leasehold rights. The appellant pointed out that UPSIDC had accounted for the payment as income and paid taxes on it. The Tribunal noted that the proviso to Section 201, having retrospective effect, absolves the appellant from being considered 'assessee in default'. Referring to the CBDT Circular, the Tribunal concluded that no TDS was required on one-time lease premium payments. As the deductee had paid taxes on the amount, the appellant could not be treated as 'assessee-in-default', leading to the dismissal of the Revenue's appeal. Consequently, the appellant's appeal was allowed.

In conclusion, the Tribunal allowed the appellant's appeal and dismissed the Revenue's appeal, emphasizing that the CBDT Circular clarified the non-applicability of TDS on one-time lease premium payments. The judgment highlighted the retrospective effect of the proviso to Section 201 and the significance of the deductee paying taxes on the income received, ultimately determining the appellant's non-default status and the dismissal of the Revenue's appeal.