2017 (2) TMI 1201 - AT - Income Tax

Non deduction of TDS - whether the premium paid by the assessee to MMRDA for acquiring the stair case, lifts, lift room, lobbies etc. for free of FSI is in the nature of rent for the purpose of the provisions of 194I of the Act or not? - Held that - the Co-ordinate bench in the case of ITO Vs. Wadhwa & Associates Realtors Pvt. Ltd 2013 (9) TMI 261 - ITAT MUMBAI considered similar issue and held that premium paid by the assessee to MMRDA for the construction of building and for additional built up area for grant of free of FSI cannot be equated to rent - lease premium paid by the assessee to MMRDA is not in the nature of rent under provisions of 194I of the Act - appeal dismissed - decided against Revenue.

Summary

Issues:
Interpretation of whether the premium paid by the assessee to MMRDA for acquiring certain areas for construction purpose constitutes rent under section 194I of the Income Tax Act.

Analysis:
The appeal was filed by the revenue against the order of the Ld. CIT (Appeals)-40, Mumbai for the assessment year 2009-10, challenging the treatment of the amount paid by the Assessee to MMRDA as not rent under section 194I. The Assessee participated in a public tender by MMRDA, paid a premium for acquiring certain areas for construction, and the Assessing Officer treated this premium as rent under section 194I. The Tribunal examined similar cases and held that such premiums are not to be equated to rent. The premium paid was considered a capital expenditure, not rent, as per various legal precedents cited. The Co-ordinate bench decisions supported the view that the premium paid for acquiring leasehold rights is not rent under section 194I.

The ld. CIT (Appeals) relied on case laws and held that the premium paid for acquiring leasehold rights and additional FSI is not rent under section 194I. The Tribunal upheld the CIT (A) order, stating that the premium paid to MMRDA was not in the nature of rent as per section 194I. The decision was based on the similarity of facts with previous cases and the absence of distinguishing features. The appeal of the revenue was dismissed, confirming that the premium paid by the Assessee to MMRDA was not rent under section 194I.

Therefore, the judgment concluded that the premium paid by the Assessee to MMRDA for acquiring certain areas for construction purpose was not to be considered as rent under section 194I of the Income Tax Act. The decision was based on established legal precedents and the absence of distinguishing features in the current case compared to previous cases. The order of the ld. CIT (Appeals) was upheld, and the appeal of the revenue was dismissed.