2014 (1) TMI 1498 - AT - Income Tax

Liability to deduct TDS u/s 194I of the Act - Whether the assessee is required to deduct tax at source from the payment of lease premium made to MMRDA during the years under consideration u/s 194I of the Act Held that - The decision in The ITO (TDS) 3 (5), Versus M/s. Wadhwa & Associates Realtors Pvt. Ltd. 2013 (9) TMI 261 - ITAT MUMBAI followed - The payment to MMRD is also for additional built up are and also for granting free of FSI area, such payment cannot be equated to rent - payment for acquiring leasehold land is a capital expenditure - the lease premium paid by the assessee to MMRDA not being in the nature of rent as contemplated in section 194-I of the Act, the assessee was not liable to deduct tax at source from the said payment and hence could not be treated as the assessee in default u/s 201(1) & 201(1A) of the Act Decided against Revenue.

Summary

Issues Involved:
- Whether the assessee is required to deduct tax at source from the payment of lease premium made to MMRDA under section 194-I of the Income Tax Act, 1961.

Detailed Analysis:

1. Issue of Tax Deduction at Source (TDS):
The primary issue in this case revolved around whether the assessee was obligated to deduct tax at source from the lease premium paid to MMRDA. The Assessing Officer (A.O.) contended that the payment of lease premium constituted rent and fell under the purview of section 194-I of the Act, necessitating TDS. The A.O. held the assessee in default for failing to deduct TDS, leading to the demand raised against the assessee.

2. Assessee's Contentions and CIT(A) Decision:
The assessee disputed the requirement of TDS on the lease premium, asserting that it did not qualify as advance rent under section 194-I. The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who, after considering submissions and comments, ruled in favor of the assessee. The CIT(A) referenced a previous decision in a similar case involving Shree Naman Developers Ltd., where it was held that the premium paid for leased land did not constitute rent under section 194-I, thereby absolving the assessee from TDS liability.

3. Tribunal's Decision and Precedents:
The Tribunal reviewed the arguments and material on record, noting a similar case involving Wadhwa & Associates Realtors Pvt. Ltd., where it was established that the lease premium was not akin to rent for TDS purposes. Citing relevant provisions and judicial decisions, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeals. The Tribunal's decision aligned with previous judgments, such as in the case of Shree Naman Hotels Pvt. Ltd., reinforcing the stance that the lease premium did not fall within the ambit of section 194-I for TDS deduction.

4. Cross Objections by the Assessee:
The assessee raised a cross objection regarding the overriding title of State Government and local authority on payments to MMRDA, contending that TDS was not required. However, due to the dismissal of Revenue's appeals and the subsequent decision in favor of the assessee, the cross objections were deemed infructuous and dismissed.

In conclusion, the Tribunal upheld the CIT(A)'s ruling, determining that the lease premium paid to MMRDA did not necessitate TDS under section 194-I of the Income Tax Act, thereby dismissing the Revenue's appeals and rendering the cross objections irrelevant.