2014 (7) TMI 386 - AT - Income Tax

Premium for acquiring lease hold rights Rent as defined u/s 194-I of the Act - Requirement to deduct TDS Held that - The decision in ITO (TDS) v/s Wadhwa & Associates Realtors Pvt. Ltd., 2013 (9) TMI 261 - ITAT MUMBAI followed - the assessee has made payment in the financial year 2007-08 towards lease premium in respect of the plot of land - 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 - 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. The assessee has made payment to MMRD under Development Control for acquiring leasehold land and additional built up area - payment for acquiring leasehold land is a capital expenditure - definition of rent as provided under the provision, there is no reason to tamper or interfere with the findings of the CIT(A) - the payment on account of premium represents transfer price of the land on lease hold basis and no part thereof qualifies to fall within the meaning of rent as contemplated in section 194-I - no deduction of tax at source is required thus, the payment made by the assessee to the CIDCO represent transfer price of the land on lease hold basis and it cannot be contemplated as rent within the meaning of section 194-I thus, the order of the CIT(A) is upheld Decided against Revenue.

Summary

Issues involved:
1. Challenge to the order passed under section 201(1) / 201(1A) and under section 154 r/w 201(1) / 201(1A) of the Income Tax Act, 1961 for the assessment year 2008-09.
2. Whether the payment made by the assessee to CIDCO towards premium for acquiring leasehold rights qualifies as rent under section 194-I of the Act, necessitating tax deduction at source.

Analysis:
1. The appeal was filed by the Revenue against the order passed by the Commissioner (Appeals) regarding the assessment year 2008-09 under the Income Tax Act, 1961. The main issue revolved around determining whether the payment made by the assessee to CIDCO for acquiring leasehold rights should be considered as rent under section 194-I of the Act, requiring tax deduction at source.
2. The assessee argued that previous decisions by the Mumbai Bench of the Tribunal consistently held that such premium payments to government authorities do not constitute rent under section 194-I, hence no TDS is necessary. The Departmental Representative acknowledged the Tribunal's decisions but supported the Assessing Officer's stance on the matter.
3. The Tribunal reviewed the Assessing Officer's findings, the Commissioner (Appeals) decision, and various case laws cited by the assessee. The Tribunal noted that the issue was settled in favor of the assessee in similar cases where the payment was considered a capital expenditure for acquiring land rights, not falling under the definition of rent in section 194-I. The Tribunal cited precedents and upheld the Commissioner (Appeals) decision, dismissing the Revenue's appeal.
4. The Tribunal emphasized that the premium payment represented the transfer price of land on a leasehold basis, not qualifying as rent under section 194-I. The decision aligned with previous judgments and confirmed that no tax deduction at source was required. Therefore, the Tribunal affirmed the Commissioner (Appeals) order, dismissing the Revenue's appeal.

This detailed analysis of the judgment provides a comprehensive overview of the legal issues, arguments presented, and the Tribunal's decision, ensuring a thorough understanding of the case.