2025 (4) TMI 40 - AT - Income Tax

TDS u/s 194I - lease rent payments - payments made by the assessee to the New Okhla Industrial Development Authority (NOIDA) - HELD THAT - As respectfully following the decision of Rajesh Projects (India) Pvt. Ltd 2017 (2) TMI 1109 - DELHI HIGH COURT and Mahagun (India) (P.) Ltd. 2023 (12) TMI 1368 - ITAT DELHI it is held that the cause of action u/s 201(1)/201(1A) in pursuance of the judgment of the Hon ble Delhi High Court is thus not available to the Revenue for A.Y. 2012- 13 in question. Therefore the TDS liability u/s 201(1) and 201(1A) of the Act deleted by the Ld. CIT(A) is confirmed. Decided against revenue.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

1. Whether the definition of "rent" under Section 194I of the Income Tax Act is sufficiently broad to include lease rent payments made to NOIDA Authority, thereby necessitating the deduction of tax at source (TDS).

2. Whether the payments made to NOIDA Authority for lease rent should be subjected to TDS under Section 194I at the rate of 10%, considering NOIDA's role in transferring land and developing urban infrastructure.

3. Whether the judgments relied upon by the Commissioner of Income Tax (Appeals) (CIT(A)) were applicable in this case, given that they addressed different issues concerning TDS applicability under Section 194C rather than Section 194I.

ISSUE-WISE DETAILED ANALYSIS

1. Definition of "Rent" under Section 194I

Relevant legal framework and precedents: Section 194I of the Income Tax Act mandates TDS on payments classified as rent. The Assessing Officer argued that the definition of rent under this section is comprehensive enough to include lease rent payments made to NOIDA Authority.

Court's interpretation and reasoning: The Tribunal considered the argument that NOIDA Authority, being a government department, levies charges for land acquisition, which are not payments for specific services rendered to the assessee. The Tribunal noted the decision in Rajesh Projects (India) (P.) Ltd. vs CIT(TDS), where it was held that such payments are not subject to TDS under Section 194I.

Application of law to facts: The Tribunal found that the payments made to NOIDA were not for any specific work done by NOIDA for the assessee, but were charges for land acquisition, thus not falling under the purview of Section 194I.

Treatment of competing arguments: The Tribunal acknowledged the Assessing Officer's reliance on the broad definition of rent but favored the interpretation that NOIDA's charges were not for specific services, aligning with the CIT(A)'s view.

2. TDS Applicability on Lease Rent Payments to NOIDA

Relevant legal framework and precedents: The Revenue argued that lease rent payments to NOIDA should be subject to TDS under Section 194I, as NOIDA develops urban infrastructure and transfers land to private builders.

Court's interpretation and reasoning: The Tribunal referred to the judgment in Mahagun (India) (P.) Ltd. vs ACIT, which highlighted that the Delhi High Court's decision in Rajesh Projects was prospective, meaning it did not apply to past assessment years, including 2012-13.

Key evidence and findings: The Tribunal noted that the assessee acted under a bona fide belief, supported by NOIDA's communications, that TDS was not applicable to lease rent payments.

Application of law to facts: The Tribunal concluded that the prospective nature of the Rajesh Projects decision meant that for the assessment year 2012-13, the Revenue could not enforce TDS under Section 194I for lease rent payments to NOIDA.

Treatment of competing arguments: The Tribunal recognized the Revenue's position but emphasized the prospective application of the Rajesh Projects decision, which precluded the Revenue's claim for TDS in this assessment year.

3. Applicability of Previous Judgments

Relevant legal framework and precedents: The Revenue contended that the CIT(A) incorrectly relied on judgments that addressed TDS under Section 194C, not Section 194I.

Court's interpretation and reasoning: The Tribunal found that the CIT(A) correctly applied the principles from Rajesh Projects, which were relevant to the issue at hand, despite the Revenue's argument to the contrary.

Application of law to facts: The Tribunal agreed with the CIT(A) that the lease rent payments were not subject to TDS under Section 194I, aligning with the legal reasoning in Rajesh Projects.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: The Tribunal reiterated the decision from Mahagun (India) (P.) Ltd. vs ACIT, stating, "The cause of action under Section 201(1)/201(1A) in pursuance of the judgment of the Hon'ble Delhi High Court is thus not available to the Revenue for A.Y. 2012-13 in question."

Core principles established: The Tribunal established that the prospective application of the Rajesh Projects decision prevents the Revenue from enforcing TDS obligations under Section 194I for the assessment year 2012-13.

Final determinations on each issue: The Tribunal confirmed the CIT(A)'s decision to delete the TDS liability amounting to Rs. 68,19,117/- for the assessment year 2012-13, dismissing the Revenue's appeal.

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