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TMI Blog2016 (5) TMI 965X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 20,91,094/- u/s 201(1) and interest of Rs. 5,63,221/- u/s 201(1A) of the I.T. Act, 1961. As such total tax and interest of Rs. 26,54,315/- has been imposed wrong, illegal and against the facts on record. 3. That during the year assessee has made total payment of Rs. 1,99,10,940/- to RIICO while ld. ACIT has grossly taken the said figure of payment to RIICO Rs. 2,09,10,940/-. As such TDS of Rs. 1,00,000/- + interest was imposed wrong and the same is a apparent mistake and addition deserves to be quashed. 4. The assessee is an educational institution and duly approved u/s 10(23C)(vi), the land from RIICO was purchased to run the educational activities and whatever payment made to RIICO in any name pertains against purchase of land, hence creating of liability to deduct tax at source against such payment is totally illegal and deserve to be quashed. 5. That the order of the ACIT is bad in law and deserve to be quashed. 6. That the appellant reserves the right to add, amend, withdraw or alter any ground of appeal before the finalization of said appeal. 2.1 During the course of hearing, the ld. AR of the assessee Shri Sharvan Kumar Gupta, Advocate through his written ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid for acquisition of rights in the lease hold property rather than use of land. Therefore the provisions of section 194 I of the Act are not applicable in the case of the assessee. The purport of section 194 I of the Act is not to bring in its purview payments of any or every kind. Only those payments which are in the nature of "use" of land come within the ambit of section 194 I of the Act. 5.4. The word "use" is therefore of prime importance for transactions where the consideration paid for the property would be termed as "rent". The term "use " according to us has to be interpreted keeping in mind the relationship between the landlord and the tenant. The same cannot be extended to bring within its purview exploitation of any kind with reference to the property by changing its identity for its own benefit and thereafter selling it for profit. If that be so and the word 'use' is given an extended meaning, there would be no difference between a sale transaction and a transaction between the landlord and the tenant. This would render the intention of the legislature in importing the word 'use ' in section 194 I of the Act otiose. Landlord-tenant relationship does not contempla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." 5.7. The Hon'ble Calcutta High Court in the case of CIT vs. Purnendu Mullick 116 ITR 0591 observed that in case where the leases is for a long period, the lump sum payment cannot be treated as rent. The relevant portion of the Judgment is extracted herein below :- 8. On further appeal, the Supreme Court held that the Tribunal and the High Court were both in 'error in treating the said sum of Rs. 55,200 as advance payment ofrent for the following reasons: (a) Prima facie, premium or salami was not income and it would be for the IT authorities to show that the facts existed which would make it a revenue receipt. (b) The sub-lease did not contain any condition or stipulation from which it could be inferred that the aforesaid amount was paid by way of advance rent. (c) It was clearly stated in the lease that the money was being paid for comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a payment by a tenant as a price for parting by the landlord with the rights under the lease of the holiday as a consideration for what the landlord transfers to the tenant. The broad principle relating to term Salami are as follows: (1) Prima facie Salami or premium is not income, it is for the taxing authorities to prove that the facts exist which would make the same as income, if they seek to tax it. (2) Where the premium represents payment of rent in advance it is income. But if it represents the whole or part of the price of the land or the sale price of the leasehold interest is not income but capital. (3) Salami to be income should be a periodical monetary return coming in which some sort of regularity or expected regularity from definite sources. (4) Salami or premium paid at the beginning of a mining lease for a long period ordinarily represents the purchase price of an out anti out sale of the property and the sum received is capital and not income but rent or royalty paid periodically is income. The principle is the same whether the premium is for a simple lease of land or for a lease of mineral rights. But royalty payable under the mining lease stands on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 lease deed dt. 22nd November, 2004. It is the say of the Revenue that this lease premium was liable for deduction of tax at source failing which the assessee is to be treated assessee in default. It is the say of the assessee that such lease premium is in the nature of capital expenditure and therefore there is no question of deduction of tax at source. Further, the said lease premium does not come within the purview of the definition of rent as provided u/s,194- 1 of the Act. 10. We have carefully perused the lease deed as exhibited from page-l 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SPV) by CIDCO and Dronagiri Infrastructure Pvt Limited (DIPL) to develop and operate the Special Economic Zone at Navi Mumbai. Pursuant thereto assessee and CID CO entered into Development Agreement and the assessee is required to make payment of lease premium in respect of the land which was being acquired by CIDCO and being allotted to assessee from time to time. As per Development Agreement, the assessee is to develop and market "NMSEZ". There is no dispute to the fact that the assessee 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 infrastructure administrating and managing "SEZ". By virtue of said lease deed(s), the assessee has acquired the rights to determine, levy, collect, retain, utilize user charges fee for provision of services and for tariffs in accordance with terms and conditions provided in the Development Agreement and the lease deed (s) entered into. Therefore, we agree with Id. CIT(A) that lease deed(s) and the Development Agreement have assigned to the assessee leasehold right which includes bundle of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and be followed. We observe that the said decision of ITAT has been consideredbytheId.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 194-1 has been considered in respect of upfront charges paid in respect of leaseoflandforaperiodof99years. 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 u/s194-1 of the Act. Therefore, we are of the considered view that the above decision of ITAT Chennai Bench (supra) relied upon by Id. DR is not applicable to the case before us. On the other hand,the Special Bench Decision of ITAT, Mumbai in the case of Mukund Ltd. (supra)squarely apply wherein it has been held that the premium paid for acquiring leasehold right in land is a capital ..... X X X X Extracts X X X X X X X X Extracts X X X X
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