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2016 (3) TMI 913 - ITAT PUNE

2016 (3) TMI 913 - ITAT PUNE - TMI - TDS u/s 194I - non deduction of tds on lease premium paid - demand raised u/s 201(1)/201(lA) - Held that:- As decided in ITO (TDS) -3, Pune Versus Shri Ajay N. Yerwadekar [2015 (11) TMI 1382 - ITAT PUNE ] 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 .....

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ORDER PER R.K. PANDA, AM : The above 2 appeals filed by the Revenue are directed against the separate orders dated 25-08-2014 and 06-08-2014 respectively of the CIT(A)-V, Pune relating to Assessment Year 2011-12. Since identical issues are involved in both the appeals, therefore, both the appeals were heard together and are being disposed of by this common order. 2. Despite service of notice on the above assessees none appeared on their behalf nor any petition was filed seeking adjournment of t .....

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73,77,700/- and agreed to pay a sum of ₹ 100/- per annum for the entire period of lease. The AO after examining the provisions of section 194I of the I.T. Act as well as terms of lease deed entered into between the assessee and PCNTDA was of the view that the payment in question was covered by the definition of rent as per proviso to section 194I of the I.T. Act. Accordingly, the AO was of the view that TDS u/s.194I was required to be deducted. The AO confronted the assessee on this issue. .....

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old rights. The AO accordingly raised demand amounting to ₹ 7,34,886/- u/s.201(1) and levied interest amounting to ₹ 2,86,605/- u/s.201(1A). 4. In appeal the Ld.CIT(A) following the decision of the Mumbai Bench of the Tribunal in the case of Navi Mumbai SEZ Pvt. Ltd. in ITA Nos.7738 to 7741/Mum/2012 order dated 12- 08-2013 for A.Yrs. 2006-07 to 2009-10 and the decision in the case of M/s. Wadhwa Associates in ITA No.695/Mum/2012 order dated 03-07-2013 and various other decisions held .....

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earned Commissioner of Income tax(Appeals) erred in not considering the fact that the lease premium paid to PCNTDA was covered by the definition of rent as per proviso of section 194I of the Act. 3. The learned Commissioner of Income tax(Appeals) erred in not appreciating the fact that the deed entered into the deductor with PCNTDA was not a transfer deed but a lease deed and Explanation to section 194I clearly stipulates that any payment by whatever name called under any lease agreement is to b .....

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both the 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 perus .....

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tion purposes 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 .....

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ictions 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, .....

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further 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 .....

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t payment 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 PCN .....

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n Society (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 .....

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h the party. 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 asses .....

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to be in default for non-deduction 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 premiu .....

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sideration for acquiring leasehold rights unlike the present case where payment of lease premium was precondition 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 t .....

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al in the 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 precondition for entering into a lease agreement, the same cannot be said to have been paid consequent to the lease agreement executed between the parties. .....

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d in raising the demand under section 201(1) and 201(1A) of the Act. The grounds of appeal raised by the Revenue are thus, dismissed. 8. Following the same parity of reasoning, we hold 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 .....

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Centre (Supra), therefore, respectfully following the decision of the Coordinate Bench of the Tribunal and in absence of any contrary material brought to our notice we find no infirmity in the order of the CIT(A) deleting the demand raised u/s.201(1)/201(1A) of the I.T. Act in respect of lease premium paid to PCNTDA. Accordingly, the order of the CIT(A) is upheld and the grounds raised by the Revenue are dismissed. 7. Since the facts of the instant case are identical to the facts of the case de .....

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venue are as under : 1. The learned Commissioner of Income tax(Appeals) erred in deleting the demand raised of ₹ 68,56,408/- u/s 201(1)/201(1A) of the Income tax Act 1961 in respect of lease premium paid to Pimpri Chinchwad New Township Development Authority. 2. The learned Commissioner of Income tax (Appeals) erred in not considering the fact that the lease premium paid to PCNTDA was covered by the definition of rent as per proviso of section 194I of the Act 3. The learned Commissioner of .....

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