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2016 (10) TMI 217 - AT - Income TaxTDS u/s 194I - assessee paid by the assessee to MMRDA for acquiring lease hold rights and additional FSI for the leased plot - CIT(A) held the payment was not in the nature of rent as defined in Section 194I of the IT Act, and is not liable for TDS - Held that - 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 periodically. A perusal of the records further show that 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. It is also seen that the MMRD in exercise of power u/s. 43 r.w. Sec. 37(1) of the Maharashtra Town Planning Act 1966, MRTP Act and other powers enabling the same has approved the proposal to modify regulation 4A(ii) and thereby increased the FSI of the entire G Block of BKC. The Development Control Regulations for BKC specify the permissible FSI. Pursuant to such provisions, the assessee became entitled for additional FSI and has further acquired/purchased the additional built up area for construction of additional area on the aforesaid plot. Thus the assessee has made payment to MMRD under Development Control for acquiring leasehold land and additional built up area. The decision of the Hon ble Jurisdictional High Court in the case of Khimline Pumps Ltd. (2002 (9) TMI 94 - BOMBAY High Court ) squarely and directly apply on the facts of the case wherein held that payment for acquiring leasehold land is a capital expenditure. Considering the entire facts in totality in the light of the judicial decisions vis- -vis provisions of Sec. 194-1, definition of rent as provided under the said provision, we do not find any reason to tamper or interfere with the findings of the Ld. CIT(A) which we confirm - Decided in favour of assessee.
Issues Involved:
- Disallowance of lease rent payment made to MMRDA under Section 40(a)(ia) of the Income Tax Act, 1961. - Interpretation of the nature of payment made to MMRDA for acquiring leasehold rights and additional FSI for the leased plot. - Applicability of TDS on the payment made to MMRDA. Analysis: Issue 1: Disallowance of Lease Rent Payment The appeal and cross objection were filed against the order passed by the Ld. CIT(A) for the assessment year 2010-11. The AO had disallowed a substantial amount towards lease rent payment made to MMRDA, resulting in an increased total income for the assessee. The Ld. CIT(A) allowed the appeal of the assessee and deleted the disallowance made under Section 40(a)(ia) of the Act. The revenue challenged this decision before the Tribunal, arguing that the payment should be considered as rent and subjected to TDS. Issue 2: Interpretation of Payment to MMRDA The main contention revolved around whether the payment made by the assessee to MMRDA for acquiring leasehold rights and additional FSI should be considered as rent under Section 194I of the IT Act. The Ld. Counsel for the assessee argued that similar issues had been decided in favor of the assessee by the ITAT Mumbai in previous cases. The Tribunal noted that the payment made by the assessee was for acquiring leasehold land and additional built-up area, which did not fall under the definition of rent as provided under Section 194I. The Tribunal relied on previous decisions and confirmed the findings of the Ld. CIT(A) in favor of the assessee. Issue 3: Applicability of TDS The revenue contended that the amended definition of "rent" under the Explanation to Section 194I of the Act should include any payment made under a lease or any other arrangement. However, the Tribunal, based on the facts of the case and the nature of the payment made by the assessee to MMRDA, concluded that the payment was not in the nature of rent as defined under the Act. The Tribunal upheld the decision of the Ld. CIT(A) and dismissed the appeal filed by the department and the cross objection filed by the assessee for the assessment year 2010-11. In conclusion, the Tribunal, following previous decisions and considering the specific circumstances of the case, ruled in favor of the assessee, holding that the payment made to MMRDA for acquiring leasehold rights and additional FSI was not liable for TDS as rent under the Income Tax Act.
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