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2014 (7) TMI 343 - AT - Income TaxTDS on Lease premium u/s 194I - lease premium is in the nature of rent or not Held that - Following Income Tax Officer(TDS) Versus M/s Shah Group Builders Ltd. 2014 (1) TMI 1497 - ITAT MUMBAI - 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 - it cannot be equated with the rent which is paid periodically - the assessee has made payment for acquiring leasehold land and additional built up area CIT(A) rightly of the view that the lease premium paid by the assessee 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.
Issues Involved:
1. Deletion of demand raised on account of TDS and interest under sections 201(1) and 201(1A) of the Income Tax Act, 1961. 2. Applicability of section 194-I for tax deduction at source on lease premium paid to CIDCO. Issue-wise Detailed Analysis: 1. Deletion of Demand Raised on Account of TDS and Interest: - The Revenue filed appeals against orders from the CIT(A) which deleted demands for TDS and interest amounting to Rs. 1,28,63,016/- for AY 2009-10 and Rs. 6,05,599/- for AY 2011-12, levied under sections 201(1) and 201(1A) of the Income Tax Act, 1961. - The Revenue contended that the assessee failed to deduct tax as required under section 194-I, leading to the imposition of interest for non-deduction of tax. - The CIT(A) had deleted these demands by following judicial precedents, which the Revenue contested through 14 grounds. 2. Applicability of Section 194-I for Tax Deduction at Source on Lease Premium: - The central issue was whether the assessee was required to deduct tax at source under section 194-I on lease premium payments made to CIDCO for a plot of land. - The Revenue argued that the lease premium should be treated as rent, thus necessitating TDS under section 194-I. - The AO treated the assessee as in default for not deducting tax, citing judicial pronouncements from the Karnataka and Calcutta High Courts that equated lump-sum lease premium payments to advance rent. - The CIT(A), however, found that the lease premium was not in the nature of rent as contemplated under section 194-I, following a similar decision in the case of Navi Mumbai SEZ Pvt. Ltd. - The Tribunal upheld the CIT(A)'s decision, referencing previous Tribunal decisions in similar cases, such as ITO vs. Shah Group Builders Ltd., where it was held that lease premium payments were capital expenditures and not subject to TDS under section 194-I. - The Tribunal reiterated that the lease premium paid to CIDCO was not "rent" under section 194-I and thus did not require TDS, affirming the CIT(A)'s order and dismissing the Revenue's appeals. Conclusion: - The Tribunal concluded that the lease premium paid by the assessee to CIDCO did not qualify as "rent" under section 194-I of the Income Tax Act, 1961. Therefore, the assessee was not liable to deduct tax at source from these payments. - The appeals filed by the Revenue were dismissed, and the order of the CIT(A) deleting the demands for TDS and interest was upheld. - The judgment was pronounced in the open court on June 19, 2014.
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