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2019 (2) TMI 977 - AT - Income TaxRevision u/s 263 - as per CIT-A assessee adopted a faulty method of revenue recognition - requirement of tax withholding u/s 194-I - assessee was spreading over lease premium at 1/99th on the basis of the lease period of 99 years, and in case of transfer, it was recognizing the same at 1/78th, apart from showing profit at 10% of the amount of Premium on the lease of plots of land - CIT held that entire amount of the lease premium was chargeable to tax in the year of receipt itself and hence the AO committed a serious mistake by accepting the shifting of income from the year of receipt of Premium to several years by means of spreading it over to 99/78 years - Held that:- There is no whisper of the issue of treatment of revenue in the assessment order. Secondly, on a specific query, the Ld. AR could not draw our attention towards any judicial pronouncement accepting the spread over of lease premium over the life of lease in the hue of the terms of the lease agreement as are prevalent in the case of the assessee. Under such circumstances, the assessment order passed by the AO accepting such spread over has necessarily to be held as erroneous, even if the assessee had put forth its explanation about the spreading over of Premium and the AO accepted the same without recording anything in the assessment order. The amount of lease premium accrues to the assessee at the time of its receipt. Such a lease premium does not bear any traits of rent, which in the extant case resembles with annual payment by the lessee at the rate of Re.1/-. Since the amount of lease premium has no characteristics of rent, in our view, such amount cannot be subjected to TDS u/s 194-I of the Act, which, therefore, rules out the application of Circular No.05/2001. It is further noted that the CBDT has recently clarified vide Circular No.35/2016 dated 13.10.2016 that on the amount of lump sum lease premium, which is not adjustable against the periodic rent, as is the case under consideration as well, there is no requirement of tax withholding u/s 194-I of the Act. We therefore jettison the contention raised on behalf of the assessee on this aspect of the matter. To sum up, since the assessee did not offer full amount of lease premium in the year of receipt and the AO accepted such a position, we are satisfied that the Ld.CIT was justified in invoking the provisions of section 263 of the Act and thus holding that the assessment order to be erroneous and also prejudicial to the interest of the Revenue Exemption u/s 11 - entitled to exemption u/s. 10(20) - assessee functions as an extended arm of the State Government of Maharashtra and hence does not come within the ambit of taxation - Held that:- The assessee is a statutory authority and is not a State Government in itself so as to claim any immunity from taxation. In our considered opinion, this issue is no more res integra in view of the latest judgment dated 12-10-2018 rendered by the Hon’ble Supreme Court in ITO Vs. M/s. Urban Improvement Trust [2018 (10) TMI 874 - SUPREME COURT OF INDIA] as held that Urban Improvement Trust constituted under the Rajasthan Urban Improvement Act, performing various municipal functions, is chargeable to tax in respect of its income and further no exemption u/s.10(20) is available to it. Since the Hon’ble Supreme Court has held that Urban Improvement Trust, doing admittedly activities similar to those of the instant assessee, is chargeable to tax and further not entitled to exemption u/s. 10(20) of the Act, the argument of the Ld. AR that assessee should be treated as not at all chargeable to tax as an arm of the State Government, deserves to be and is hereby repelled.
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