2015 (12) TMI 984 - HC - Income Tax

TDS u/s 194I - Lease premium for the land given on lease - whether is in the nature of a capital expense not falling within the ambit of Section 194I - Held that - In Durga Khanna v. Commissioner of Income Tax 1969 (1) TMI 1 - SUPREME Court the Supreme Court held that, prima facie, premium or salami was not income and the onus was on the Revenue to show that facts existed which would make it a revenue payment. As far as the present case is concerned, the facts brought on record, and which have not been contested by the Revenue, unmistakably show that the payment of the lease premium for the land given on lease to the Assessee for a period of 80 years with all the rights, easements and appurtenances was in the nature of a capital expenditure. This coupled with the fact that the MMRDA did not treat the receipt as income clinches the issue in favour of the Assessee and against the Revenue.

Summary

Issues:
- Extraordinary delay in re-filing the appeals
- Nature of lease premium payment as capital or revenue expenditure under Section 194I of the Income Tax Act, 1961

Analysis:
1. Extraordinary Delay in Re-filing the Appeals:
The High Court noted an extraordinary delay of 740 days in re-filing the appeals by the Revenue under Section 260A of the Income Tax Act. The explanation provided regarding the practice directions for e-filing was deemed unacceptable by the Court, emphasizing that the directions were issued after consultation with the bar and ample time was given to adapt to e-filing. Consequently, the Court refused to condone the significant delay in re-filing the appeals.

2. Nature of Lease Premium Payment:
The Revenue contended that the lease premium paid by the Assessee to the Mumbai Metropolitan Regional Development Authority (MMRDA) for acquiring a plot of land was in the nature of advance rent and should attract TDS under Section 194I of the Act. However, the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal (ITAT) held it to be a capital expense not requiring TDS deduction. The Court analyzed the lease agreement clauses, emphasizing that the payment was solely for the lease premium and not rent, and there was no provision for adjusting the premium against the annual rent. Additionally, factual aspects, including the long-term lease of 80 years and MMRDA treating the premium as a capital receipt, supported the conclusion that the payment was a capital expenditure, not a revenue payment.

3. The Court referred to various legal precedents, including decisions by the Supreme Court and previous High Court judgments, to support the conclusion that the payment for the lease premium, considering the enduring benefit and nature of the transaction, qualified as a capital expenditure. The Court highlighted the factual aspects and the absence of contested facts by the Revenue, which decisively settled the issue in favor of the Assessee.

4. Conclusion:
The High Court dismissed the appeals based on both the extraordinary delay in re-filing and the merits of the case regarding the nature of the lease premium payment. The Court's decision was primarily based on the conclusion that the payment made by the Assessee to MMRDA for the long-term lease of land was a capital expenditure, supported by the lease agreement clauses and factual aspects, thereby favoring the Assessee over the Revenue's contentions. The Court did not find it necessary to decide on the issue of limitation that arose in one of the assessment years.