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Income Tax Officer (TDS) 2 (5) , Mumbai Versus M/s Progressive Civil Engineers Private Limited,

2016 (1) TMI 566 - ITAT MUMBAI

TDS u/s 194I - non deduction of TDS on the amount paid to the lessor towards lease premium - whether the said amount paid was not in nature of rent covered u/s 194I? - CIT(A) delted the addition - Held that:- We have observed that the assessee company has made payment to CIDCO towards lease premium for plot no 166 in Sector 27 of Belapuron on 5.5.2009 which is leased to the assessee company by CIDCO for 60 years , which in our considered opinion is for acquisition of capital asset being long ter .....

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rm the orders of the CIT(A) deleting the additions made by the AO on accounts of defaults u/s 201(1) and 201(1A) of the Act. - Decided in favour of assessee. - ITA Nos.2930/Mum/2014 - Dated:- 23-10-2015 - Shri Shailendra Kumar Yadav, Judicial Member, and Shri Ramit Kochar, Accountant Member For The Revenue : Shri C.W.Angolkar For The Appellant : Sh. Rajeev Waglay ORDER Per Ramit Kochar, Accountant Member This appeal has been filed by the Revenue against the order dated 7th February 2014 passed b .....

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by CIT(A) that the said amount paid was not in nature of rent covered u/s 194I of the Act and not confirming the assessee company as an assessee in default u/s 201(1) of the Act for failure to deduct and pay TDS and for levying interest u/s 201(1A) of the Act. 3.The Brief facts of the case are that during the course of survey u/s 133A of the Act on 04.02.2011 in the case of the CIDCO ,it was found by Revenue that the CIDCO had given plots to the assessee company on lease through tender against w .....

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ling under the provisions of Section 194I of the Act and why the assessee should not be treated as an assessee in default as per provisions of Section 201(1) and 201(1A) of the Act. 5. The assessee company submitted before AO that it has been allotted plot no 166 in Sector 27 of Belapuron on 5.5.2009 which is leased to the assessee company under the provisions of Section 118 of Maharashtra Regional and Town Planning Act,1966 by a Development Authority constituted by State Government namely the C .....

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ot liable to deduct TDS as per provisions of the Act . The assessee company, without prejudice, submitted that till the erection of building for residential purposes within a period of 4 years from the date of agreement, the lease can not be executed and till that time the assessee company shall be merely licensee only liable to pay rent and service charges to CIDCO as if the lease has been executed and the Managing Director has power to revoke the license and re-enter the land even if Town plan .....

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ITR 226 (SC). 6. The AO rejected the contentions of the assessee company by relying on Section 194I of the Act and held that the said section 194I of the Act is of widest amplitude and shall cover rent and lease in relation to any kind of property transactions be it lease, sub-lease, tenancy or any other agreement or arrangement for use of land, building, land appurtenant to a building ,machinery, plant, equipment , furniture , fittings whether or not any or all of these are owned by the payee .....

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ng period running into 60 years which cannot change the inherent nature of the transaction which is giving land on lease basis by the CIDCO and hence TDS is deductible on the said payments. The agreement with CIDCO contains several clauses restricting usage of land that even sign board and advertisements cannot be put by the assessee company. Other restrictive clauses in the agreement relate to not to excavate, not to erect beyond the building line, sanitation, alteration, to repair , to enter a .....

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t TDS u/s 194I of the Act. Thus, the AO held that the assessee company has paid ₹ 1,38,12,158/- towards lease premium or cost of additional FSI as consideration for use of land under the lease , the assessee has committed default with in the meaning of Section 201(1) of the Act by not deducting TDS u/s 194I of the Act and also the assessee company is also liable to pay interest u/s 201(1A) of the Act. 7. Aggrieved by the orders of the AO, the assessee company filed first appeal with the CI .....

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esidential units with a right to sell the constructed area on ownership basis which is towards bringing capital assets and hence there is no question of deduction of TDS. 8. The CIT(A) held that the premium is paid to CIDCO for granting allotment of plot. The amount paid is as per rates prevalent as per stamp duty ready reckoner and payment for acquisition of land rights and not merely a payment of rent for use of land. The CIT(A) held that the Mumbai Tribunal in Shah Group Builders Limited in I .....

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e AO on accounts of defaults u/s 201(1) and 201(1A) of the Act. 9. Aggrieved by the orders of CIT(A), the Revenue is in appeal before us. 10. The Ld. DR relied upon the orders of the AO and contended that the payment of ₹ 1,38,12,158/- has been made by the assessee company to CIDCO towards lease premium for lease of plot for 60 years entered into by the assessee company with CIDCO and no TDS is deducted while the said payment is duly covered under the provisions of Section 194I of the Act .....

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ding rights in the plot. The assessee company reiterated its submissions as made before authorities below. The assessee company relied upon the orders of CIT(A) and submitted that one time payment of ₹ 1.38 crores has been made for acquiring long lease of plot of land for 60 years. The assessee company relied upon the decision of Mumbai Tribunal in DCIT v. Paradise Infra-con Private Limited in ITA No. 4592/Mum/2012 - (2014) 40 CCH 0567 (Mum-Trib.), whereby Mumbai Tribunal has held that the .....

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velopment Corporation), towards premium for acquiring lease hold rights is in the nature of rent or not as defined in section 194-I of the Act, and accordingly, the assessee was not required to deduct the tax at source under section 194- I. 3. Before us, the learned Counsel for the assessee submitted that this issue is covered by a series of decisions given by the Tribunal, Mumbai Bench, in various cases, wherein it has been consistently been held that the amount of premium in such cases to the .....

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order of the Assessing Officer. 5. After carefully considering the relevant findings of the Assessing Officer and the learned Commissioner (Appeals) as well as various decisions relied upon by the assessee in ITO (TDS) v/s Wadhwa & Associates Realtors Pvt. Ltd., [2004] 146 ITR 694, and TRO v/s Shelton Infrastructures Pvt. Ltd., ITA no.5678/Mum./2012, order dated 19th May 2014, we find that the issue involved herein before us is squarely covered by the decisions of the Tribunal. In this case .....

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the definition of rent as stipulated under section 194-I of the Act. 6. The learned Commissioner (Appeals), after considering the detail submissions of the assessee and analyzing various decisions and also the lease deed between the assessee and CIDCO, came to the conclusion that such a payment cannot be treated as in the nature of rent within the meaning of section 194-I. The Tribunal in Shelton Infrastructures Pvt. Ltd. (supra), after noting series of decisions of the Tribunal, decided the is .....

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son is that the lease premium is capital expenditure to acquire land with substantial right to construct and cover the building complex. For the sake of ready reference, we are quoting the relevant observations and findings of the Tribunal in ITO v/s Trent Ltd., ITA no.4629/Mum./2012, order dated 21st August 2013, wherein the Tribunal observed and held as under:- 7. We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that a sim .....

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by the Tribunal in favour of the assessee for the following reasons given in para 9 to 10 of its order dated 3-7- 2013 (supra):- 9. We have considered the rival submissions, perused the order of the lower authorities and the material evidence brought on record in the form of paper Book and the judicial decisions relied upon by the rival parties. The entire grievance revolves around the premium paid by the assessee to M/s. MMRDA Ltd. for the leasehold rights acquired by the assessee through the .....

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efully perused the lease deed as exhibited from page-1 to 42 of the Paper Book. A careful reading of the said lease deed transpires that the 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, by any stretch of imagination, it cannot be equated with the rent which is paid periodically. A perusal of the records further show that the payment to MMRD is also for additional built up are and also for granting free of FSI a .....

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itional FSI and has further acquired/purchased the additional built up area for construction of additional area on the aforesaid plot. Thus the assessee has made payment to MMRD under Development Control for acquiring leasehold land and additional built up area. The decisions of the Tribunal in the case of M/s. National Stock Exchange (supra) and Mukund Ltd (supra) have been well discussed by the Ld. CIT(A) is his order. The decision of the Hon‟ble Jurisdictional High Court in the case of .....

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the issue involved in the present case as well as all the material facts relevant thereto are similar to the case of Wadhwa & Associates Realtors Pvt. Ltd. (supra) as well as Shree Naman Hotels Pvt. Ltd. & Shree Naman Developers Ltd. (supra) decided by the Tribunal, we respectfully follow the decisions rendered in the said cases by the co-ordinate Bench of this Tribunal and uphold the impugned order of the ld. CIT(A) holding that the lease premium paid by the assessee to MMRDA not being .....

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meaning of rent as contemplated in section 194-I and, therefore, no deduction of tax at source is required. We, accordingly, confirm the findings and conclusion of the learned Commissioner (Appeals) and dismiss the grounds raised by the Revenue. 7. Thus, consistent with the view taken by the Tribunal, we also hold that the payment made by the assessee to the CIDCO represent transfer price of the land on lease hold basis and it cannot be contemplated as rent within the meaning of section 194-I. .....

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