TMI Blog2016 (12) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... ificate was issued by ACIT in favour of Suzlon Developers Private Limited to deduct tax at source @0.55% on contractual payments during the financial year 2003-04 which was produced by the payee (pb/page 19). In our considered view,this payment of ₹ 3 lacs was covered under the provisions of Section 194-C of the Act and the assessee has defaulted in not deducting tax at source u/s 194-C of the Act on this payment of ₹ 3 lacs to Suzlon Developers Private Limited. The verification is required from the side of A.O. w.r.t. claims of the assessee that the said Suzlon Develoeprs Private Limited hold lower deduction certificate issued by Revenue u/s 197(1) of the Act as also the claim of the assessee that the said Suzlon Develoeprs Private Limited has duly paid taxes on these payment of ₹ 3 lacs paid by the assessee( page 19-20/pb) and accordingly we set aside and restore this issue to the file of the A.O. with a direction to verify the afore-stated contentions of the assessee that M/s Suzlon Developers P. Ltd. has produced TDS certificate issued u/s 197(1) of the Act in their favour for the impugned assessment year 2004-05 for lower deduction of tax at source @0.55% on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 124,038 on short deduction of TDS of ₹ 143,756. The Appellant Company humbly submits that the delay in passing the Ordeer u/s 201(1) /201(1A) dated 28.03.2011 (on account of survey on 02.03.2007) was not on the part of the Appellant Company. Hence no interest(if any) should be levied beyond the reasonable time required to complete the assessment i.e. say 31-03-2008.. 3. The Brief facts of the case are that a survey u/s. 133A of the Act was conducted by the Revenue in the case of the assessee on 2nd March, 2007 in its office premises situated at 207/208, Bhaveshwar Arcade, Opp. Shreyas cinema, LBS Marg, Ghatkopar(West), Mumbai-400 086. The assessee is engaged in the business of power generation. It was observed during the course of survey and subsequent proceedings u/s 201 of the Act that the assessee had incurred expense on account of acquiring sub-lease rights of 5 Bigha Land for 19 years. However, no tax was deducted at source on payment of ₹ 3 lacs made to Suzlon Energy Ltd for the above said expenses. The assessee was asked to explain the same whereby it was submitted that the amount paid as consideration towards acquiring sublease rights of 5 Bigha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bursement facilitator whereas the actual development of infrastructure is carried out by various agencies for years together and in such circumstances contribution of ₹ 3 lacs amounts to acquiring common facility for life time of the wind mill and does not attract any provisions of the tax deduction at source. The A.O. relied upon the provisions of section 194-I of the Act and observed that the expense incurred by the assessee is clearly covered by the definition of Rent and it does not matter that the facilities developed are owned by the payee or by any other else and hence the assessee was liable to deduct tax at source u/s 194-I of the Act on the said payments and hence the assessees contentions were rejected by the AO and since the assessee company did not deduct tax at source u/s 194-I of the Act on the payments made to Suzlon Developers Private Limited on account of Rent called by the assessee as payment for sharing infrastructure facility , the assessee was deemed to be an assessee in default within the provisions of section 201 of the Act and the assessee s default was determined at ₹ 61,500/- (20.5% of ₹ 3,00,000/-) and as such , an amount of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. installed one windmill during financial year 2003-04. As a part of the windmill Turn-Key project the company paid ₹ 3 lacs to Suzlon Developers Pvt. Ltd. as its share to the undivided common infrastructure facilities to be enjoyed throughout the life of the Windmill. Without prejudice , it was submitted that Suzlon Developers Pvt. Limited i.e. the payee has no tax dues payable as it had paid its entire tax liability for the assessment year 2004-05 hence no taxes can be determined/recovered from the assessee in view of the Hon ble Supreme court judgment in the case of CIT v. Hindustan Coco Cola Beverage Pvt Ltd., (2007)293ITR226(SC). The ld. CIT(A) after considering the submissions of the assessee, relied upon the order of the Chennai Bench of the Tribunal in the case of Foxconn India Developer (P) Ltd. V. ITO, (2012) 53 SOT 213(Chenn. Trib.) ,whereby the ld. CIT(A) observed that the definition of rent would definitely include payments of any type under any agreement or arrangement for the use of land. The learned CIT(A) observed that for the purposes of Section 194-I of the Act, the normal meaning of the term rent could not be used but that the specific definition of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... throughout the life of the Windmill which does not attract any provisions for tax deduction at source. It was submitted that section 194-I of the Act has been amended w.e.f. 13th July 2006 by Taxation Law (Amendment) Act, 2006 whereby new explanation(i) has been incorporated in lieu of old explanation(i) defining the meaning of Rent It was also stated that TDS was applicable whether or not the building was owned by the payee or not as per the pre-amended definition while no such exclusion was there in pre-amended definition w.r.t. land and hence w.r.t. land it was compulsory that the land must be owned by the payee. It was submitted that the payment of rent for use of land is covered by the Explanation (i) of section 194-I of the Act only if the payee is the owner of the land as per pre-amended definition and payment made for acquiring land or capital assets cannot be brought within ambit of definition of Rent as per Section 194-I of the Act. It is submitted that in assessee s case the payee M/s Suzlon Energy Ltd. is not the owner of land but the lessee of the land granted by Government of Rajasthan and the actual owner is Government of Rajasthan and the Rajasthan Government le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 2004-05 and governed by pre-amended definition of Rent in explanation(i) to Section 194-I of the Act. It was submitted that in preamended definition plant and machinery and equipments were not covered by the definition of Rent u/s 194-I of the Act and hence payment of ₹ 3 lacs for sharing common infrastructure facilities cannot be brought within ambit of Section 194-I of the Act and at best ,without prejudice, it could be covered u/s 194-C of the Act being contractual payments. To this effect certificate u/s 197(1) of the Act was issued by the Revenue-ACIT in favour of Suzlon Developers Private Limited to deduct TDS @0.55% for which the assessee may be held as assessee in default to that extent, which certificate issued by the Revenue u/s 197(1) of the Act is placed at paper book page 19. It was submitted that the Chartered Accountant of Suzlon Developers P. Ltd. has given certificate that they have duly deposited the tax with the Government whereby the receipt of ₹ 3.0 lacs from the assessee for the impugned assessment year i.e. 2004-05 was duly included in the income of the Suzlon Developers Private Limited in the return of income filed with the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved that the assessee is in the business of generation of power. The assessee had given contract to Suzlon Energy Limited to supply, install, commission and operate Wind Turbine Generation J38(Windmill) in Wind Farm situated at Village Baramsar , Tehsil and District Jaisalmer, Rajasthan for total consideration of ₹ 1,36,50,000/- . We have observed that the assessee has made payment of ₹ 3 lacs to M/s Suzlon Energy P. Ltd. which was included in the afore-stated total payment of ₹ 1,36,50,000/-, for acquisition of sub lease rights for a period of 19 years of the 5 Bigha land at village Baramsar with an option for further extension for 11 years. The said payment of ₹ 3 lacs included payment for stamp duty, registration , legal and administration charges. The said land was sub-leased to the assessee by Suzlon Energy Private Limited for setting up windmill project. The Government of Rajasthan has allotted 307 Bigha 3 Biswa land on lease basis to Suzlon Eneregy Private Limited at Village Baramsar , Tehsil and District Jaisalmer, Rajasthan for a period of thirty years for the purpose of setting up Windmill projects vide lease deed dated 19-02-2004 which can be furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g tax at source. We have observed that the issue is covered by the decision of the Tribunal in the case of Wadhwa Associates Realtors Pvt. Ltd.(supra) and also decision of Hon ble Madras High Court in the case of Foxconn India Deeveoper Private Limited (supra) as well other decisions relied upon by the assessee as detailed in preceding para s albeit in the said decisions the Court/tribunal were concerned with up-front lease premium paid for acquisition of land on long term lease basis while in the instant case land is acquired for setting up wind mill by entering into sublease deed where in the lessor has granted sub-lease in favour of the assessee with the approval of the owners of the land i.e. Government of Rajasthan for a period of 19 years with further option of extending by 11 years and also further option of extension beyond 30 years if Government of Rajasthan extends the lease with Suzlon Energy Private Limited beyond 30 years, with the permission of the owners of land i.e. Government of Rajasthan. We have also gone through the recent CBDT Circular No. 35/2016 [F No. 275/29/2015-IT (B)] dated 13th October, 2016 whereby CBDT have accepted the decision of the Hon ble High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome in the hands of the lessor, obliging the lessee to deduct tax at source under section 194-I of the Act and that in such a situation the lease assumes the character of deemed sale . The Hon'ble Chennai High Court has also in the cases of Tril Infopark Limited (Tax Case Appeal No. 882/2015) ruled that TDS was not deductible on payments of lump sum lease premium by the company for acquiring a long term lease of 99 years. 5. In all the aforesaid cases, the Department has accepted the decisions of the High Courts and has not filed an SLP. Therefore, the issue of whether or not TDS under section 194-I of the Act is to be made on lump sum lease premium or one-time upfront lease charges paid for allotment of land or any other property on long-term lease basis is now settled in favour of the assessee. 6. In view of the above, it is clarified that lump sum lease premium or one-time upfront lease charges, which are not adjustable against periodic rent, paid or payable for acquisition of long-term leasehold rights over land or any other property are not payments in the nature of rent within the meaning of section 194-I of the Act. Therefore, such payments are not liable for TD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of CIT v. Hindustan Coco Cola Beverage Pvt Ltd., (2007)293ITR226(SC). In our considered view, these common infrastructure facilities as detailed above require rendering of services associated with these infrastructure facilities for availing these infrastructure facilities which are in the nature of payment to contractor for carrying out the work associated with the utilization of these common infrastructure facilities. These are payments hich are contractual payment for provision of various common infrastructure facilities by Suzlon Developers Private Limited to the assessee and is covered u/s 194-C of the Act. The assessee has claimed that the lower deduction certificate was issued by ACIT in favour of Suzlon Developers Private Limited to deduct tax at source @0.55% on contractual payments during the financial year 2003-04 which was produced by the payee (pb/page 19). In our considered view,this payment of ₹ 3 lacs was covered under the provisions of Section 194-C of the Act and the assessee has defaulted in not deducting tax at source u/s 194-C of the Act on this payment of ₹ 3 lacs to Suzlon Developers Private Limited. The verification is required from the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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