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2015 (8) TMI 1024 - ITAT CHENNAI

2015 (8) TMI 1024 - ITAT CHENNAI - [2015] 44 ITR (Trib) 139 (ITAT [Chen]) - Non deduction of TDS u/s 194-I - nature of lease agreement - AO found the assessee as assessee in default under Section 201(1) and levied penal interest under Section 201(1A) - period of limitation for issuing order u/s 201(3) - Held that:- The date of filing of the statement for all practical purposes has to be taken as 18th August, 2011. If the date of filing of statement is taken as 18.08.2011, then the impugned order .....

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ost of acquisition of the land could be decided after going through the so15 called lease deed executed by the assessee and TIDCO. Moreover, the matter needs to be re-examined in the light of the provisions of Section 2(47) read with Explanation (i) to Section 194-I of the Act. This Tribunal is of the considered opinion that the nature of the transaction could be ascertained only after going through the lease agreement said to be executed by the assessee and Tamil Nadu Industrial Development Cor .....

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e Tax (Appeals)-VII, Chennai, dated 28.02.2014 and pertains to assessment year 2009-10. 2. Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the Assessing Officer found the assessee as assessee in default under Section 201(1) of the Income-tax Act, 1961 (in short 'the Act') and levied penal interest under Section 201(1A) of the Act. According to the Ld. counsel, the Assessing Officer passed the order on 3.10.2013 treating the assessee as assessee in default for the a .....

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hall, after paying the tax deducted to the credit of the Government within the prescribed time, prepare such statements quarterly for the year ending 30th June, 30th September, 31st December and 31st March in each financial year. According to the Ld. counsel, the assessee was filing its statements under Section 200 of the Act and also filed its TDS return in the first quarter of the financial year 2008-09. According to the Ld.counsel, the due date for passing the impugned order under Section 201 .....

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gust, 2011 for the second quarter of financial year 2008- 09. This is the revised statement filed by the assessee. The Ld. D.R. placed a Xerox copy of the statement filed under Section 200 of the Act on file. Since the revised statement itself was filed on 18th August, 2011, according to the Ld. D.R., the order passed by the Assessing Officer on 03.10.2013 is within the period of time limit provided under Section 201(3) of the Act. Therefore, the contention of the assessee that the order passed .....

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.2011. The fact remains that the assessee revised itself the statement filed under Section 200 of the Act by way of correction on 18th August, 2011. The Assessing Officer may not be in a position to consider the revised statement filed by the assessee on or before 18.08.2011. Therefore, the date of filing of the statement for all practical purposes has to be taken as 18th August, 2011. If the date of filing of statement is taken as 18.08.2011, then the impugned order is within the period of time .....

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he purpose of development of Special Economic Zone in relation to Information Technology and Information Technology Enabled Services, the Government of Tamil Nadu, by an order dated 24.04.2007, allotted 25.27 acres of land on lease for a period of 99 years. The assessee paid ₹ 1412,79,68,017/- to Tamil Nadu Industrial Development Corporation Ltd. The Ld.counsel clarified that in fact the Government of Tamil Nadu authorized Tamil Nadu Industrial Development Corporation Ltd. to lease 25.27 a .....

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ee is upfront fee for allotment of the land for 99 years. The Ld.counsel pointed out that the lease for 99 years is almost like a sale. Therefore, what was paid by the assessee is a sale consideration, hence there is no question of deduction of tax under Section 194-I of the Act. Referring to a unreported judgment of Madras High Court in CIT v. Rane Brake Linings Ltd. in Tax Case (Appeal) No.1031 of 2007 dated 07.04.2014, the Ld.counsel submitted that the upfront fee paid by the assessee for get .....

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nce on the judgment of the Bombay High Court in Director of Income-tax v. Mahindra & Mahindra Ltd. (2014) 48 taxmann.com 150 and submitted that for the assessment year 1998-99, the Income-tax Act does not prescribe any limitation for declaring the assessee as assessee in default under Section 201(1) of the Act. Inspite of that, the Bombay High Court found that the revenue authorities have to exercise their power to declare the assessee as assessee in default within a reasonable time. Since n .....

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ion to Section 194-I of the Act. Therefore, this Tribunal found that the assessee is liable to deduct tax at source. However, by placing reliance on the judgment of Apex Court in Hindustan Coca Cola Beverages Pvt. Ltd. v. CIT (2007) 293 ITR 226, the Ld.counsel submitted that the recipient has already paid the tax. Therefore, at the best, the Department could recover interest till the payment of tax by the recipient. 7. On the contrary, Dr. S. Moharana, the Ld. D.R. submitted that on identical ci .....

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hinery, furniture and fixtures and vehicles for 99 years. Under the lease agreement, the assessee was required to pay the lessor annual payments for 99 years. The agreement provided that in the event of premises being acquired by the Government, the lessor would entitle only to the capitalized value of the rent accrued for the unexpired period of lease and the remaining surplus would be paid to the lessee. The lessee was given option to renew the lease at much lower rent. The assessee claimed th .....

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ture of equated annuity payments consisting partly of price of the asset and partly of either the hire charges or interest in respect of unpaid purchase price. The Tribunal directed the Income Tax Officer to work out the interest embedded in each annual payment and allow the same as deduction and balance of the annuity, was found to be attributable to the capital value of the assets. Accordingly, the same was treated as capital expenditure. On further reference, the Calcutta High Court found tha .....

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rent, therefore, it was allowable as revenue expenditure. In view of the Calcutta High Court judgment in Braithwaite & Co.(India) Ltd. (supra), according to the Ld. D.R., the assessee is liable to deduct tax while making payment. 8. The Ld. Departmental Representative further submitted that the contention of the assessee is that the transaction amounts to sale of the property is not tenable. According to the Ld. D.R., the so-called upfront fee paid by the assessee was duly escalated and add .....

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ns of the Income-tax Act. Referring to Section 194-I of the Act, the Ld. D.R. submitted that the payment of rent for land is subject to deduction of tax under Section 194-I of the Act. According to the Ld. D.R., Section 194-I provides for deduction of 20% of the rent payable for use of the land or building where the payee is other than individual or HUF. 9. The Ld. Departmental Representative further pointed out that as per the Government order dated 11.03.2010, 25.27 acres of land were alienate .....

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um. Since the provisions of Section 194-I provide for deduction of tax on payment of rent for the use of the land, according to the Ld. D.R., the assessee is liable to deduct tax. Therefore, the CIT(Appeals) has rightly confirmed the order of the Assessing Officer. 10. We have considered the rival submissions on either side and perused the relevant material on record. We have also gone through the orders of the Government of Tamil Nadu. The Government order dated 11.03.2010 in G.O (Ms) No.28 iss .....

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The Government further found that Tamil Nadu Industrial Development Corporation has to retain only ₹ 5.50 Crores out of ₹ 1412.80 Crores received from the assessee and should have paid the balance of ₹ 1407/- Crores to the Government. On the request of the Chairman & Managing Director of Tamil Nadu Industrial Development Corporation, the above said balance amount of ₹ 88.22 Crores was treated as term loan for a period of three years and repayable with interest @ 10.5% .....

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y, hence, what was paid by the assessee is a capital amount for acquiring the land. The contention of the Revenue is that the amount paid by the assessee is only a lease rent for using the land, therefore, tax has to be deducted under Section 194-I of the Act. To appreciate the contentions made by the parties before the Tribunal, it is necessary to go through the copies of the lease agreement entered into between the parties. During the course of hearing, it was pointed out to the Ld.counsel for .....

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that he will file one more copy of the lease deed before the Tribunal, in fact, no such copy was filed till now. Therefore, this Tribunal is unable to appreciate the exact nature of transaction between the assessee and Tamil Nadu Industrial Development Corporation. Therefore, we have to proceed only on the basis of the facts which were brought on record by the Assessing Officer. 11. We have carefully gone through the judgments relied upon by the Ld.counsel for the assessee during the course of .....

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t;transfer" is defined in Section 2(47) of the Act. In fact, Section 2(47) is an inclusive definition and substituted by Taxation Laws (Amendment) Act, 1984 with effect from 1.04.1985. We also find that Parliament has introduced Section 194-I of the Act by Finance Act, 1994 with effect from 1.06.1994. Explanation to Section 194-I was substituted by Taxation Laws (Amendment) Act, 2006 with effect from 13.07.2006. For the first time in the Income-tax Act, the Parliament defined "rent&quo .....

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anation (i) to Section 194-I which was introduced with effect from 13.07.2006. In fact, this Bench of the Tribunal in Foxconn India Developer (P) Ltd. (supra) considered this identical issue and found that the assessee is liable to deduct tax on the lease rent in view of Explanation (i) to Section 194-I of the Act. However, after referring to judgment of Apex Court in Hindustan Coca Cola Beverages P. Ltd. (sulpra), this Tribunal found that since the payee has paid taxes, there cannot be any doub .....

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