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2015 (8) TMI 1024 - AT - Income TaxNon deduction of TDS u/s 194-I - nature of lease agreement - AO found the assessee as assessee in default under Section 201(1) and levied penal interest under Section 201(1A) - period of limitation for issuing order u/s 201(3) - Held that - The date of filing of the statement for all practical purposes has to be taken as 18th August, 2011. If the date of filing of statement is taken as 18.08.2011, then the impugned order is within the period of time limit as provided under Section 201(3) of the Act. Therefore, this Tribunal is of the considered opinion that the order passed by the Assessing Officer under Section 201(1) of the Act is not barred by limitation. Since copy of the lease agreement between the assessee and Tamil Nadu Industrial Development Corporation is not available before us, we are unable to express our opinion on the nature of transaction whether, it was an advance payment of rent or cost of acquisition of the land could be decided after going through the so15 called lease deed executed by the assessee and TIDCO. Moreover, the matter needs to be re-examined in the light of the provisions of Section 2(47) read with Explanation (i) to Section 194-I of the Act. This Tribunal is of the considered opinion that the nature of the transaction could be ascertained only after going through the lease agreement said to be executed by the assessee and Tamil Nadu Industrial Development Corporation. Accordingly, the orders of the lower authorities are set aside. The entire issue is remitted back to the file of the Assessing Officer. - Decided in favour of assessee for statistical purposes
Issues Involved:
1. Limitation period for passing the order under Section 201(1) of the Income-tax Act, 1961. 2. Nature of payment made by the assessee to Tamil Nadu Industrial Development Corporation Ltd. and applicability of Section 194-I of the Act. 3. Whether the payment made by the assessee is a capital payment or lease rent. 4. Liability of the assessee to deduct tax at source. 5. Verification of tax payment by the recipient and recovery of interest under Section 201(1A) of the Act. Issue-wise Detailed Analysis: 1. Limitation Period for Passing the Order under Section 201(1): The assessee argued that the order passed by the Assessing Officer (AO) on 3.10.2013 was barred by limitation as per Section 201(3) of the Income-tax Act, 1961, which stipulates a two-year period from the end of the financial year in which the statement is filed. The assessee filed the statement for the first quarter of the financial year 2008-09 on 15th July 2008, making the due date for passing the order 31.03.2011. However, the revised statement was filed on 18th August 2011. The Tribunal held that the date of filing for practical purposes should be considered as 18th August 2011, making the AO's order within the limitation period. 2. Nature of Payment and Applicability of Section 194-I: The assessee contended that the payment of Rs. 1412.79 Crores to Tamil Nadu Industrial Development Corporation Ltd. was an upfront fee for a 99-year lease, which is akin to a sale, and thus not subject to tax deduction under Section 194-I of the Act. The Department argued that the payment was lease rent, requiring tax deduction under Section 194-I. The Tribunal noted the absence of the lease agreement in the records, which is crucial to determine the nature of the transaction. 3. Capital Payment vs. Lease Rent: The Tribunal observed that the payment's nature-whether it was a capital payment for acquiring land or lease rent-could only be determined by examining the lease agreement. The Tribunal referenced the Madras High Court's judgment in Rane Brake Linings Ltd., which treated a 99-year lease as a sale, but noted that the High Court did not consider the Explanation to Section 194-I introduced in 2006. The Tribunal also considered the judgment in Foxconn India Developer (P) Ltd., which found that upfront fees for a lease fall under the definition of "rent" as per Section 194-I. 4. Liability to Deduct Tax at Source: The Tribunal reiterated that if the payment is considered lease rent, the assessee is liable to deduct tax under Section 194-I. However, without the lease agreement, it could not conclusively determine the nature of the payment. The Tribunal highlighted the need to re-examine the issue in light of Section 2(47) and Explanation (i) to Section 194-I. 5. Verification of Tax Payment by the Recipient: The Tribunal instructed the AO to verify whether Tamil Nadu Industrial Development Corporation Ltd. had paid taxes on the amount received. If taxes were paid by the recipient, the Tribunal held that only interest under Section 201(1A) could be recovered from the assessee, as per the Supreme Court's decision in Hindustan Coca Cola Beverages Pvt. Ltd. Conclusion: The Tribunal set aside the orders of the lower authorities and remitted the issue back to the AO for fresh consideration, emphasizing the need to review the lease agreement and verify the recipient's tax payments. The appeal was allowed for statistical purposes, with instructions for the AO to decide the issue afresh in accordance with the law.
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