TMI Blog2013 (8) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... t for obtaining a lease for a long period is a payment for enduring advantage, so that it is a capital expenditure which is not deductible – In the present case it is held that lease premium paid by assessee to CIDCO is not in the nature of rent as contemplated u/s 194-I of the Act - Provisions of section 194-I of the Act to deduct TDS on the lease premium paid by the assessee is not attracted - Deleted the demand raised by the AO u/s 201(1) and 201(1A) of the Act by rejecting the grounds of appeal taken by the department – Decided against the Revenue. - I.T.A. Nos.738 to 741/Mum/2012 - - - Dated:- 16-8-2013 - Shri B. R. Mittal,(JM) And Sanjay Arora (AM),JJ. For the Appellant : Shri Pritam Singh For the Respondent : Shri Devesh Vasavada ORDER Per Bench: The department has filed these appeals for Assessment Years 2006-07 to 2009- 10 against separate orders of ld. CIT(A) all dated 24.11.2011. In all these appeals, the facts and the issue involved is common. Hence, we have heard these appeals together and dispose off the same by a common order for the sake of convenience. 2. We may state that the grounds of appeal taken by department are elaborative in all these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecial Economic Zone at Navi Mumbai. iv) As per Development Agreement between the assessee and CIDCO, the assessee is required to make payment of lease premium in respect of the land which is being acquired by CIDCO and being allotted to the assessee from time to time. v) As per Development Agreement, the assessee is authorized to develop and market the NMSEZ. Accordingly, assessee-company paid lease premium of Rs.50 crores in assessment year 2006-07, Rs.946.06 crores in assessment year 2007-08, Rs.1033.61 crores in assessment year 2008-09 and Rs.146.82 crores in assessment year 2009-10, in respect of land allotted to it and the relevant lease deed(s) executed. vi) By virtue of said lease deed(s), assessee has acquired lease hold rights in the land for the purpose of developing, designing, planning, financing, marketing, developing necessary infrastructure, providing necessary services, operating and maintaining infrastructure administrating and managing "SEZ". Assessee has also acquired the rights to determine, levy, collect, retain, utilize user charges fee for provision of services and /or tariffs in accordance with terms and conditions provided in the Development Agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Hence, the lease premium paid to CIDCO Ltd. for acquisition of leasehold land is clearly distinct from rent. On behalf of assessee, a reference was made to section 105 of the Transfer of Property Act, 1882 and submitted that rent is defined to mean money paid periodically or on specified occasion to the transferor of land. Relying on the decision of the Hon'ble Apex Court in the case of A.R.Krishnamurthy V/s CIT (176 ITR 417) it was submitted that there is a difference between rent and premium and if what is paid is the cost of acquisition of right in a property known as leasehold right, it is not rent but a premium which is a capital for the recipient. On behalf of the assessee it was also submitted that section 2(14) of the Act also recognizes leasehold interest as a separate, distinct and independent right in an immovable property capable of being transferred for a consideration. Thus the payment made by the lessee to the lessor to be construed as a capital payment for acquisition of leasehold rights in any immovable property. Hence the premium for transfer of land under lease will be taxable in the form of capital gain u/s 45 of the Act in the hands of the lessor. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 194-I of the Act. Therefore, the assessee has committed default within the meaning of section 201(1) of the Act by not deducting the tax at source u/s 194-I of the Act on payment of lease premium of Rs.50 crores in assessment year 2006-07, Rs.946.06 crores in assessment year 2007-08, Rs.1033.61 crores in assessment year 2008-09 and Rs.146.82 crores in assessment year 2009-10. AO has further stated that the assessee is also liable to pay interest u/s 201(1A) of the Act. Accordingly, AO has stated the tax and interest liability of the assessee for the assessment years under consideration as under : Assessment Year Section 201(1) Section 201(1A) Total 2006-07 8,49,75,000 5,86,32,750 14,36,07,750 2007-08 212,29,50,187 1,01,90,16,048 3,14,19,66,235 2008-09 2,34,21,65,994 1,00,33,40,347 3,34,55,06,341 2009-10. 33,26,96,202 10,37,80,071 43,64,76,273 7. Being aggrieved, assessee filed appeals before ld. CIT(A) against aforesaid orders of AO passed u/s 201(1) and 201(1A) of the Act all dated 14.3.2011 8. L.d CIT(A) in the impugned orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Transfer of Property Act, 1882 to mean money paid periodically or on specified occasion to the transferor of land. Premium on the other hand means a consideration of a price paid for transfer of a right to enjoy the property. Thus, there is a difference between rent and premium. Premium is not paid for the use of land. When the interest of the Lessor is parted with for a price, the price paid is called lease premium. But, the periodical payments made for the continuous enjoyment of the benefit under the lease is in the nature of rent. The aforesaid view has also been endorsed by the Supreme Court in its decision in the case of A.R. Krishnamurthy v/s CIT reported -176 ITR 417. The Supreme Court in the case of A. R Krishnamurthy V/s OT (supra) has held that if what is paid is the cost of acquisition of right in a property known as leasehold rights it is not rent but a premium which is a capital receipt for the recipient. Consequently, Section 2(14) of the Income-tax Act, 1961 also recognizes leasehold interest as a separate, distinct and independent right in an immovable property capable of being transferred for a consideration. Based on the foregoing decision, the payment ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontention that lease premium is capital in nature and cannot be allowed on proportionate basis over the period of lease. 2. Revenue's stand that premium of Rs.62,500 in addition to increased rent for converting temporary lease into a long term one, for a period of 30 years payable in installments where lease agreement provided for lessor to take back possession in certain contingencies was not advance rent and was capital expenditure which was confirmed by the Hon'ble Bombay High Court in the case of Commissioner of Income-tax v. Project Automobiles (1983) 15 Taxman 227 (Bom.). 3. When the assessee claimed that cost of land paid to the liquidator for the lease land from MIDC should be allowed to be considered for 71 years of lease period on a proportionate basis; the Dept rejected the claim of the assessee which was upheld by the Hon'ble High Court of Bombay in the case of CIT V/s Khimline Pumps Ltd [258 ITR 459 (Bom)(2002). 4. Assessee firm had acquired a plot of lease for 30 years and it had to pay premium in 12 installments and also 5% of such premium annually as ground rent. The assessee paid the installments of the aforesaid premium in the relevant years and claimed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ights Oil portion of his estate - Besides, certain rent and royalties were also paid by lessees of mining leases upon coal raised - Whether in view of fact that a lump sum paid under name of salami for grant of lease, was more in nature of an out and out sale of property, sum so received by assessee was in no sense income within meaning of Act - Held, yes - Whether, however, annual rent and royalty received from lessees on quantity of coal extracted was income chargeable to tax - Held, yes. 3. Decision of Calcutta High Court in the case of Commissioner of Income-tax v. Purnendu Mullick [1979] 116 ITR 591 (CAL.) Section 4 of Income-tax Act; 1961 - Income - Chargeable as - Assessment year 1964-65 - Assessee, on executing a lease deed in respect of certain premises in favour of a company, received a lump sum amount besides monthly rent - Assessee claimed that said sum received as salami or premium constituted capital receipt and therefore,was not taxable as income - Tribunal accepted assessee's claim - On instant reference, it was seen that lump sum amount paid was described as salami or premium and not rent - There was no clause for repayment of said amount or adjustment of said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right to the land but reduced it to a rental arrangement for use of the land. Ld. CIT(A) has stated that the AO also cited the cases, the details of which he has mentioned in para 5.9 of the impugned order (s). 8.3 Ld. CIT(A) has further stated that AO vide letter dated 2.11.2011 furnished supplementary arguments for all the assessment years under consideration and stated that as the premium is nothing but advance lease rent and referred the decision of Hon'ble Apex Court in the case of Agarwal Chambers of Commerce V/s Ganpat Rai Hiralal, reported in 33 ITR 245 wherein it has been held that persons who are responsible for deduction of tax at source are not concerned with the ultimate result of the assessment. 8.4 Ld. CIT(A) has stated in para 5.11 of the impugned order (s) that a copy of written submission filed by AO was provided to the assessee for their comments and the assessee filed its rejoinder common for all the assessment years under consideration on 25.10.2011, reiterating its stand that the lease premium paid constitutes capital payment for acquiring leasehold right in the property and does not represent rent for use of land as contemplated u/s 194-I of the Act. Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... area. viii) Karnataka High Court Judgement in the case of HMT Ltd. has been decided by the Hon'ble court on a finding of fact by the ITAT that the payment made by the Lessee constitutes an advance rent and hence the same shall be allowed as deduction u/s 37( 1) of the 1. T. Act. Moreover the various decisions of the Bombay High Court and the 1TAT have clearly distinguished the HMT's case and its applicability to the premium paid for acquiring lease hold right. The Hon'ble ITAT Mumbai Special Bench in the case of Mukund Ltd. has discussed in detail the judgement of HMT Ltd. and held that premium paid for acquiring the leasehold right does not constitute an advance rent. Hon'ble ITAT Mumbai, Special Bench has followed the jurisdictional High Court's view in the case of Khimlin Pipes Ltd. wherein the jurisdictional High Court has held that premium paid for acquiring the lease hold right constitutes a capital expenditure and not anadvance payment of rent for the lease period. ix) Section 194-I of the IT Act clearly provides that payment made by a person should be in the nature of "an income by way of rent". This expression expressly requires that the receipt in the hands of the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the analysis of Development Agreement and lease deed(s) entered into between the assessee and CIDCO, written submissions of the assessee and the assessing officer and the assessment order and various other related documents following facts emerge: "i. The Government of Maharashtra through a resolution dated 18.03.1970 decided that a subsidiary company of the State industrial Investment Corporation of Maharashtra Ltd. should be entrusted the task of development of trans-Thana and trans-harbour areas in Uran, Panvel and Thana with a view to decongest and provide relief to Mumbai city and also to ensure the integrated development of the region alonq with its industrial development Later, City and Industrial Development Corporation of Maharashtra Ltd (CIDCO) which was created and established under the Companies Act, 1956, was designated as new town development authority for this task ii. It was decided by the government that privately owned lands in the project area shall be acquired by the government and will be placed at the disposal of CIDCO. CIDCO was required to undertake all the development work, provide necessary infrastructure on behalf of the government and dispose-off the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereof in favour of the lenders including granting of step-in rights in the event of default under the financing agreement for the purpose of obtaining finance. xi. The appellant has also acquired sole rights for marketing of the NMSEZ and the industrial/ commercial projects to potential tenants." 10. In view of above, ld. CIT(A) has stated that the assessee has been allotted land for a period of 60 years on the payment of lease premium. That the lease deed(s) and the Development Agreement, assigns to the assessee lease hold rights which includes a bundle of rights, some of which are outlined above. Assessee made payment of lease premium to CIDCO without deducting TDS and the AO has held that the payment of lease premium is nothing but rent covered under the definition of rent provided u/s 194-I of the Act and hence the deduction of tax at source was required. Ld. CIT(A) has thereafter reproduced section 194-I of the Act which is as under : "Rent. 194-I. Any person, not being an individual or a Hindu undivided family, who is responsible for paying to [a resident] any income by way of rent, shall, at the time of credit of such income to the account of the payee or at the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paying to a resident come by way of rent" "for the use of" land etc. shall at the time of credit or payment of such income deduct tax at source at required rate. Although this meaning is very wide so as to include all types of transactions which fall in this category, still the legislature has intentionally included the words "for the use of' so that the meaning of the rent" is not interpreted beyond its meaning in common parlance. In common parlance, rent is a consideration paid by a tenant to the land lord in respect of a property or asset taken on rent. The rent is paid obviously for the use of the said property as otherwise, if the property is not used, there would be no need to take the property on rent. The word "use" here is therefore of utmost importance in any transaction where the consideration paid for the property would be termed as 'rent'. However, the meaning of word 'use' here has to be interpreted in the most simple and common manner, keeping in view the relationship between a landlord and a tenant. 5.21 This is so because, if the word 'use' was also meant to include exploitation of Property by changing its identity/ shape and then selling it off, there would be n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h spaces at a profit. This transaction therefore cannot be stretched beyond its meaning and it cannot be categorized as a transaction which is in-between a landlord and a tenant. This is so because the appellant is not bound to use the property itself and hence consideration paid is not rent within the meaning of explanation below section 194-I. The appellant has thus acquired a capital right to develop the land and exploit the same. 5.23 It is also seen that the amount charged by the CIDCO as lease premium has no connection with the rental value of land. Thus, the whole transaction towards grant of leasehold rights to the appellant is nothing but a transaction of transfer of property and the lease premium is the consideration for the purchase of the said leasehold rights, which comprises of a bundle of rights, including right of possession, right of exploitation of property and its long-term enjoyment. 5.24 In this context, the decision of Hon'ble Supreme Court in the caseof A.R.Krishnamurthy (supra) is very much relevant where the assessee, after purchasing two pieces of land, had granted a mining lease in favour of a company. When the AO assessed the income from the said tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property and the rent to be paid periodically to the lessor When the interest of the lessor is parted with for a price, the price paid is premium or salami. But the periodical payments made for the continuous enjoyment of the benefits under the lease are in the nature of rent. It would, therefore transpire that a premium is not paid under a lease, but is paid as a price for obtaining the lease; hence, it precedes the grant of lease Therefore, it cannot be equated with the rent. which is paid periodically. 5.28 Furthermore, if the lease premium was in the nature of advance rent, then, if for any reason the lease is terminated earlier than the prescribed period, the advance rent would have to ble refunded. However, in the case of appellant, the lease deed does not prove for any refund of lease premium. It is thus seen that there is no provision in the lease for termination of lease at the instance of the lessee and hence for refund of the lease premium. " 12. Ld. CIT(A) has thereafter discussed in paras 5.30 to 5.45 of impugned order(s) the case laws as referred by AO as well as by the assessee in their written submissions and also pointed out at the time of hearing. We consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court in the case of Commissioner of Income-tax V/s Panbari Tea Co. Ltd.(1965) 57 ITR 422 (SC). In this judgment, the Supreme Court has considered various decisions available on the issue and held that since there was a transfer of substantive interest of lessor in estates in favour of the lessee and there was a conferment of a right on the lessee to use the said estates by exploiting them, premium received by the assessee was a capital receipt in the hands of the lessor. It would be useful to consider the ratio of the said decision, which is as under : "the real test of a salami or premium is whether the amount paid, in a lumpsum or in instalments is the consideration paid by the tenant for being let into possession. When the interest of the lessor is parted with for a price, the price paid is premium or salami. But the periodical payments made for the continuous enjoyment of the benefits under the lease are in the nature of rent. The former is a capital receipt, and the latter are revenue receipts. There may be circumstances where the parties may camouflage the real nature of the transaction by using clever phraseology." 5.34. While deciding the issue the Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs.1,62,400/- as premium. At the end of the lease, the lessee was to quietly deliver to the lessor the land. The lessee was also entitled to remove any buildings, erections or structures put up by the lessee on the land. Under the lease, it was further provided that without the permission of the lessor, the lessee shall not assign, under let or part with the possession of the premises. Later, since the said company M/s APVE Ltd went into liquidation, the assets of the company were sold to the assessee on a price of Rs.75 lakhs out of which Rs.45 lakhs related to acquisition of leasehold land. The assessee contended before the AO that Rs.45 lakhs was paid as advance rent towards the leasehold land and hence the same was deductible. In the light of above facts and circumstances, Hon'ble Bombay High Court as already stated above, held that the payment of Rs.45 lakhs by the assessee was a capital expenditure and hence the same was not deductible. 5.37 The Special Bench of Mumbai Tribunal in the case of JCIT vs. Mukund Ltd., (106 ITR 231] also had an occasion to consider the similar issue i.e. "whether the premium paid for acquiring leasehold right in land is revenue or capital". Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id as "premium" for acquisition of leasehold rights in the premises. The clause 5(b)( i) of the said agreement dated 5-3-1992 provides that in case of termination of lease, the "premium" is non-refundable. It provides that in case the licensee fails to complete the said factory building within the time aforesaid and in accordance with the stipulations provided therein, the MIDC without making any compensation or allowance to licensee for the same and without making any payment to the licensee for refund or repayment of the premium aforesaid or any part thereof, can resume the land in question. Thus, in case of termination of lease, the "premium" is non-refundable and therefore, the same cannot be considered as advance payment of rent. There is no clause in this agreement to show that the amount of Rs. 2.04 crores was paid by the assessee as advance rent for all future years and the lump sum payment of future year's rent has been paid to avail some concession for advance payment of rent or for some other business consideration. The land in question is inheritable also as per the terms and conditions of the agreement with MIDC. Therefore, considering the terms of agreement dated 5-3- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons, the landlords made a claim that no tax is deductible because their individual share of rent is belong the deductible limit. Hon'ble High Court held that it was a jointly owned property and hence the landlords were an amalgam of 4 persons. Therefore, the tax under section 194-I was to be deducted @20%. In none of these case, the issue of "lease premium" as in the case of the appellant vis- -vis "rent " has been considered. 5.40 Ld. Addl. CIT, in support of his arguments has also furnished a copy of the decision dated 02.02.2010 of Ld. CIT(A)-IV, Chennai in the case of Foxconn India Developers Pvt.Ltd wherein similar issue was involved and the decision of AO (TDS officer) has been upheld. I have considered this decision of ld.CIT(A)- IV, Chennai. However, I respectfully do not agree with the same. Firstly, it is seen that most of the decisions discussed above were neither cited by the AO/ assessee in that case, nor considered by the Ld. CIT(A). Furthermore, it is not known as to whether or not in that case, the assessee was granted deduction towards lease rent in assessment proceedings. The AO has also stated that for deduction of tax at source, it is not necessary that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO in the case of the appellant. 5.43 The AO has further relied upon Karnataka High Court Judgement in the case of CIT vs. HMT l.td. 203 ITR 820 wherein the said Hon'ble High Court has held that the amount paid by the lessee to the lessor for granting the lease is deductible revenue expenditure. On close scrutiny of this case of Karnataka High Court relied upon by the AO and other judgements relied upon by the Appellant, I am of the considered opinion that HMT's case is distinguishable on facts and in law. The Hon'ble High Court has proceeded on the finding of the fact recorded by the Tribunal that the payment made by the assessee is a rent and hence shall be allowed as business expenditure. Moreover with due respect the Karnataka High Court judgement in the HMTs case is inconsistent with the earlier decisions of the High Courts and the Supreme Court. In this judgement Hon'ble High Court has not considered these other decisions of High Courts and the Supreme Court which renders it 'per-incuriam' as it is delivered in ignorance of the decision of other High Courts and Supreme Court [This principle of 'per- incuriam' has been illustrated by Hon'ble Supreme Court in the case of Pun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.7,75,736/- treating the payment of lease premium as capital expenditure. On appeal by the assessee the CIT(A) confirmed the stand taken by the AO. On further appeal of the assessee the Hon'ble Mumbai Tribunal dismissed the appeal of the assessee relying upon the judgement of the special bench of the Tribunal in the case of Mukund Ltd (supra) and decision of the Hon'ble Bombay High Court in the case of Khimline Pumps Ltd(supra). 5.45 In the present case the assessee has capitalized the lease premium in its books of accounts and treated the same as capital expenditure for tax purposes and the same was accepted by the department in its regular income tax assessment. However, the AO (during TDS proceedings) came-up with the argument that lease premium paid to CIDCO is in the nature of "rent" liable for TDS u/s 194-I of the Act. This stand taken by the AO cannot be accepted as it is contrary to the decision of various High Courts, Supreme Court and the Tribunal and is against the basic principles of law" 13. Thus, ld. CIT(A) has stated that various clauses of lease agreement are standard regulatory clauses which do not affect leasehold right of the assessee in any manner. They are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for obtaining the lease of land. Therefore, the said premium was paid for acquiring leasehold rights and not for use of land. That said premium paid does not fall under the definition of "rent" u/s 194-I of the Act. Ld. AR submitted that Delhi Bench of the Tribunal while considering the similar issue in the case of ITO V/s The Indian News Papers Society in its order dated 20.6.2013 in ITA No.5207/Del/2012 (AY-2007-08) confirmed the order of the ld. CIT(A) that lease premium paid by assessee to MMRDA cannot be subjected to tax deduction at source u/s 194-I of the Act. He filed a copy of the said order of the Tribunal and submitted that the Tribunal after considering the decision of the Hon'ble Apex Court in the case of A.R.Krishnamurthy (supra) and the decision of Special Bench of the Tribunal in Mukund Ltd (supra) has held that the premium paid on acquisition of leasehold rights in land constitutes capital expenditure and it does not constitutes advance rent. Ld. AR further submitted that similar issue has again come up before the Mumbai Bench of the Tribunal in the case of ITO V/s M/s Wadhwa and Associates Realtors Pvt Ltd. In ITA No.695/Mum/2012 (AY-2008-09)dated 3.7.2013 in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o section 194-I of the Act defines the expression "rent". It is worthwhile and relevant to state section 194-I which is a subject matter of dispute. It reads as under : "[Rent. 194-I. Any person, not being an individual or a Hindu undivided family, who is responsible for paying to [a resident] any income by way of rent, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, [deduct income-tax thereon at the rate of-- [(a) two per cent for the use of any machinery or plant or equipment; and (b) ten per cent for the use of any land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings:]] Provided that no deduction shall be made under this section where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed [one hundred and eighty thousand rupees] : [Provided further that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of the AO to hold the premium paid by assessee to hold it as rent is on the definition of rent under section 194-I of the Act that it creates a legal fiction and the lease deed(s) entered into contain various restrictive covenants. That the said payments in substance are for consideration for use of land under the lease deed(s), hence provisions of section 194-I of the Act is attracted. 20. On the other hand, we observe that Government of Maharashtra appointed CIDCO as the nodal agency for setting up of Special Economic Zone at Navi Mumbai "NMSEZ". That the assessee has been jointly promoted as a Special Purpose Vehicle (SPV) by CIDCO and Dronagiri Infrastructure Pvt Limited (DIPL) to develop and operate the Special Economic Zone at Navi Mumbai. Pursuant thereto assessee and CIDCO entered into Development Agreement and the assessee is required to make payment of lease premium in respect of the land which was being acquired by CIDCO and being allotted to assessee from time to time. As per Development Agreement, the assessee is to develop and market "NMSEZ". There is no dispute to the fact that the assessee has acquired leasehold right in the land for the purpose of developing, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also the assessee has paid lease premium to acquire the demised leasehold land and there is no material on record that the said lease premium paid by the assessee is refundable to the assessee and/or is in the nature of advance rent or merely for use of land. We observe that the term "rent" though has been defined in section 194-I of the Act, but other terms like, lease, lease premium, lessor and lessee etc have not been defined under the Income Tax Act. The ld. CIT(A) has rightly stated in the impugned order that the meaning of these terms as provided in the Transfer of Property Act, 1882 have to be considered. The term lease is defined under section 105 of Transfer of Property Act, 1882 as "A lease of immoveable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who , accepts the transfer on such terms. In the case of lease price is called the premium, and the money, share, service or any other thing to be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame up before the Hon'ble Jurisdictional High Court in the case of Khimline Pumps Ltd (supra). In the said case open plot of land was leased out to APVE Ltd, a company for a period of 95 years on payment of a premium of Rs.1,62,400/- and yearly rent of Rs.1. In the lease, the company had, at the end of 95 years to deliver a vacant possession of the land. The company was entitled to remove any building, erections or structures put up by it on the land. The company had erected building, plant and machinery thereon. APVE Ltd. were to be wound up and its assets were sold under direction of Hon'ble High Court. The assessee company offered Rs. 75 lakhs of which the AO held that Rs.45 lakhs related to acquisition of lease hold land. But that amount could not be deducted as it was capital expenditure. The Tribunal held it was capital expenditure, but without giving reasons, held that since benefit of the expenditure would be existed in 71 years, a proportionate amount relatable to each year viz Rs.63,380/- might be allowed as deduction on account of payment of rent. On appeal to the Hon'ble High Court the Hon'ble Jurisdictional High Court agreed with the AO that Rs.45 lakhs was a capital e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of transaction, the Ld. CIT(A) observed that the amount charged by MMRD as lease premium is equal to the rate prevalent as per Stamp Duty recovery for acquisition of the commercial premises. These rates are prescribed for transfer of property and not for the use as let out tenanted property. The Ld. CIT(A) further observed that even the additional FSI given for additional charges as per Ready Reckoner rates only. It is the finding of the Ld. CIT(A) that the whole transaction towards grant of leasehold transaction rights to the assessee is nothing but a transaction of transfer of property and the lease premium is the consideration for the purchase of the said leasehold rights. The ld. CIT(A) went on to discuss the judicial decisions relied upon by the AO of Hon'ble Calcutta and Karnataka High Court and observed that both the decisions pertain to the same issue i.e. whether lease premium was a revenue or a capital expenditure. The ld. CIT(A) also discussed the decision in the case of Raja Bahadur Kamakshya Narain Singh of Ramgarh v. Commissioner of Income-tax 11 ITR 513 PC wherein it has been held that the payment which under the lease is exigible by the lesser may be classed un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the same cannot be made applicable to the facts of the present case where the issue raised is completely different." 5.3. The Ld. CIT(A) finally considered the decision of the Tribunal in the case of M/s. National Stock Exchange of India Ltd. in ITA Nos. 1955/M/99, 2181/M/99, 4853/M/04,4485/M/04, 4854/M/04, 356/M/01and 5850/M/00. At para 5.45 of his order on page 57, the Ld. CIT(A) has given a comparative chart of the facts in the case of the assessee and that in the case of NSE and after comparing the facts finally concluded that the facts of the case of the NSE are identical to the facts of the case of the assessee and observed that in the case of NSE, the stand of the department as well as the decision of the Tribunal was that the consideration paid for acquiring leasehold rights in land is a capital expenditure and not 'rent'. 5.4. The Ld. CIT(A) finally concluded that the amount paid by the assessee is lease premium for acquiring leasehold rights and additional FSI in respect of the leased plot and the same is not in the nature of rent as contemplated u/s. 194-1 of the Act. Accordingly, the assessee was not required to deduct tax at source u/s. 194-1 of the Act and del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) that the assessee which had taken a quarry on lease, the lease rent paid was capital expenditure and the Hon'ble High Court also affirmed the decision of the Tribunal. The Hon'ble Apex Court while confirming the decision of the Hon'ble High Court held that premium for lease or any lumpsum payment for obtaining a lease for a long period is a payment for enduring advantage, so that it is a capital expenditure which is not deductible . The Hon'ble Apex Court also confirmed the decision of Hon'ble Madras High Court that even the alternate claim for proportionate deduction of the amount, paid during the period of lease is not admissible. Therefore, considering the reasons as mentioned hereinabove and the decisions of ITAT, Mumbai Bench (supra) wherein it has been held that single payment made for acquisition of right of lease to enjoy leasehold rights in the land granted to the assessee is a capital expenditure. Similarly, ITAT Delhi Bench (supra) has held that the lease premium paid by assessee to CIDCO is not in the nature of rent as contemplated u/s 194-I of the Act. Hence, we agree with ld. CIT(A) that the provisions of section 194-I of the Act to deduct TDS on the lease premium p ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
