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2016 (3) TMI 913 - AT - Income TaxTDS u/s 194I - non deduction of tds on lease premium paid - demand raised u/s 201(1)/201(lA) - Held that - As decided in ITO (TDS) -3, Pune Versus Shri Ajay N. Yerwadekar 2015 (11) TMI 1382 - ITAT PUNE where the lease premium paid to PCNTDA was a pre-condition for entering into the lease agreement, the same not being paid consequent to the execution of the lease agreement, cannot be said to be payment in lieu of rent as envisaged under section 194 I of the Act. In addition, the assessee had paid stamp duty on the market value of the plot represented by the lease premium and the said finding of the CIT(A) having not been controverted by the learned Departmental Representative for the Revenue, we find no merit in the appeal filed by the Revenue - Decided in favour of assessee
Issues Involved:
1. Whether the lease premium paid to Pimpri Chinchwad New Township Development Authority (PCNTDA) is subject to Tax Deducted at Source (TDS) under section 194I of the Income Tax Act. 2. Whether the Assessing Officer (AO) was justified in raising demand under sections 201(1) and 201(1A) for non-deduction of TDS on the lease premium. Issue-wise Detailed Analysis: 1. Lease Premium and TDS under Section 194I: The primary issue revolves around whether the lease premium paid by the assessees to PCNTDA qualifies as "rent" under section 194I of the Income Tax Act, which mandates TDS on rent payments. The AO argued that the lease premium should be considered rent and thus subject to TDS under section 194I. The AO's stance was based on the interpretation that any payment under a lease agreement, irrespective of its nomenclature, should be treated as rent for TDS purposes. This position was supported by the Chennai Bench decision in the case of Foxconn India Developer Pvt. Ltd. vs. ITO, which held that TDS was applicable on payments for acquiring leasehold rights. However, the CIT(A) and the Pune Bench of the Tribunal disagreed with this interpretation. They relied on the Mumbai Bench decisions in Navi Mumbai SEZ Pvt. Ltd. and M/s. Wadhwa Associates, which held that lease premium paid as a pre-condition for entering into a lease agreement does not fall under the definition of rent as per section 194I. The Tribunal observed that the payment of lease premium was a pre-condition for entering into the lease agreement and not a payment made under the lease terms. Therefore, such payments fell outside the purview of section 194I. 2. Demand under Sections 201(1) and 201(1A): The AO raised demands under sections 201(1) and 201(1A) for non-deduction of TDS on the lease premium. The AO computed the liability for non-deduction of TDS and levied interest on the assessees. The CIT(A) deleted these demands, and the Revenue appealed against this decision. The Tribunal upheld the CIT(A)'s order, stating that the lease premium paid to PCNTDA was not subject to TDS under section 194I. The Tribunal referenced its earlier decisions, including the case of ITO vs. Preetam Medical Foundation & Research Centre, which had similar facts and issues. The Tribunal reiterated that the lease premium paid as a pre-condition for entering into a lease agreement does not constitute rent under section 194I. Consequently, the AO was not justified in raising demands under sections 201(1) and 201(1A). Conclusion: The Tribunal dismissed the Revenue's appeals, affirming that the lease premium paid to PCNTDA was not subject to TDS under section 194I. The Tribunal found no merit in the AO's demands under sections 201(1) and 201(1A) and upheld the CIT(A)'s orders deleting these demands. The Tribunal's decision was consistent with its previous rulings on similar issues, reinforcing the interpretation that lease premiums paid as pre-conditions for lease agreements do not qualify as rent for TDS purposes.
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