TMI Blog2015 (11) TMI 1377X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Authority, Mumbai. The only ground raised in this appeal pertains to holding that the amount paid by the assessee bank (the lessee) to City Industrial Development Corporation (MMRDA) (Lessor) was not in the nature of rent as defined u/s 194 I of the Act. 2. During hearing of this appeal, the ld. DR, Shri O.P. Meena defended the conclusion arrived at in the assessment order by contending that the ld. Commissioner of Income Tax (Appeals) erred in accepting the claim of the assessee that no tax deductible from the payment made by the assessee to the MMRDA for acquisition of plot of land on lease from MMRDA and further ignoring the definition of rent as contained in the said section resorting to interpretative reasoning. On the other hand, the ld. counsel for the assessee, Shri V. Mohan, defended the conclusion arrived at in the impugned order by contending that the impugned issue is covered by the decision of the Tribunal in the case of Navi Mumbai SEZ Pvt. Ltd. vs Income Tax (ITA No.738 to 741/Mum/2012), ITO(TDS) vs Wadhwa and Associates Realtors (P) Ltd. (2013) 36 taxman.com 526 (Mumbai Trib.) and ITO vs Indian Newspaper Society (2013) 144 ITD 668 (Del.). This factual m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided 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 land, residential, commercial and social structures and collect service charges etc. to the extent required. iii) Later for promotion of above objective, by another resolution, passed by the government of Maharashtra on 15.09.2000, CIDCO was appointed as the nodal agency for setting up a Special Economic Zone at Navi Mumbai i.e. the NMSEZ. For this purpose, the assesseecompany 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. 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, assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inant objective for the payment of lease premium under lease deed(s) is acquisition of leasehold rights in the said leasehold land and not for the use of the land. That lease premium are consideration for purchase of larger interest in the said leasehold land which comprises of bundle of rights including but not limited to right of possession, right of long term enjoyment, right of development by way of construction of building thereon, right to sale constructed premises on ownership basis right to collect and appropriate the sale proceeds etc. Thus by implication lessor would forego all such rights in favour of lessee permanently. It was also contended that rent as defined in section 194- I of the Act, envisages such payments only for use of land or building, without there being any corresponding acquisition of larger rights in the said leasehold plots. 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 onspecified occasion to the transferor of land. Relying o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that there are various restrictive clauses in the lease agreement which negates the assessee s contention that it has acquired rights in the land and not merely the rights to use the land. AO has stated that had it being a case of acquisition of land rights, there was no need to put restrictive clauses in the agreement. AO after considering the decisions of the Hon ble Delhi High Court in the case of United Airlines V/s CIT reported in 152 Taxmann 516(Delhi), the caseof CIT V/s Reebok Co. reported in 163 Taxmann 61 (Del), the decision of Hon ble Karnataka High Court in the case of CIT V/s HMT Ltd 67 Taxmann 506 (Kar) and decision of the Hon ble Andhra Pradesh High Court in the case of Krishna Oberoi V/s Union of India 123 Taxmann 709 has held that the lease premium paid by the assessee is in the character of rent as per extended definition contained under section 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 ₹ 50 crores in assessment year 2006-07, ₹ 946.06 crores in assessment year 2007-08, ₹ 1033.61 crores in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich comprises of bundle of rights including but not limited to right of possession, right of long term enjoyment, right of development by way of construction of building thereon, right to sale constructed premises on ownership basis, right to collect and appropriate the sale proceeds, etc. That grant of lease by CIDCO in favour of assessee is a capital assets. Hence the consideration received by CIDCO is a capital receipt and not income by way of rent. The ld. CIT(A) has also stated that assessee further submitted before him as under : Rent as defined in Section 194-I of the Income-tax Act, 1961 envisages such payments made under a lease only for use of land, without there being any corresponding acquisition of larger rights in the said leasehold plots. Hence the lease premium paid by us to CIDCO are clearly distinct from Rent. Further to the above explanation, Section 105 of the Transfer of Property Act, 1882 defines a lease of an immovable property as transfer of right to enjoy the property, made a certain time in consideration of a price. The Section further distinguishes between Lease Premium and Rent. Rent is defined u/s 105 of the Transfer of Property Act, 1882 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Act. Thus, question of deduction of TDS on above payment will not arise. 8.1 It is also observed on perusal of order of ld. CIT(A) that assessee also referred clauses (v) and (vi) of sub-section (47) of section 2 and section 269UA(d) of the Income Tax Act and stated that lease of land is considered as an immovable property and the lease premium paid to CIDCO is consideration for transfer of immovable property which is taxable under section 45 as capital gains on sale of capital assets. Therefore, in the hands of purchaser consideration paid by way of lease premium is for acquisition of a capital asset. Thereafter, assessee referred the cases before ld. CIT(A) which are discussed by ld. CIT(A) at pages 20 to 23 of the impugned order(s) which we consider relevant to reproduce hereinbelow: 1. When lease premium is paid in respect of lease hold land on lease for a period of 60 years the appellant cannot claim write-off of the lease premium on proportionate basis. In the case of JCIT Special Range 23 v/s National Stock Exchange of India, Hon ble ITAT, Mumbai in ITA No. 1955/M/99, 2181/M/99, 4853/M/04, 4485/M/04, 4854/M/04, 356/M/01, 5850/M/00 upheld the AO s conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a capital receipt and not in the nature of advance rent. 1. Decision of Supreme Court in the case of Commissioner of Incometax V/s Panbari Tea Co. Ltd. OF INDIA (1965) 57 ITR 422 (SC) Section 4 of the Income-tax Act, 1961 [Corresponding to section 3 of the Indian Income-tax Act, 1922J - Income - Chargeable as - Assessment year 1952-53- Assessee company leased out tea estates along with machinery and buildings and received premium -ITO made assessment treating premium as a revenue receipt - Whether since, there was a transfer of substantive interest of lessor in estates to lessee and a conferment of a right on lessee to use said estates by exploiting same, premium received by assessee and balance in specified number of half-yearly installments was a capital receipt - Held, yes. 2. Decision of Patna High Court in the case of Sri Sri Raja Shiva Prasad Singh of Jharia Rata Jyoti Prasad Singh Deo of Panchkote V/s Crown SIR DAWSON MILLER KT, K.C., CJ. AND FOSTER. J. (1924) 1 ITC 384 (Pat). Section 4 of the Income-tax Act, 1961 [Corresponding to section 3 of the lndian Income-tax Act, 1922) - Income Chargeable as - Assessee received certain amount by way of salami o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry wide and comprehensive and covers any payment by whatever name called under any lease, sub-lease, tenancy or other agreement or arrangement and leaves no scope for any interpretation. That all the payments under the lease by whatever name called are rent within the meaning of section 194-I of the Act. AO has stated that one has to look at substance and not the form of the transaction while considering the provision of law. The AO also placed reliance on the decision of the Hon ble Calcutta High Court in the case of Braithwaite and Co. India Ltd, 111 ITR 542 and Karnataka High Court Judgment in the case of CIT V/s HMT Ltd (supra). Ld.CIT(A) has also stated that ld.Addl. CIT also contended in the personal hearing that TDS provisions are a separate code in themselves. That while applying these provisions, one has to look into the liability of the deductor only, irrespective of the tax liability of the deductee. It was submittedthat it is not necessary that capital expenditure in the hands of one party is also a capital receipt in the hands of other party. AO in the written submissions also submitted that the lease agreement signed by CIDCO with the assessee contains various restr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; ii) The lease premium has been paid for getting possession of the lease property before the lease agreement is entered into. iii) The Appellant (Lessee) has a right to own and transfer the lease property for a consideration subject to compliance of conditions stipulated in the lease agreement. iv) The lease property under the agreement can be inherited or succeeded by the legal heir or successor; v) The clauses in the lease agreement refer to the payment made by the Appellant (Lessee) as a premium being consideration for acquiring the lease hold property. None of the clauses in the lease agreement refers to the premium paid by the appellant (lessee) as advance rent; vi) The Appellant(Lessee) will have no right to get any refund of premium paid for acquiring the lease hold right on its surrender before the expiry date. vii) The various clauses of the lease agreement which are referred by the AO in its submission before your Honour as restrictive clauses, are in fact regulatory clauses incorporated in the lease agreement for desired development of the leased area in a particular manner and a particular purpose as regulatory authority provides com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmits that its submission concerning lease premium paid is fully supported by various judicial pronouncements which are discussed in detail by the Hon ble ITAT special bench, Mumbai in the case of Mukund Ltd. xii) Recently the Hon ble ITAT, Mumbai had an occasion to consider similar issue wherein the lease premium paid by National Stock Exchange of India Ltd. to MMRDA for acquiring leasehold right in land at Bandra Kurla Complex was claimed to be a deductible advance rent over the lease period. The Hon ble ITAT following Mukund Ltd s case and clearly held that such payment of lease premium constitutes a capital expenditure for acquiring lease hold right and not an advance rent for a lease period. In View of the above submissions it is respectfully submitted that the lease premium paid by the Appellant (Lessee) cannot be considered to be an advance rent within the meaning of section 194-I of the I. T. Act and the order passed by the AO u/s 201/201(1A) shall be vacated 9. Ld. CIT(A) has stated that he has considered AO s order, submissions as well as the assessee s submissions and rejoinder. He has stated that he has studied the Development Agreement and the Lease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lease premium of ₹ 285.87 crores, vide lease deed dated 16.3.2006. Out of this amount, an amount of ₹ 50 crores has been paid by the appellant in the current year. vii. By virtue of the said lease deed(s), the appellant has acquired leasehold right in the land for the purpose of developing, designing, planning, financing, marketing, developing necessary infrastructure, providing necessary services, operating and maintaining the infrastructure, administering and managing the SEZ. The appellant also has acquired the rights to determine, levy, collect. retain and utilize the user charges, fees for provision of services and / or tariffs in accordance with the terms land conditions provided in the Development Agreement and the lease deed(s). viii. The lease deed(s) as well as the Development Agreement, assigned to the appellant rights to develop, construct and dispose off residential and commercial spaces as per terms and conditions provided therein. ix. The appellant is also entitled to grant sub-leases in respect of the portions of the demised (leased) land, in accordance with the applicable law, and as per the provisions of the lease deed. x. Simil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 44AB during the financial year immediately preceding the financial year in which such income by way of rent is credited or paid, shall be liable to deduct income-tax under this section.] Explanation.-For the purposes of this section,- [(i) rent means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any,- (a) land; or (b) building (including factory building); or (c) land appurtenant to a building (including factory building); or (d) machinery; or (e) plant; or (f) equipment; or (g) furniture; or (h) fittings, whether or not any or all of the above are owned by the payee;] (ii) where any income is credited to any account, whether called Suspense account or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. 11. Ld.CIT(A) vide paras 5.20 to 5.28 has held that lease premium paid by the assessee under lease is paid for obtai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sense that certain more valuable rights in the property are transferred. As per legal understanding of the terms, the transaction in which licence ' is granted to the transferee for use of the property is more often likely to be to the transaction between a landlord and a tenant whereas in a 'lease' transaction pertaining to an immovable property, it may not be so very often. Therefore, in my opinion, although the meaning of term 'rent' used in the above section isvery wide, still cannot be applied to all and any of the transactions out of context indiscriminately. 5.22 Therefore, if the tenant/ lessee/ licensee of the property uses the property for his own purpose or employs it for his own benefit, the consideration paid would be 'rent'. However, if the property is exploited in a manner that its identity does not remain the same and thereafter it is sold for a profit, I'm afraid, it would not be called 'use' of property by the tenant; rather it would be exploitation of the property by virtue of certain rights, which would be over and above the rights of a tenant (which are for mere use of the property may be with certain modif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lves. I also agree that it is not desirable or permissible to pick out a word or sentence from the judgement of a Court divorced from the context of the question under consideration and treat it to be the complete law declared by the Court (refer CIT Vs. Sun Engineering (supra)]. However, everything would depend upon the facts of each case and the facts of the cases cited as well as the context in which the cited decisions have been delivered. - 198 ITR 297(SC) 5.26 Although the term 'rent' has been defined in the above section of the Act. other terms like 'lease', 'lease premium', 'lessor' and 'lessee' etc. have not been defined in the Act. It may be useful to refer to the meaning of these terms as provided in the Transfer of Property Act, 1882. Section 105 of the Transfer of Property Act defines the term lease 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 transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneral right may properly be regarded as a capital asset, and the money paid to purchase it may properly be held to be a payment on capital account. But the royalties were on a different footing. 5.31 In the Member for the Board of Agricultural Income Tax Assam V/s Sindhurani Chaudhrani and ors, 32 ITR 169, the Hon ble Supreme Characterized a lease premium (salami) as a lumpsum non-recurring payment. It has been held : Where salami is in the form of a lumpsum-non- recurring payment made by a prospective tenant to the landlord as a consideration for the settlement of agricultural land and parting with certain rights of the land in the land in favour of the prospective tenants, and is paid anterior to the constitution of relationship of landlord and tenant, it is not rent within the meaning of the word used in the definition of agricultural income in section 2(1)(a) of the Assam Agricultural Income Tax Act, 1939. It has all the characteristics of a capital payment and it is not revenue. It is, therefore, not agricultural income within the meaning of that Act. 5.32 Similarly in the case of Chintamani Saran Nath Sah Deo V/s Commissioner of Income-tax [1961] 41 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... joy the 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. The former is a capital income and the latter a revenue receipt. 5.35 The Court further observed that : in some cases, the so-called premium is in fact advance rent and in others rent is deferred price. It is not the form but the substance of the transaction that matters. The nomenclature used may not be decisive or conclusive but it helps the court, having regard to the other circumstances, to ascertain the intention of the parties. After considering various facts and provisions of law, the Supreme Court, while approving the order of High Cout held that the receipt of premium is capital receipt and not revenue receipt. 5.36 Hon'ble Bombay High Court in the case of Khimline Pumps Ltd., 258 ITR 459 have on the basis of identical facts and circumstances held that, an amount of ₹ 45 lakhs paid by the assessee to M/s APVE Ltd (which was being wound up) for acquisition of le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land in Kalva Industrial Area. The plea of the assessee that the lease agreement was not entered into till date and hence, the status of the assessee is that of a licensee only, makes no difference, since on page-2 of the agreement of the assesseecompany with MIDC dated 5-3-1992, it is specifically mentioned that the licensee shall be deemed to be bare licensee only of the premises at the same rent and subject to same terms as if the lease had been actually executed. A reading of the agreement dated 5-3-1992 entered into with MIDC clearly shows that the amount of ₹ 2.04 crores were paid by the assessee-company to MIDC as Premium or Salami for the acquisition of the premises of lease for a period of 99 years. In reply to a specific query from the Bench, the Ld. Counsel for the assessee submitted that the cost of boundary walls on this 50 acres of land was capitalized in the account books of the assessee and depreciation was claimed by the assessee. The action of the Assessing Officer in allowing proportionate rent in the subsequent assessment years 1995-96 and 1996-97, shall not alter the character of the amount paid by the assessee to MIDC for acquisition of the premises. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hikar, 172 ITR 311 Hon ble Supreme Court held that the premium received for grant of lease of a plot of land for 99 years is chargeable as capital gains as the assessee had transferred an asset of enduring nature viz right of possession and enjoyment of the property. Thus various judgments delivered by the Courts and Tribunals brings out a distinction between the lease premium and rent under the Income tax laws which are also in line with the principles of general law laid down under Transfer of Property Act. 5.39 The AO has cited cases where the term rent was given wide meaning as envisaged in section 194-I of the Act and in view of the facts and the circumstances of the case. In all these cases, the decision given is not at all in conflict with the discussion and the finding arrived at paras 5.20 to 5.22 above. In the case of Krishna Oberoi V/s Union of India (supra), the amount paid for use and occupation of hotel rooms was considered as rent within the meaning of section 194-I of the Act. It was held that there was no weighty or sound reason to limit the meaning of work rent occurring in explanation to section 194-I only to the payment made by a tenant or lessee for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . I find that in none of the above cases the court has held that the lease premium in similar circumstances is in the nature of advance rent and hence liable for deduction of TDS u/s 194-I of the Act. The cases relied upon by the AO are thus distinguishable on facts and in law and the same cannot be made applicable to the facts of the present case where the issue raised is completely different. I therefore do not find any merit in the submission of the AO so far as the case laws cited by him are concerned. 5.42 The AO has cited the decision of Calcutta High Court in the case of Braithwaite Co India Ltd, 111 ITR 542 where the assessee had taken on lease, a whole undertaking for 99 years on payment of rent of ₹ 4 lakhs per annum from Angus Co Ltd The assessee claimed the same as the revenue expenditure in its income tax return which was not accepted by the AO, who held that the above arrangement was in effect a sale of the undertaking to the assessee. On these facts, Hon'ble High Court held that the assessee is entitled for deduction of rent, which was held to be revenue expenditure It is evident from the facts of this case that what was taken on lease by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdictional High Court where as the decision of non-jurisdictional High Courts is not binding. 5.44 Since the principles laid down in all the cases are similar, I have not discussed all the decisions cited by the two sides and have quoted only a few landmark judgments so as to avoid repetition (It may be noted that the decision of Calcutta High Court in the case of Purnendu Mulick 116 ITR 591 and Patna High Court in the case of Sri Sri Raja Shiva Prasad Singh of Jharia Raja Jyoti Prasad Singh Deo of 1 ITC 384 (all supra) are also noteworthy]. However, it is worthwhile to note that similar issue came up very recently before the Hon ble ITAT, Mumbai in the case of M/s National Stock Exchange of India Limited in ITA Nos. 1955/M/99, 2181/M/99, 4853/M/04, 4485/M/04, 4854/M/04, 356/M/01, 5850/M/00. The facts of this case are that The Bombay Metropolitan Region Development Authority (BMRDA) [Now known as Mumbai Regional Development Authority i.e MMRDA] had given on lease a plot of land in G-Block of the Bandra Kurla Complex to National Stock Exchange for a total lease premium of ₹ 90.60 crores for a period of 80 years. The assessee in its computation of total income had g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of sections 201(1) /201(1A) of the Act in respect of all the assessment years under consideration are deleted by him. Hence these appeals by the department before the Tribunal. 14. Ld. DR while supporting the order(s) of the AO submitted that assessee acquired right to use land for a period of 60 years under lease deed(s) entered into between the assessee and the CIDCO. That the assessee has not acquired the ownership right for the land. Thus, the AO had rightly treated so called lease premium as rent. Hence the said lease premium paid by the assessee to CIDCO is covered within the meaning of rent as per section 194-I of the Act. He submitted that the definition of rent provided u/s 194-I of the Act is extensive and the word any payment implies that it would include all sorts of payments made under any agreement/arrangement. He submitted that the assessee made the lump sum payment for use of land for a period of 60 years and therefore, it is a rent under section 194-I of the Act. He submitted that such lumpsum premium paid by the assessee is an advance rent and therefore, the assessee was required to deduct tax at source u/s 194-I of the Act. Ld. DR submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99, 2181/M/99, 4853/M/04, 4485/M/04, 4854/M/04, 356/M/01, 5850/M/00 also considered the similar issue on identical facts and held that consideration paid for acquiring leasehold rights in land is a capital expenditure and not rent. Ld. AR submitted that the said decision of M/s National Stock Exchange of India (supra) and of Mumbai Bench of the Tribunal are considered by ld. CIT(A) in paragraph 5.44 of the impugned order(s) and also by the Tribunal in its decision in the case of M/s Wadhwa and Associates Realtors Pvt Ltd. (supra) to hold that provisions of section 194-I do not apply to the payment for acquiring leasehold land as it is a capital expenditure. Ld. AR submitted that issue is squarely covered in favour of the assessee by aforesaid decisions of the Tribunal which have been decided by following the decisions of the Hon ble Apex Court and the decisions of jurisdictional High Court as well as other High Courts(supra). Therefore, the decision of the ld. CIT(A) is right and the same may be confirmed. 16. Ld. DR in his rejoinder submitted that the said decisions relied upon by the ld. AR (supra) are distinguishable as the same have been decided on the issue as to whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her agreement or arrangement for the use of (either separately or together) any,- (a) land; or (b) building (including factory building); or (c) land appurtenant to a building (including factory building); or (d) machinery; or (e) plant; or (f) equipment; or (g) furniture; or (h) fittings, whether or not any or all of the above are owned by the payee;] (ii) where any income is credited to any account, whether called Suspense account or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.] 18. On perusal of the explanation, we agree with the ld. DR that the word rent as defined u/s 194-I has a wide meaning than the rent in common parlance. 19. In the case before us, the assessee has entered in to lease agreements with CIDCO for acquisition of leasehold rights in the land to develop and operate the Special Economic Zone at Navi Mumbai. Assessee has paid premium for demised lease land. The question before us is as to whether the said lease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t lease deed(s) and the Development Agreement have assigned to the assessee leasehold right which includes bundle of rights. The Assessee has paid the premium for lease deed(s) for the demised land to acquire entire rights of the land for a period of 60 years. Therefore, we are of the considered view that the said payment of lease premium is a payment for acquisition of leasehold land and not merely for use of land. The assessee has made payment for entering into lease agreements to acquire lease hold rights in the land for a period of 60 years and not under a lease. Similar issue came up before the Special Bench ITAT Mumbai in the case of Mukund Ltd. (supra). The assessee acquired a land on lease for a period of 99 years from the Maharashtra Industrial Development Corporation (MIDC) and paid ₹ 2.04 crores as premium of leasehold land and apart from fixing annual rent at ₹ 1 per annum. The assessee claimed that the said premium on leasehold land is a revenue expenditure, which was disallowed by the AO holding it as a capital in nature. Ld. CIT(A) held that the premium cannot be treated as capital expenditure as the assessee did not acquire ownership of land. It was held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of rent. The Hon ble Apex Court has held in the case of A.R. Krishnamurthy (supra) that lease of land is transferred of interest in the land and creates a right in rem : and there is a transfer of title in favour of the lessee though the lessor has the right of reversion after the period of lease terminates. It was held that grant of mining lease at a premium is a capital asset. The Hon ble Delhi High Court also brought out the difference between the amount payable for acquiring lease hold rights as premium and the amount which would be payable for use of assets as rent in Bharat Steel Tubes Ltd V/s CIT (2001) 252 ITR 622(Del). Their Lordships have held that when the premium is paid at the beginning of the mining lease for a long period, ordinarily represents the purchase of an out and out sale of the property and the sum received is capital and not income, but rent or royalty paid periodically is income. It was held that the principle is the same, whether the premium is for a simple lease of land or for a lease of mineral rights. Therefore, when the interest of the lessee is parted with for a price, the price paid is premium or salami. But the periodical payments made f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easehold land in favour of the assessee. That there is a conferment of right on the lessee by acquiring leasehold land and the premium has been paid in lieu thereof and not for the purpose of use of land. The case cited by the ld. CIT(A) of Raja Bahadur Kamakhya Narain Singh of Ramgarh (supra) and the case of the Hon ble Apex Court in the case of Panbari Tea Co. Ltd. OF INDIA (supra) squarely apply to the facts of the case before us that the lease premium paid by the assessee to CIDCO for acquiring leasehold land is capital expenditure to acquire capital asset and not for the use of land. Therefore, we agree with ld. AR that the lease premium paid by the assessee for acquiring leasehold land with a right to develop and market, NMSEZ, cannot be said to be an advance payment of rent. Accordingly, premium paid by the assessee for acquiring leasehold land under the lease deed(s) entered into, although with restrictive covenants is a capital expenditure, and it does not fall within the ambit of rent under section 194-I of the Act. 21.3 We observe that similar issue has also been considered recently by the Mumbai Bench of Tribunal vide order dated 3.7.2013 (supra) in the case of M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dhrani Ors 32 ITR 169 wherein it has been held that Salami is in the form of a lump sum non recurring payment made by a prospective tenant to the landlord as a consideration and is paid anterior to the constitution of relationship of landlord and tenant, it is not rent within the meaning of the word used in the definition of agricultural income in section 2(1)(a) of the I.T. Act. It has all the characteristics of a capital payment and it is not revenue. The Ld. CIT(A) further discussed certain other judicial decisions and in particular the decision of the Hon ble Jurisdictional High Court in the case of CIT Vs Khimline Pumps Ltd., 258 ITR 459 wherein the Hon ble Jurisdictional High Court has held that an amount of ₹ 45 lakhs paid by the assessee to M/s. APVE Ltd., for acquisition of leasehold land was a capital expenditure and hence the same was not deductible. The Ld. CIT(A) has further considered the decision of the Special Bench of Mumbai Tribunal in the case of JCIT Vs Mukund Ltd. 106 ITD 231 wherein the issue was whether the premium paid for acquiring leasehold right in land is revenue or capital . The Special Bench has held that the same is capital expenditure. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture to acquire land on lease with substantial right to construct and cover the building complex. 22. During the course of hearing ld. DR submitted that the above decisions of ITAT, Delhi Bench and ITAT Mumbai Bench (supra) are distinguishable. Whereas the decision of ITAT, Chennai Bench in the case of Foxconn India Developers Pvt.Ltd (supra) should be considered and be followed . We observe that the said decision of ITAT has been considered by the ld. CIT(A) in para 5.40 of the impugned order. On perusal of the said order of ITAT, Chennai Bench, we observe that in the said order of Chennai Bench only the provisions of section 194-I has been considered in respect of upfront charges paid in respect of lease of land for a period of 99 years. On perusal of the facts of the case, it is observed that the assessee had already entered into lease agreements and the said payment was made to SIPCOT Ltd under lease agreement. Therefore, the said payment is for lease or use of land and accordingly the payment could not be said to have been made for acquiring leasehold land and hence, it is observed that the Chennai Bench has held that the payment by the assessee company to CIDCO is rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or assessment years 2006-07 to 2009- 10 are dismissed. 2.2. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, conclusion drawn in the aforesaid order of the Tribunal dated 16/08/2013, assertions made by the ld. respective counsels, if kept in juxtaposition and analyzed, we note that in the aforesaid order an elaborate discussion has been made by the Tribunal along with citing various judicial pronouncements on identical issue/facts and concluded that the provisions of section 194-I are not applicable to the facts of the present appeal to deduct TDS on the lease premium paid by the assessee. The ld. Commissioner of Income Tax (Appeals) in the impugned orders has also followed one of the aforesaid decisions, relied upon by the assessee and more specifically M/s Wadhwa Associates realtors Pvt. Ltd. (supra) along with various other decisions and found that the payment to MMRDA is for additional built up area and also for granting fee of FSI and such payments cannot be equated to rent, thus, we find no infirmity in the impugned orders, wherein, the decision of the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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