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2015 (11) TMI 1382 - ITAT PUNE

2015 (11) TMI 1382 - ITAT PUNE - TMI - TDS u/s 194I - premium for acquisition of Lease hold rights for 99 years - Held that:- Where the lease premium paid to PCNTDA was a pre-condition for entering into the lease agreement, the same not being paid consequent to the execution of the lease agreement, cannot be said to be payment in lieu of rent as envisaged under section 194 I of the Act. In addition, the assessee had paid stamp duty on the market value of the plot represented by the lease premium .....

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led by the Revenue is directed against the order dated 09-12-2013 of the CIT(A)-V, Pune relating to Assessment Year 2011-12. 2. The grounds raised by the Revenue are as under : 1. The Ld.CIT (Appeals) erred in deleting the demand raised of ₹ 74,67,727/- u/s 201(1)/201(1A) of the Income Tax Act, 1961 in respect of lease premium payment paid to Pimpri Chinchwad New Township Development Authority (PCNTDA). 2. The Ld.CIT (Appeals) erred in considering the fact that the premium paid to PCNTDA i .....

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brief, are that the assessee is the proprietor of Sea Face Beach Resort, Polly House, Shri Samarth Engineering Company businesses. During the course of TDS verification in the case of Pimpri Chinchwad New Town Development Authority (PCNTDA) on 07-11-2012 it was noted that the assessee had entered into lease agreement for 99 years with PCNTDA on the terms and conditionis laid down by the lessor in the lease deed dated 28-02-2011 for Plot No.1/1 in sector No.32A of the Pimpri Chinchwad New Town D .....

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appeal the Ld.CIT(A) held that payment of lease premium to PCNTDA was a precondition for entering into lease agreement and therefore it cannot be said that the same was paid under the terms of lease agreement. He further observed that the stamp duty has been paid on the market value of the plot represented by lease premium. Relying on various decisions including the decision of the Mumbai Bench of the Tribunal in the case of Navi Mumbai SEZ Pvt. Ltd. vide ITA No.738 to 7741/Mum/2012 for A.Yrs. 2 .....

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e sides, we find an identical issue had come up before the Tribunal in the case of ITO Vs. Preetam Medical Foundation & Research Centre vide ITA No.190/PN/2014 order dated 16-01-2015 wherein similar demand u/s.201(1) & 201(1A) was raised by the AO in respect of lease premium paid to PCNTDA. The CIT(A) deleted such demand and on appeal filed by the Revenue, the Tribunal dismissed the appeal filed by the Revenue by holding as under : 5. We have heard the rival contentions and perused the r .....

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poses as per clause (N) of the lease deed. The assessee paid lease premium of ₹ 1,37,36,963/- for the said plot and further agreed to pay sum of ₹ 100/- per annum for the entire period of lease. The Assessing Officer (TDS) was of the view that the assessee was required to deduct tax at source under section 194 I of the Act at the time of payment of lease premium to PCNTDA. The Assessing Officer issued a show cause notice to the assessee and also issued summons to the deductor. In rep .....

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on the Lessee / assessee put up by the Lessor and it was observed by the Assessing Officer that this was not a case of freehold transfer or sale and the assessee was not the absolute owner of the property. The Assessing Officer thus, concluded that the assessee was liable to deduct tax at source under section 194 I of the Act on the lease premium paid to PCNTDA. The assessee having failed to deduct tax at source, was held to be in default under section 201(1) of the Act at ₹ 13,73,696/- an .....

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period and take back the possession of the land. However, the preliminary clause of the lease agreement reflects that the payment of lease premium was a pre-condition for entering into lease agreement. The CIT(A) has reproduced the preliminary clause of the lease agreement at page 7 of the appellate order, which are not being reproduced for the sake of brevity. The CIT(A) thus, held that the payment of lease premium of ₹ 1,37,36,963/- was a pre-condition for entering into the lease agreeme .....

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t of lease and further the said upfront payment was part of the conditions for acquiring leasehold rights, unlike the present case where, the payment of lease premium was a pre-condition for entering into a lease agreement. The CIT(A) placed reliance on the decision of Mumbai Bench of the Tribunal in Navi Mumbai SEZ(P) Ltd in ITA No.738 to 7741/Mum/2012, relating to assessment years 2006-07 to 2009-10, vide order dated 12.08.2013, in order to hold that the payment of lease premium to PCNTDA bein .....

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y (supra), wherein it was held as under:- 6. We have heard the rival contentions and perused the record. The assessee was an educational society registered under section 12A of the Act. The assessee was running various schools and colleges in the city of Pune. During the year under consideration, in order to establish another school in Pimpri Chinchwad area, the assessee in reply to an advertisement by PCNTDA, applied for a plot on leasehold basis. As per the Bid document, where the Bid quoted b .....

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rty. The assessee entered into a lease agreement with PCNTDA for 99 years and the lease rent was ₹ 100/- per annum for the period of 99 years. The assessee accordingly, deposited the premium amount of ₹ 2,20,24,860/-. After receiving the premium amount, the licenser i.e. PCNTDA agreed to execute Lease Deed to convey / transfer / assign the leasehold rights. The Lease Deed authorizes the assessee to build / construct any building on the said plot of land. The case of the assessee was .....

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n default for nondeduction of tax on source under section 194I of the Act on the lease premium paid to PCNTDA and demand under section 201(1) of the Act was raised and interest under section 201(1A) of the Act was charged, raising a demand of ₹ 22,90,585/-. 8. The CIT(A) vide para 8 referred to the preliminary clauses of the agreement entered into between assessee and PCNTDA and pointed out that the lease premium finds mention in the Lease Deed but the said payment of lease premium was a p .....

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n for acquiring leasehold rights unlike the present case where payment of lease premium was pre-condition for entering into lease agreement and therefore the facts of the case were clearly distinguishable. Further reliance was placed on the series of decisions, under which such similar payment of lease premium was held to be not subject to deduction of tax at source under section 194I of the Act. 9. We find that similar issue of payment of lease premium arose before the Mumbai Bench of the Tribu .....

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e case of M/s. Wadhwa Associates in ITA No.695/Mum/2012, vide order dated 03.07.2013, held that TDS was not required to be deducted under section 194I of the Act in respect of payment of lease premium to M/s. MMRD Ltd. 10. In view of above said facts and circumstances, wherein the lease premium was paid to PCNTDA by the assessee as a pre-condition for entering into a lease agreement, the same cannot be said to have been paid consequent to the lease agreement executed between the parties. Further .....

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